Brokers: Do they offer value?

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The cloud may be promoted as an answer to the problem of managing IT in-house, but brings complexities of its own. As the number of providers grows, chief executives find themselves faced with a bewildering range of choices.

Brokers act as intermediaries in a number of sectors, including insurance and the financial markets, but until relatively recently the term has not been applied to IT.

That is starting to change, although some in the industry remain sceptical as to whether it is simply a buzzword for what has long been provided under other labels, including “managed service provider” or “IT hosting”.

Will brokers simply introduce another layer of cost and complexity into the business of managing IT?

“It can be difficult for chief executives to understand the capabilities of the different technologies,” says Paul Watson, interim chief executive of Star, a provider of on-demand computing and communications services. “They have to stitch together a range of services from different vendors.

“They can either invest in a large IT team and get it to create solutions, or they can go to people who can do it on their behalf. The danger is that ‘broker’ becomes an abused term and that everyone jumps on the bandwagon to rename traditional services.”

Gartner, an IT consultancy, says organisations will often need intermediaries to help them consume cloud services, but warns that businesses must understand that there are trade-offs to be made between the different approaches.

“Cloud services brokerage intermediation will be the best choice for many cloud consumers and IT projects but only under the right circumstances,” it said in a recent report: How to Determine When to Use a Cloud Services Brokerage.

Managing your own relationship with IT providers has the virtue of directness and simplicity, since many providers are geared up to provide exactly what the customer wants. Buying and implementing your own IT systems means you have a better understanding of what you are getting. Because you are in control of the process, you can negotiate on price and the exact level of support you need.

But being your own “prime contractor” means you will require, in-house, the ability to deal with suppliers across a range of IT services, ensuring the technologies marry up and that service agreements are consistent. The more services you require, the more complex it becomes.

Managing these relationships can involve hidden costs, Gartner warns. These can build up in the technical area, where services may need to be integrated and customised and also in non-technical areas such as procurement and legal services. Individual customers may not be well placed to put pressure on large vendors to get exactly what they want.

Using a broker, by contrast, should mean a single contract and consistent service level agreements. In addition, a broker can deliver extra value by integrating the IT services that are being bought in. Spreading your bought-in cloud services across more than one supplier means you are more likely to be able to keep operating if one supplier experiences a system failure or ‘outage’.

But, Gartner says: “The broker role is still relatively immature and the quality varies widely from provider to provider. A broker may not support required third-party services or have the capacity expediently to bring them on line.”

Savvis, a provider of cloud infrastructure and hosted IT solutions, is sceptical of the value of brokers and of cloud computing marketplaces. Speaking at the launch of the company’s global cloud alliance programme recently, Bill Fathers, president, said partnerships with one cloud platform provider offered better value to customers. Price was not the only factor, he noted.

That may be so, but price is clearly an important aspect of any deal. It is already taken into account by traditional service providers such as Star. “We have never called ourselves brokers,” says Mr Watson. “Yet our promise to customers is that we make sure we get the best underlying technology and the best price.

“We will switch customers out of suppliers whose platforms have become legacy or that do not offer the capability available elsewhere. We will change providers that may have been the leader once in, for example, security, but that have not kept up with the market.”

New-style brokers will clearly face strong opposition from established providers of managed services. Cloud vendors such as Amazon have already responded by developing their own technology to help customers manage the services they provide.

Brokers will only achieve greater market share if they can deliver value to their clients.

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