Welcome!

Apache Authors: Pat Romanski, Liz McMillan, Elizabeth White, Christopher Harrold, Janakiram MSV

Related Topics: @CloudExpo

@CloudExpo: Blog Feed Post

Cloud Brokerage: The Market Unified

Commodity brokers don’t own the transport system for the market

This is Part III in a series by 6fusion Co-founder and CEO John Cowan on the emerging trend of Cloud Brokerage and the impact it will have on the technology industry and markets. Be sure to check out Part I of the series here and Part II here.

The feedback and fallout from Part II of this post has been quite interesting.  I thought for sure the bulk of the flack I would have to take would be from the cloud vendor incumbents I said would be relegated to the world of retail cloud business.  But since I posted my perspective I’ve found myself digging in to the nature of the Total Addressable Market (TAM) for the Cloud Brokerage industry.

For those of you keeping score at home, I said the market for cloud brokerage is more that 10 times the market for cloud computing software and related services.

Yes, 10 times.

And it is because this market is so big that cloud brokerage will spawn the next generation of technology innovation.

But before I get to the underlying technologies that are on the horizon and necessary for the future that I, along with my collaborators, envision, let me first spend a few paragraphs to explain why I am not just pulling numbers out of my, um, ‘IaaS’.

On the 6fusion iNode Network the median server in production in the cloud is a quad core dual processor unit with an average of 4TBs of available storage.  Using this standard configuration, partners and customers yield approximately $42,000 per year in net billable proceeds. I would classify that number, give or take on either side of it, to be a reasonable annual revenue estimation.

IDC recently reported that the 2011 server shipments topped out at 8.3 million units.  At a $42K clip, that is a market growing by a healthy $350 billion each year.

But of course, as we all know, server shelf life is not exactly the same as what you’d expect from a box of Krusty-O’s from the Kwik-E-Mart.

A quick trip down the hall to Gary Morris’s office at 6fusion is always an educational adventure.  “Depreciation,” Gary explains, “is a systematic and rational process of distributing the cost of tangible assets over the life of those assets. US GAAP calls for depreciation of servers using the server’s cost, estimated useful life and residual value. Typically, computers, software and equipment are depreciated over a period of 1 to 5 years, with the average useful life being 3 years.”

If we take Gary’s use of the GAAP average as a multiplier, it means there is estimated to be over $1trillion in billable utility computing presently in use around the world.

The point here is that cloud brokerage is underpinned by the availability of both private and public compute, network and storage resources.  And it is this massive untapped market that will drive the next wave of innovation.

If the origins of the cloud business belonged to the innovation of companies like Amazon, Rackspace and VMware, then the future of the cloud brokerage belongs to a new cadre of agnostic intermediaries that will enable a true utility computing marketplace to flourish.

The unification of the market is what I refer to as the point in time at which cloud computing technologies in production today can be used to interface to the commodity market.  In order for that to happen, cloud brokerage as an industry must form and deliver the underlying technologies necessary to make a true market.

Just what are these technologies?  Let’s take a look at three areas of innovation that will underpin the future of the utility computing.

Cloud brokerage technologies are best considered in the context of supply, demand and delivery.

Universal Resource Metering: Quantification of Demand and Supply

I delivered a presentation in Asia a few weeks ago and I opened with a slide that had two simple definitions:  Utility and Commodity.

A Utility, I paraphrased, “is a service provided by organizations that are consumed by a public audience.”

A Commodity, according to common definition, “is a class of goods or services that is supplied without qualitative differentiation.”

Theoretically, you can have a utility without it necessarily being commodity.  But it rarely ever works that way because in order to have a utility in the way we think about the utilities we consume every day, you must have scale.   And in order to achieve scale, the utility must be pervasive and uniform.  One should not require any special skills in order to use it.  It must be simple and consistent to use.   Think about your interaction with things like power or water services or subscribing to the Internet.

Utility is a word used quite often to describe the cloud.   In a post a couple months ago Simon Wardley aptly explained the difference between the cloud and a computer utility.  The difference, says Wardley, is really only that “cloud was simply a word used by people to explain something that really wasn’t well understood to people who were even more confused than they were.”

So is the cloud really a computer ‘utility’?  Not yet.

You see, what the cloud is missing is the factor that truly negates qualitative differentiation – common measurement. You simply cannot claim something to be a true utility if every provider measures services differently.  Common utilities all share the characteristic of universal measurement.  Think about it.  Power. Water.  Energy.  The Internet.  Whatever.

A standardized unit of measurement for the computer utility will be one of the greatest innovations to come from the emerging market for cloud brokerage because it will establish basis from which a commodity market can emerge.

Cloud Infrastructure Federation: Tapping Global Supply

When you buy corn or wheat or soybeans by contract on a commodity exchange today, you don’t buy a brand.   You buy a commodity.  Cloud brokers of the future will move commodities, not brands.   Today, cloud brokers form ‘partnerships’ with service providers.   But for a true brokerage model to blossom, there can be no possibility for vendor discrimination.  Anyone that brings product to market can and should trade it.  The denial of interoperability cannot happen.

With this in mind true cloud brokers will overcome the interoperability hurdle through collaboration and cooperation.   This doesn’t mean ascribing to one API framework or another, regardless of how high and mighty the leading retail cloud properties might become.   It means absolving oneself from the politics of the API game completely.

The Underlying Transport System:  Delivering the Commodity

It doesn’t always happen, but when a commodity contract comes due, something must be delivered.   The party that holds the paper for a hundred thousand units of corn must be able to take possession of it.  Modern commodity markets are supported by an elaborate network of supply chain delivery systems – from tankers to trains and transport trucks.

The equivalent underlying transport system must exist for the cloud infrastructure market.

Commodity brokers don’t own the transport system for the market.   And for good reason.  However, if you subscribe to the early analyst view of cloud brokerage, they do.   The analysts see brokers facilitating the transaction and delivering the compute commodity itself.   To me, they either don’t fully grasp the potential of the broker or they are describing something all together different.

Cloud interoperability is not a new concept.  It has been bandied about the blogosphere for several years already.  The problem to date is that such movements have been nothing more than thinly veiled product sales pitches.  The cloud brokers of the future will drive the innovation to construct the underlying transport system to “connect the clouds.”

In the final part of this series I will explore the future state of cloud computing; a world where the immovable IT asset becomes movable in a commodity exchange.

More Stories By John Cowan

John Cowan is co-founder and CEO of 6fusion. John is credited as 6fusion's business model visionary, bridging concepts and services behind cloud computing to the IT Service channel. In 2008, he along with his 6fusion collaborators successfully launched the industry's first single unit of meausurement for x86 computing, known as the Workload Allocation Cube (WAC). John is a 12 year veteran of business and product development within the IT and Telecommunications sectors and a graduate of Queen's University at Kingston.

Comments (0)

Share your thoughts on this story.

Add your comment
You must be signed in to add a comment. Sign-in | Register

In accordance with our Comment Policy, we encourage comments that are on topic, relevant and to-the-point. We will remove comments that include profanity, personal attacks, racial slurs, threats of violence, or other inappropriate material that violates our Terms and Conditions, and will block users who make repeated violations. We ask all readers to expect diversity of opinion and to treat one another with dignity and respect.


@ThingsExpo Stories
Explosive growth in connected devices. Enormous amounts of data for collection and analysis. Critical use of data for split-second decision making and actionable information. All three are factors in making the Internet of Things a reality. Yet, any one factor would have an IT organization pondering its infrastructure strategy. How should your organization enhance its IT framework to enable an Internet of Things implementation? In his session at @ThingsExpo, James Kirkland, Red Hat's Chief Archi...
In his general session at 19th Cloud Expo, Manish Dixit, VP of Product and Engineering at Dice, discussed how Dice leverages data insights and tools to help both tech professionals and recruiters better understand how skills relate to each other and which skills are in high demand using interactive visualizations and salary indicator tools to maximize earning potential. Manish Dixit is VP of Product and Engineering at Dice. As the leader of the Product, Engineering and Data Sciences team at D...
Personalization has long been the holy grail of marketing. Simply stated, communicate the most relevant offer to the right person and you will increase sales. To achieve this, you must understand the individual. Consequently, digital marketers developed many ways to gather and leverage customer information to deliver targeted experiences. In his session at @ThingsExpo, Lou Casal, Founder and Principal Consultant at Practicala, discussed how the Internet of Things (IoT) has accelerated our abilit...
Organizations planning enterprise data center consolidation and modernization projects are faced with a challenging, costly reality. Requirements to deploy modern, cloud-native applications simultaneously with traditional client/server applications are almost impossible to achieve with hardware-centric enterprise infrastructure. Compute and network infrastructure are fast moving down a software-defined path, but storage has been a laggard. Until now.
Digital Transformation is much more than a buzzword. The radical shift to digital mechanisms for almost every process is evident across all industries and verticals. This is often especially true in financial services, where the legacy environment is many times unable to keep up with the rapidly shifting demands of the consumer. The constant pressure to provide complete, omnichannel delivery of customer-facing solutions to meet both regulatory and customer demands is putting enormous pressure on...
The best way to leverage your CloudEXPO | DXWorldEXPO presence as a sponsor and exhibitor is to plan your news announcements around our events. The press covering CloudEXPO | DXWorldEXPO will have access to these releases and will amplify your news announcements. More than two dozen Cloud companies either set deals at our shows or have announced their mergers and acquisitions at CloudEXPO. Product announcements during our show provide your company with the most reach through our targeted audienc...
JETRO showcased Japan Digital Transformation Pavilion at SYS-CON's 21st International Cloud Expo® at the Santa Clara Convention Center in Santa Clara, CA. The Japan External Trade Organization (JETRO) is a non-profit organization that provides business support services to companies expanding to Japan. With the support of JETRO's dedicated staff, clients can incorporate their business; receive visa, immigration, and HR support; find dedicated office space; identify local government subsidies; get...
DXWorldEXPO LLC announced today that ICC-USA, a computer systems integrator and server manufacturing company focused on developing products and product appliances, will exhibit at the 22nd International CloudEXPO | DXWorldEXPO. DXWordEXPO New York 2018, colocated with CloudEXPO New York 2018 will be held November 11-13, 2018, in New York City. ICC is a computer systems integrator and server manufacturing company focused on developing products and product appliances to meet a wide range of ...
@DevOpsSummit at Cloud Expo, taking place November 12-13 in New York City, NY, is co-located with 22nd international CloudEXPO | first international DXWorldEXPO and will feature technical sessions from a rock star conference faculty and the leading industry players in the world.
DXWorldEXPO LLC announced today that the upcoming DXWorldEXPO | CloudEXPO New York event will feature 10 companies from Poland to participate at the "Poland Digital Transformation Pavilion" on November 12-13, 2018.
22nd International Cloud Expo, taking place June 5-7, 2018, at the Javits Center in New York City, NY, and co-located with the 1st DXWorld Expo will feature technical sessions from a rock star conference faculty and the leading industry players in the world. Cloud computing is now being embraced by a majority of enterprises of all sizes. Yesterday's debate about public vs. private has transformed into the reality of hybrid cloud: a recent survey shows that 74% of enterprises have a hybrid cloud ...
In his keynote at 19th Cloud Expo, Sheng Liang, co-founder and CEO of Rancher Labs, discussed the technological advances and new business opportunities created by the rapid adoption of containers. With the success of Amazon Web Services (AWS) and various open source technologies used to build private clouds, cloud computing has become an essential component of IT strategy. However, users continue to face challenges in implementing clouds, as older technologies evolve and newer ones like Docker c...
Business professionals no longer wonder if they'll migrate to the cloud; it's now a matter of when. The cloud environment has proved to be a major force in transitioning to an agile business model that enables quick decisions and fast implementation that solidify customer relationships. And when the cloud is combined with the power of cognitive computing, it drives innovation and transformation that achieves astounding competitive advantage.
Cloud-enabled transformation has evolved from cost saving measure to business innovation strategy -- one that combines the cloud with cognitive capabilities to drive market disruption. Learn how you can achieve the insight and agility you need to gain a competitive advantage. Industry-acclaimed CTO and cloud expert, Shankar Kalyana presents. Only the most exceptional IBMers are appointed with the rare distinction of IBM Fellow, the highest technical honor in the company. Shankar has also receive...
Michael Maximilien, better known as max or Dr. Max, is a computer scientist with IBM. At IBM Research Triangle Park, he was a principal engineer for the worldwide industry point-of-sale standard: JavaPOS. At IBM Research, some highlights include pioneering research on semantic Web services, mashups, and cloud computing, and platform-as-a-service. He joined the IBM Cloud Labs in 2014 and works closely with Pivotal Inc., to help make the Cloud Found the best PaaS.
In his Opening Keynote at 21st Cloud Expo, John Considine, General Manager of IBM Cloud Infrastructure, led attendees through the exciting evolution of the cloud. He looked at this major disruption from the perspective of technology, business models, and what this means for enterprises of all sizes. John Considine is General Manager of Cloud Infrastructure Services at IBM. In that role he is responsible for leading IBM’s public cloud infrastructure including strategy, development, and offering m...
DXWorldEXPO LLC announced today that All in Mobile, a mobile app development company from Poland, will exhibit at the 22nd International CloudEXPO | DXWorldEXPO. All In Mobile is a mobile app development company from Poland. Since 2014, they maintain passion for developing mobile applications for enterprises and startups worldwide.
Headquartered in Plainsboro, NJ, Synametrics Technologies has provided IT professionals and computer systems developers since 1997. Based on the success of their initial product offerings (WinSQL and DeltaCopy), the company continues to create and hone innovative products that help its customers get more from their computer applications, databases and infrastructure. To date, over one million users around the world have chosen Synametrics solutions to help power their accelerated business or per...
We are seeing a major migration of enterprises applications to the cloud. As cloud and business use of real time applications accelerate, legacy networks are no longer able to architecturally support cloud adoption and deliver the performance and security required by highly distributed enterprises. These outdated solutions have become more costly and complicated to implement, install, manage, and maintain.SD-WAN offers unlimited capabilities for accessing the benefits of the cloud and Internet. ...
Founded in 2000, Chetu Inc. is a global provider of customized software development solutions and IT staff augmentation services for software technology providers. By providing clients with unparalleled niche technology expertise and industry experience, Chetu has become the premiere long-term, back-end software development partner for start-ups, SMBs, and Fortune 500 companies. Chetu is headquartered in Plantation, Florida, with thirteen offices throughout the U.S. and abroad.