Welcome!

SOA & WOA Authors: Trevor Parsons, Yeshim Deniz, Jason Bloomberg, Lisa Pope, Carmen Gonzalez

Related Topics: Cloud Expo

Cloud Expo: 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
The definition of IoT is not new, in fact it’s been around for over a decade. What has changed is the public's awareness that the technology we use on a daily basis has caught up on the vision of an always on, always connected world. If you look into the details of what comprises the IoT, you’ll see that it includes everything from cloud computing, Big Data analytics, “Things,” Web communication, applications, network, storage, etc. It is essentially including everything connected online from hardware to software, or as we like to say, it’s an Internet of many different things. The difference ...

ARMONK, N.Y., Nov. 20, 2014 /PRNewswire/ --  IBM (NYSE: IBM) today announced that it is bringing a greater level of control, security and flexibility to cloud-based application development and delivery with a single-tenant version of Bluemix, IBM's platform-as-a-service. The new platform enables developers to build ap...

Cloud Expo 2014 TV commercials will feature @ThingsExpo, which was launched in June, 2014 at New York City's Javits Center as the largest 'Internet of Things' event in the world.
An entirely new security model is needed for the Internet of Things, or is it? Can we save some old and tested controls for this new and different environment? In his session at @ThingsExpo, New York's at the Javits Center, Davi Ottenheimer, EMC Senior Director of Trust, reviewed hands-on lessons with IoT devices and reveal a new risk balance you might not expect. Davi Ottenheimer, EMC Senior Director of Trust, has more than nineteen years' experience managing global security operations and assessments, including a decade of leading incident response and digital forensics. He is co-author of t...
The major cloud platforms defy a simple, side-by-side analysis. Each of the major IaaS public-cloud platforms offers their own unique strengths and functionality. Options for on-site private cloud are diverse as well, and must be designed and deployed while taking existing legacy architecture and infrastructure into account. Then the reality is that most enterprises are embarking on a hybrid cloud strategy and programs. In this Power Panel at 15th Cloud Expo (http://www.CloudComputingExpo.com), moderated by Ashar Baig, Research Director, Cloud, at Gigaom Research, Nate Gordon, Director of T...
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 Internet of @ThingsExpo, James Kirkland, Chief Architect for the Internet of Things and Intelligent Systems at Red Hat, described how to revolutioniz...
Technology is enabling a new approach to collecting and using data. This approach, commonly referred to as the "Internet of Things" (IoT), enables businesses to use real-time data from all sorts of things including machines, devices and sensors to make better decisions, improve customer service, and lower the risk in the creation of new revenue opportunities. In his General Session at Internet of @ThingsExpo, Dave Wagstaff, Vice President and Chief Architect at BSQUARE Corporation, discuss the real benefits to focus on, how to understand the requirements of a successful solution, the flow of ...
The security devil is always in the details of the attack: the ones you've endured, the ones you prepare yourself to fend off, and the ones that, you fear, will catch you completely unaware and defenseless. The Internet of Things (IoT) is nothing if not an endless proliferation of details. It's the vision of a world in which continuous Internet connectivity and addressability is embedded into a growing range of human artifacts, into the natural world, and even into our smartphones, appliances, and physical persons. In the IoT vision, every new "thing" - sensor, actuator, data source, data con...
"BSQUARE is in the business of selling software solutions for smart connected devices. It's obvious that IoT has moved from being a technology to being a fundamental part of business, and in the last 18 months people have said let's figure out how to do it and let's put some focus on it, " explained Dave Wagstaff, VP & Chief Architect, at BSQUARE Corporation, in this SYS-CON.tv interview at @ThingsExpo, held Nov 4-6, 2014, at the Santa Clara Convention Center in Santa Clara, CA.
Focused on this fast-growing market’s needs, Vitesse Semiconductor Corporation (Nasdaq: VTSS), a leading provider of IC solutions to advance "Ethernet Everywhere" in Carrier, Enterprise and Internet of Things (IoT) networks, introduced its IStaX™ software (VSC6815SDK), a robust protocol stack to simplify deployment and management of Industrial-IoT network applications such as Industrial Ethernet switching, surveillance, video distribution, LCD signage, intelligent sensors, and metering equipment. Leveraging technologies proven in the Carrier and Enterprise markets, IStaX is designed to work ac...
"There is a natural synchronization between the business models, the IoT is there to support ,” explained Brendan O'Brien, Co-founder and Chief Architect of Aria Systems, in this SYS-CON.tv interview at the 15th International Cloud Expo®, held Nov 4–6, 2014, at the Santa Clara Convention Center in Santa Clara, CA.
C-Labs LLC, a leading provider of remote and mobile access for the Internet of Things (IoT), announced the appointment of John Traynor to the position of chief operating officer. Previously a strategic advisor to the firm, Mr. Traynor will now oversee sales, marketing, finance, and operations. Mr. Traynor is based out of the C-Labs office in Redmond, Washington. He reports to Chris Muench, Chief Executive Officer. Mr. Traynor brings valuable business leadership and technology industry expertise to C-Labs. With over 30 years' experience in the high-tech sector, John Traynor has held numerous...
Bit6 today issued a challenge to the technology community implementing Web Real Time Communication (WebRTC). To leap beyond WebRTC’s significant limitations and fully leverage its underlying value to accelerate innovation, application developers need to consider the entire communications ecosystem.
The 3rd International @ThingsExpo, co-located with the 16th International Cloud Expo - to be held June 9-11, 2015, at the Javits Center in New York City, NY - announces that it is now accepting Keynote Proposals. The Internet of Things (IoT) is the most profound change in personal and enterprise IT since the creation of the Worldwide Web more than 20 years ago. All major researchers estimate there will be tens of billions devices - computers, smartphones, tablets, and sensors - connected to the Internet by 2020. This number will continue to grow at a rapid pace for the next several decades.
The Internet of Things is not new. Historically, smart businesses have used its basic concept of leveraging data to drive better decision making and have capitalized on those insights to realize additional revenue opportunities. So, what has changed to make the Internet of Things one of the hottest topics in tech? In his session at @ThingsExpo, Chris Gray, Director, Embedded and Internet of Things, discussed the underlying factors that are driving the economics of intelligent systems. Discover how hardware commoditization, the ubiquitous nature of connectivity, and the emergence of Big Data a...
Almost everyone sees the potential of Internet of Things but how can businesses truly unlock that potential. The key will be in the ability to discover business insight in the midst of an ocean of Big Data generated from billions of embedded devices via Systems of Discover. Businesses will also need to ensure that they can sustain that insight by leveraging the cloud for global reach, scale and elasticity.
SYS-CON Events announced today that Windstream, a leading provider of advanced network and cloud communications, has been named “Silver Sponsor” of SYS-CON's 16th International Cloud Expo®, which will take place on June 9–11, 2015, at the Javits Center in New York, NY. Windstream (Nasdaq: WIN), a FORTUNE 500 and S&P 500 company, is a leading provider of advanced network communications, including cloud computing and managed services, to businesses nationwide. The company also offers broadband, phone and digital TV services to consumers primarily in rural areas.
SYS-CON Events announced today that IDenticard will exhibit at SYS-CON's 16th International Cloud Expo®, which will take place on June 9-11, 2015, at the Javits Center in New York City, NY. IDenticard™ is the security division of Brady Corp (NYSE: BRC), a $1.5 billion manufacturer of identification products. We have small-company values with the strength and stability of a major corporation. IDenticard offers local sales, support and service to our customers across the United States and Canada. Our partner network encompasses some 300 of the world's leading systems integrators and security s...
IoT is still a vague buzzword for many people. In his session at @ThingsExpo, Mike Kavis, Vice President & Principal Cloud Architect at Cloud Technology Partners, discussed the business value of IoT that goes far beyond the general public's perception that IoT is all about wearables and home consumer services. He also discussed how IoT is perceived by investors and how venture capitalist access this space. Other topics discussed were barriers to success, what is new, what is old, and what the future may hold. Mike Kavis is Vice President & Principal Cloud Architect at Cloud Technology Pa...
Cloud Expo 2014 TV commercials will feature @ThingsExpo, which was launched in June, 2014 at New York City's Javits Center as the largest 'Internet of Things' event in the world. The next @ThingsExpo will take place November 4-6, 2014, at the Santa Clara Convention Center, in Santa Clara, California. Since its launch in 2008, Cloud Expo TV commercials have been aired and CNBC, Fox News Network, and Bloomberg TV. Please enjoy our 2014 commercial.