Here Come the Cloud Services Brokers

As companies start shifting computing tasks to outside providers in the cloud, intermediaries have emerged to help them do it. Systems Integrator Appirio has already made a name for itself

Flextronics (FLEX) Chief Information Officer David Smoley is quickly overcoming the misgivings over security and reliability he once harbored about entrusting computing tasks to outside providers.

One of his biggest concerns now is to make sure the various cloud services work well together—and are compatible with existing systems. Instead of buying hardware and software and managing e-mail and other applications internally, CIOs like Smoley can now rent those capabilities from such companies as Microsoft (MSFT) or Google (GOOG), much the way consumers use Hotmail or Gmail. Yet setting up cloud services for a large corporation is far more complex than it is for a consumer or small business. "We don't have folks who are experts on this," says Flextronics' Smoley.

As Flextronics considered adding business tools from Google and Microsoft, Smoley turned to a company called Appirio to give him guidance about the various strengths and weaknesses of each vendor's offering. Appirio is among an emerging class of companies known as cloud services brokers, which help companies figure out which services can best meet their needs.

Just as a consumer would turn to a travel agent or an insurance broker, companies in growing numbers are relying on these cloud services brokers. By 2015, at least 20 percent of all cloud services will be handled via brokers, rather than directly—up from less than 5 percent today, according to Gartner Research (IT).

Gartner: Meteoric Growth to 2015

In the future, companies may hook up with more than a dozen different cloud services providers. Brokers would serve as intermediaries, offering such services as customization, integration, security, and aggregation. Through 2014, cloud service brokerage will generate more than $5 billion in sales—up from less than $50 million this year—making it the fastest growing area of cloud computing, Gartner said earlier this year.

The need for brokers is compounded by the lack of standards in the cloud services industry, which means that information can't travel between different services without specially written code to translate among them. "If companies integrate it themselves, they have no hope of saving money," says Daryl Plummer, group vice-president of Gartner Research. In general, cloud services appeal to companies because they're less expensive than buying hardware and software.

Some brokers specialize in integration among various providers, including (CRM), Workday, and Google.This group includes Appirio, Boomi, Cast Iron, SnapLogic, and more than a dozen other companies. Some have already become acquisition targets. On Nov. 2, Dell (DELL) said it had agreed to acquire Boomi. That announcement came just six months after IBM's (IBM) May 3 acquisition of Cast Iron. Neither deal's terms were disclosed.

As many corporations will likely move gradually to cloud services, some integration will need to be done between cloud services and on-premise software obtained from traditional vendors such as SAP (SAP) and Oracle (ORCL). "You'll replace the integration you have today with a different kind of integration challenge," says James Harris, managing director of cloud computing for Accenture (ACN).

Systems Integrators Hold Advantage

Some companies are better-positioned than others to help integrate cloud services. In a June survey, Gartner asked respondents what kind of companies they would trust to serve as their broker. Among respondents, 63.5 percent listed systems integrators, which are already in the business of helping companies get computing systems to work together, while 47.9 percent listed telecommunications carriers.

Toronto-based Enomaly lets companies buy and sell unused cloud computing capacity in a clearinghouse called SpotCloud. It also gives companies the ability to switch services on demand to get the best price while still receiving a single bill, says James Staten, vice-president and principal analyst at Forrester Research (FORR).

Flextronics' Smoley says he was happy with the consulting services Appirio provided. Appirio has helped more than 180 organizations—including IMS Health, Motorola (MOT), Qualcomm (QCOM), and RehabCare (RHB)—implement cloud solutions using, Google, and Amazon (AMZN). Says Smoley: "Appirio is where the future of consulting needs to be."

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