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Will the cloud exchange be the next big ecosystem player?

An emerging branch of the cloud ecosystem, the cloud exchange, has the potential to address many concerns about the cloud broker model.

Cloud computing in all of its various forms has become a major commercial opportunity for service providers, but success in the market is not without its challenges. In addition to well-publicized concerns about cloud security, many users have a limited understanding of the cloud's full potential and lack the in-house expertise necessary to get the most out of it.

Rob Rich, TM ForumRob Rich, TM Forum

There are issues for cloud providers, too: figuring out how to manage multiple business relationships; maintaining a multi-vendor environment with a jumble of proprietary processes and systems; and navigating the potential incompatibility between different vendors' products.

That's where a new breed of service providers called cloud brokers has been lending a hand. A broker, which can be an external or internal entity, acts as an intermediary between the cloud service providers and the customers. Brokers can provide the cloud user with higher levels of expertise and experience than they would otherwise have on staff. They can also manage and simplify multiple contractual relationships between suppliers and consumers, and customize certain aspects of the cloud service being delivered to map more closely to users' requirements.

However, as the market has matured, it has become clear that brokers can introduce their own set of challenges. If they aren't packaging services in a way that's open and standards-based, then users can find themselves locked in. This conflicts with one of the greatest appeals of cloud: that you can consume IT services as you need them, and draw from the most economic and suitable resource for any given task. Brokers may also have to reconcile inconsistencies among various cloud providers' service-level agreements and customer requirements around the geographic location of data -- both of which limit some brokers' opportunities.

The birth of cloud exchanges

This situation has given rise to another new branch of the ecosystem: the cloud exchange. Exchanges, which differ from vendor-driven cloud marketplaces, claim to bring new efficiency to the whole cloud ecosystem by using vendor-neutral, widely accepted standards for the benefit of service providers, brokers and end users. A cloud exchange allows any broker or service provider to become a member, as long as they meet the exchange's admission criteria. The idea behind an exchange is that it prevents lock-in because it enables real-time trading of bandwidth, enabled by a bilateral contract with all the suppliers or suppliers' representatives.

Although they're still in the very early stages, cloud exchanges will be the place where standardized cloud capacity and services -- like many other commodities -- can be bought and sold, based on such parameters as price, quality, availability and geographic location. Critical to the successful functioning of such spot and derivatives marketplaces will be their ability to offer standardized products, allowing any seller to contract with any buyer under the same market and legal-framework conditions.

German stock exchange operator Deutsche Börse is set to launch the first vendor-neutral marketplace for cloud services in 2014 when it turns up service on its Deutsche Börse Cloud Exchange (DBCE). The DBCE will offer standardized products allowing accredited sellers to contract with any registered buyer in a unified market and legal framework. Interoperability among multiple cloud providers will be enabled through standard interfaces and a cloud management layer aligned with the TM Forum's Information Framework and designed by Berlin-based software vendor Zimory.

At TM Forum, we are excited about the potential for cloud exchanges. We've already helped our membership learn more about cloud brokering through our Catalyst program, and even though a complete set of standard service definitions to facilitate and support cloud exchanges doesn't exist yet, some of the work TM Forum has developed will contribute to a foundation for one.

We're looking forward to using our role as a leading vendor-neutral standards developer and advocacy body to make contributions to the development of cloud exchange-related management standards and service definitions.

About the author:
Rob Rich is managing director of Insights Research at TM Forum. He has more than 15 years of experience in market research and consulting, and an extensive knowledge of various aspects of telecommunications. With more than 900 member companies, TM Forum is the largest global trade association focused on bringing together the digital ecosystem -- including communication service providers, digital service providers and enterprises -- with the goal of enabling an open digital world.

This was last published in September 2013

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