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Cool bananas! Trading in clouds.

Stuart Lauchlan Profile picture for user slauchlan July 3, 2013
Summary:
Clouds are just bananas really. Or so reckons Michael Osterloh, a member of the board of the Deutsche Börse Cloud Exchange (DBCE), a joint venture formed by the German stock exchange with Berlin-based Zimory GmbH.

Clouds are just bananas really.

Or so reckons Michael Osterloh, a member of the board of the Deutsche Börse Cloud Exchange (DBCE), a joint venture formed by the German stock exchange with Berlin-based Zimory GmbH to create what they claim to be the world’s first trading venue for cloud computing resources.

Due to start in 2014, DBCE will offer a standardised trading platform which gives access to numerous cloud providers for firms seeking outsourced storage and computing capacity.

In other words, cloud as a commodity item.

Like bananas.

Osterloh told reporters at the Exchange's launch this week:

“It's the same with bananas. It is possible to agree on a price, without all the bananas looking the same.

“With its great expertise in operating markets, Deutsche Börse is making it possible for the first time to standardise and trade fully electronically IT capacity in the same way as securities, energy and commodities."

How does it work?

The main users for the Exchange will be large corporates, public sector agencies and organisations such as research institutes that need additional storage and computing resources on demand, or have excess capacity that they would like to offer to the marketplace.

Clients will be able to choose capacity providers freely, as well as select the jurisdiction that will apply to the outsourced data.

DBCE will partner with TÜV Rheinland to create a streamlined auditing process for services being sold through the cloud marketplace.

Providers such as CloudSigma, Devoteam, Equinix, Host Europe, Leibniz- Rechenzentrum and  T-Systems are all initial participants in DBCE.

Frank Strecker, head of the cloud business of T-Systems, said:

“The cloud marketplace of Deutsche Börse offers companies a further choice to purchase top secure and tested cloud-services from T-Systems. Due to the high level of standardisation this [trading] will all be done with great speed and efficiency and with up-to-date prices.”

Who's on board?

It's not technically the first such exchange. Nasdaq and the New York Stock Exchange have specialist marketplaces for financial services cloud resources, while the likes of the UK government's G-Cloud CloudStore might also stake a claim to being an exchange of sorts.

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Forrester's Stefan Reid

Stefan Reid of Forrester Research notes:

While only very few large scape corporate IT divisions managed to establish a cloud broker style engagement model with their lines of business, quite some enterprises or government agencies use already external cloud brokers. This external service maps dynamically the demand to dynamic sourcing options.

But this is perhaps legitimately the first 'all purpose' private sector exchange of its kind.

It's been built on Zimory’s IaaS cloud management software. Zimory worked with a user group of buyers and sellers to establish interfaces for the buy side. It is also working on an interface to such as vCloud Director, OpenStack and HyperV to connect common cloud management instruments in data centers.

Ruediger Baumann, CEO of Zimory, said:

"New cloud computing industries, application areas and brokerage services will develop. The necessary prerequisites for this new age of cloud computing are industry standards for IaaS and a neutral, secure marketplace, which we are creating together with Deutsche Boerse group."

The DBCE will begin operations in Frankfurt and New York around February or March next year, before adding Singapore for the Asian market 4-5 months later.

Baa!

Forrester's Reid sees the DBCE as a bold move:

Offering a public trading of cloud resources is really a courageous and bold move! It pushes the discussion of cloud economics to the level of public trading of long term capacity, spot capacity or even futures.

But he warns that it won't be an easy ride to get enterprise buyers on board:

Long term contracts benefit less from a real-time exchange. The sourcing of three year contracts is more similar to B2B market place trading. Cloud providers will stick to the traditional B2B – RFP process.

The DBCE demand will come from local cloud provider – not from enterprises. Many local cloud providers in Europe built an portfolio of own resources complemented by public cloud resources from the mega players, Amazon, Microsoft, HP, IBM, and Fujitsu.

The DBCE will be an interesting sourcing option especially for these cloud providers that will simply resell public cloud resources to complement their portfolio of self-hosted services in Europe.

Reid adds that German law in relation to IT contracts is outdated and this needs to be kept a wary eye on, as does its stance on data privacy:

The DBCE most likely has to cover the risk of the delivering cloud provider in the sense of a supply chain. If DBCE manages to keep the right balance of unification and keep itself out of the contract relation it could work.

Actually this concept is very similar to the alliances in the airline industry such as Star Alliance: unified purchasing, joint benefits such as mileage programs, but separate business units of each airline.

Resell spare capacity of corporate data centers is an illusion. Neither German data privacy laws, nor most cloud management stacks implemented in most private clouds would be able to share spare capacity to arbitrary external consumers brought in from the DBCE.

However, if Deutsche Börse explores business opportunities around temporary spare capacities “subscribed” by European enterprises from public clouds. Some of this capacity might be up for sales and DBCE could become an independent counterpart to Amazon’s reserved instance marketplace.

Overall, the backers of DBCE need to realise that success will not come overnight. This is a long game, says Reid:

The engagement model between IT departments and lines of business is changing to an OpEx model. Ideally the IT departments transforms from an cost center to a profit center, which enables them to cover the risk of under utilization or failed speculation at the exchange.

Very likely we will even see the raise of a new wave of IT spin-offs stimulated by corporate cloud provider business models.

However, Deutsche Börse needs to acknowledge, that this is a 5 to 10 year transformation requiring a long staying power.

Verdict

A good iteration of a theoretically nice idea that works in niche or vertical markets elsewhere already.

But it is  one that has banana skins lying on the road to success.

Tread carefully.

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