Cloud Services Brokerage: It's About More Than Technology

By Mae Kowalke
TMCnet Contributor

In traditional commerce parlance, a broker is a person or party that arranges transactions between a buyer and seller, and gets a commission when the deal is complete. Brokers operate in many industries, including real estate and finance.

Buyers looking for a specific product or service to buy may choose to enlist the help of a broker to select what to buy, especially if it’s something specialized that requires in-depth technical or other knowledge to effectively select.

The brokerage business model is enjoying a period of growth in the information and communications technology market, driven in large part by maturing of the cloud services sector and the Software-as-a-Service market.

“Cloud services brokerage is a model for aggregating different kinds of cloud services from different providers,” explained Jamcracker’s (News - Alert) VP of marketing and business development, Steve Crawford, during a conversation at ITEXPO (News - Alert) East 2012.

Jamcracker itself falls into this category; the company was founded in 1999 as an aggregator of application service providers, but is now more accurately described as a cloud services brokerage enabler. 

Crawford explained that IT service providers of all types are now getting into the business of being cloud service brokerages. For service providers, this is a great way to drive retention under core services. For distributors, it’s a way to enable their value-added reseller (VAR) partners to sell cloud customers to their end customers.

Ten years ago, Crawford noted, the application service provider (ASP) model—which involved taking on-premise applications, hosting them in data centers, and then selling them as subscription services—was touted as the next big thing.

The ASP model didn’t last, though: multi-tenant SaaS (News - Alert) architecture was much more scalable, and the introduction of virtualized services clinched it.

Crawford stressed that Jamcracker’s solution is based on robust technology, but it’s not just about technology; its power also lies in a pre-integrated ecosystem of cloud providers with many master distribution agreements already in place.

Being a successful cloud services brokerage, in other words, involves more than technology. With multi-tiered distribution, for example, it’s important to ensure there is enough margin to spread it across all the channels. Also, existing organizational structures must be set up to provide support for core services and new cloud services.

If done right, however, cloud services brokerage is a great opportunity for providers, especially telcos.

“IDC (News - Alert) did a study recently forecasting that telcos will constitute 40 percent of distribution of cloud services by 2020,” Crawford noted.