Cloud Brokerage

Cloud broker is a third-party individual or business who acts as an intermediary between the purchaser
of a cloud service and the sellers of that service. In general, broker is someone who acts as an
intermediary between two or more parties during negotiations.

Cloud broker’s role is of three types.

a- cloud aggregator
b- Integration Brokerage
c- cloud enabler
a-Cloud aggregator -Cloud broker is granted the rights to negotiate contracts with cloud providers on
behalf of the customer. The broker has the authority to distribute services across multiple vendors to be
as cost-effective as possible, in spite of any complexity that negotiations with multiple vendors might
involve. The broker may provide the customer with an application program interface (API) and user
interface (UI) that hides any complexity and allows the customer to work with their cloud services as if
they were being purchased from a single vendor. This type of broker is sometimes referred to as a cloud
aggregator.
Capabilities-Ability to support large scale cloud provisioning.
Normalized discovery, access,billing,support
Centralized management, SLAs,security etc

Examples of provider-
IT distributor & Reseller-
Ingram Micro, Insight, Synnex, Tech Data
b-Integration Brokerage-IB is one of three primary cloud services brokerage (CSB) roles and combines
cloud-based B2B integration infrastructures with people and processes to help companies for initial
implementation and ongoing project management for a wide range of cloud and B2B integration
projects.
Capabilities-
Messaging, Adapters, translation, orchestration, Community management, Shared services
(management & security)
Typical Scenarios-
Cloud to cloud integration-
Synchronizing contacts between Gmail and salesforce.com
Cloud to on premise integration-
 Synchronizing order to cash between NetSuite, Quickbooks
Example Providers-
B2B/EC provider-
Hubsapn, IBM(sterling commerce), SAP
CSB enabler-
Dell(Boomi), IBM(Cast Iron), Informatica, Intel
c-Cloud enabler -In addition to acting as an intermediary for contract negotiations, a cloud broker might
also provide the customer with additional services, facilitating the deduplication, encryption and
transfer of the customer's data to the cloud and assisting with data lifecycle management (DLM). This
type of broker is sometimes referred to as a cloud enabler.  Another type of broker, sometimes referred
to as a cloud customizer or white label cloud service, selects cloud services on behalf of a customer,
integrates the services to work together and sells the new offering under their own brand. 
The business model for cloud brokerage is still evolving. At its simplest, the customer may hire a broker
at the beginning of a project and pay the broker an hourly fee for their time. A broker providing more
robust services, however, may charge the customer on a sliding scale, depending on what services the
customer contracts for. A broker may also partner with one or more cloud service providers and take a
small percentage of the cloud provider's profit as remuneration once the customer has arranged service.

Why do we need Cloud Service Brokerage?

A trusted CSB can make it easier, more secure, and less costly to choose and manage cloud services,
particularly in multi-cloud environments. Fast IT is transforming IT infrastructure, making it more
flexible, automated, simple, and secure, and the enterprise is working with an ever-increasing number
of cloud vendors. Whether the CSB is an internal or external resource, by acting as an intermediary
between the enterprise and cloud service providers, a broker should add value by helping the enterprise
clearly define business and technical requirements while carefully evaluating the infrastructure
capabilities, security policies, and unique differentiating features offered by each cloud service provider.
Broker pricing

A broker makes a profit by matching buyer's demands with seller's supplies: the broker uses a variety of
methods to achieve a best price between these parties, and typically makes a profit either by taking a
commission fee from any completed deal, or by varying the broker's spread, or some combination of
fees and spread. The spread is the difference between the price at which a broker buys from sellers and
the price at which it sells to buyers.
The broker's skill lies in forecasting when to purchase the resources in advance and when to simply
provide their clients with resources purchased directly from the spot market or from the broker's own
private stock of resources.
A simple broker model consists of two stages. In the first stage, the broker plans what to buy. The broker
will make a forecast of demand, determine what and when to buy and then will make any advanced
purchases from the provider.
In the second stage, clients approach the broker for a resource. If the broker has previously purchased a
resource, they can sell it to the client for a profit if the cost is less than the client wants to pay. If not, the
broker must purchase an on-demand instance and provide it to the client.
Consider N users who live for two discrete periods. Each user can purchase a unit of resource from a
service provider to use in the second period, either at a discounted rate of 1 in Period 1, or at higher
price C, where C > 1, in Period 2. In Period 1, each user only knows the probability that they will need
the resource in Period 2--it is not known for certain until the next period.
A third agent, the Coordinator, is introduced who makes a profit by aggregating the users' probabilities
and absorbing risk through a two period game described below:
1. Period 1: Each user i submit to the Coordinator a probability, qi, which does not have to be the real
probability, pi, that they will require a unit of resource in Period 2.
2. Period 1: The Coordinator reserves qini units of resource from the resource provider at the discount
price for use in Period 2, where ni is the number of units of resource required by each user. For simplicity
in this simulation, ni = 1 for all users.
3. Period 2: The Coordinator delivers the reserved resources to users who claim them. If the amount
reserved by the Coordinator is not enough to cover the demand, the Coordinator purchases more from
the resource provider at the higher unit price C.
4. Period 2: User i pays:
 f(qi) if resource is required
g(qi) if resource is not required
The contract can be regarded as an option if g(qi) is paid in Period 1 (i.e. as a premium), and f(qi)-g(qi) is
paid in Period 2 (i.e. as a price) should the resource be required. In Period 1, the resource is reserved,
but the user is not under any obligation to purchase.
Wu et al. showed that if the following conditions could be met, the Coordinator would make a profit:
• Condition A: Each user prefers to use the service provided by the Coordinator, rather than to deal with
the resource provider (for example, by achieving cost-reduction)
• Condition B: The Coordinator can make a profit by providing the service.
The following truth-telling conditions are not completely necessary, but are useful, for conditions A and
B to hold:
• Condition T1 (truth-telling): Each user submits his true probability in Period 1 so that he expects to pay
the lowest amount later.
• Condition T2 (truth-telling): When a user does not need a resource in Period 2, it is reported to the
Coordinator in the same period.
The following specific case was proved to meet these conditions, where k, a constant chosen to alter the
price paid by the customer, is set to 1.5 and C is set to 2:

To incentivize users to use the broker's service, it must save them money compared to going to the
provider direct.
If the user is submitting honestly they will expect to pay:

We refer to the Coordinator as the broker, as the Coordinator performs a role traditionally performed
by a financial broker.

External CSB-

External CSBs are focused on monetizing cloud services delivery by aggregating and selling/distributing
from their own private-branded Cloud Marketplaces.
Examples of External CSBs:
 Service providers (telecommunications providers)
 Distributors
 Financial services organizations
 Technology OEMs
 System integrators
 Vertical / other marketplaces
 Internal CSB-
Internal CSBs are typically driven by centralized IT organizations that want to provide internal self-
service Cloud Catalogs with a unified security, compliance, license management, support, and user
experience for their employees or affiliated members.
Examples of Internal CSBs:
 Enterprise and government IT organizations unifying services delivery and lifecycle management
for their employees
 Associations or other communities of interest (e.g., healthcare), providing services to affiliated
members
Recommendations-
Service in CSB has both Technical and business connotation, with emaphasis on outcome.
Interpret CSB role through three primary IT roles:
Aggregation Brokerage
Integration Brokerage
Customization Brokerage
A CSB can make cloud services more valuable because they work closely with cloud providers to get
price breaks or access to more information about how a service works
 Instead of spending time and money to address these problems internally, consumers can leverage
solutions offered by CSBs that allow organizations to focus on other pressing business needs instead.
A viable CSB provider can make it less expensive, easier, safer and more productive for companies to
navigate, integrate, consume and extend cloud services, particularly when they span multiple, diverse
cloud services providers.