The Cloud Broker Business Paradigm

Forrester Research recently published a very interesting and extremely relevant report on the “Cloud Broker” business paradigm. This research explores the current and future business models around cloud computing while outlining why the cloud broker paradigm represents not only “the most promising, but also the most ambitious, cloud approach”. The Researchers opine that “the cloud broker model offers a unified approach to virtually all cloud segments – from infrastructure-as-a-service (IaaS) to people-as-a-service or end-to-end business-process-as-a-service (BPaaS).”

Aimed at vendor strategists, customers, and market observers who are perplexed by the proliferation of numerous business models and value propositions around cloud computing, this report highlights Forrester’s “cloud computing taxonomy”, which helps identify your positioning in the cloud value-chain, and then explores the fascinating relationships between “the traditional value contributions of independent software vendors (ISVs) and service providers and the new cloud computing markets”, before converging onto the details of the 7 new cloud business models, with the focus on the “cloud broker” model. The report, replete with intriguing details, visual graphics and well thought-out sections is a must-read for anyone looking to understand the convoluted world of cloud computing.

Here’s a sneak peak at what’s covered in this research:

Forrester’s market taxonomy essentially defines 12 distinct cloud market segments across the different levels of resource sharing – from private cloud to public cloud, as shown in the figure below:

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According to the report, each of the 12 different cloud market segments represents different levels of maturity and adoption speed and hence, also provides for different market opportunities in terms of market size. The two most commonly emerging trends in this picture are:

1.  Commoditization of Infrastructure cloud markets – The IaaS is fast becoming the most commoditized cloud segment, and its trajectory is almost mimicking the traditional hardware space. Many IaaS offerings are already interchangeable and wholly standardized. For example, .NET or Java workloads can be deployed across multiple IaaS options without any change.
2. Evolution of new cloud markets around human resource pools – As an example, imagine a large retail organization that currently operates a call center for phone order entry services based on a software-as-a-service (SaaS) customer relationship management (CRM) application. The firm may be able to operate this call center efficiently with their own staff during periods of normal demand. However, the firm can also support peak loads (e.g., during the Christmas period) or unpredicted bottlenecks with additional people — acting on the same standardized business process. If there is no long-term contract and these additional “people-as-a-service” are available at short notice, Forrester considers this to be a business-process-as-a-service (BPaaS).

The report then highlights how the traditional business models are evolving into new cloud segments:

1. Pure packaged software models
2. Pure consulting models
3. Pure infrastructure models

Because these traditional business models are starting to converge in the cloud computing space, Forrester sees them as evolving into seven new cloud business models, as shown in the figure below.

And, then, towards the end, the researchers dedicate the last part of their report to understanding the emergence and relevance of the cloud broker model. Ultimately, the research strongly urges businesses to understand and embrace the cloud broker model to drive sustainable business and economic value and margins.

Overall, this is a very detailed and intriguing research from Forrester – a must-read for all of those cloud-curious minds!