Cloud Computing

Watch out for 'boiler room' cloud brokers

hands and cloud

Several years ago, Ben Affleck starred in a movie called "Boiler Room." In the film, a New York brokerage house buys up large amounts of stock in companies with low stock prices or a limited amount of outstanding shares. The shares are then considered "in-house" assets.

The stock brokers push clients to buy the assets, claiming that they represent exciting investment opportunities, rather than help the clients find investments that are best suited to their needs. The results for the clients are devastating. Although this was just a movie, it was based on the real-life practices of a brokerage house called Stratton Oakmont. (The recent film "The Wolf of Wall Street" is based on the memoir of one of the firm's founders.)

Now, unfortunately, it appears the federal cloud space could be heading in that direction as well. Many large systems integrators have entered the cloud computing marketplace as cloud service providers (CSPs). Several have invested the time and money to receive highly coveted certification under the government's Federal Risk and Authorization Management Program, which provides a standardized approach to security assessment, authorization and continuous monitoring for cloud products and services.

Because not all CSPs provide all required platforms and services, many federal agencies are seeing the advantages of using a cloud broker to buy services from multiple CSPs. And now some CSPs are interested in becoming cloud brokers as well.

The simple definition of any type of broker is an independent agent who brings together a buyer and a seller. So the question arises: How can a broker that is also a CSP truly be independent?

What's to stop a CSP turned cloud broker/integrator from selling "in-house" cloud services rather than those from other CSPs that might have a better mix of services for that particular customer? Even if a company says its CSP business is completely separate from its broker business, there is still a serious perception issue.

Many large government departments already fight a generally uphill battle to obtain buy-in from their component agencies on a centralized approach to IT. That persuasive effort will be much more challenging for a department that is planning an enterprisewide cloud procurement if the component agencies must simultaneously be convinced that a CSP can be an independent broker.

Preventing vendor lock-in while providing the ability to shift workloads to different providers is one of the greatest benefits of working with a cloud broker. Unfortunately, all those advantages are put at risk when the broker is not independent but instead is a seller as well.

What's to stop a CSP turned cloud broker/integrator from selling "in-house" cloud services rather than those from other CSPs?

Furthermore, CSPs in a broker role would not have the same independence to incorporate offerings from the growing list of providers in the cloud service marketplace. There could be complications resulting from a CSP brokering another CSP that essentially is a direct competitor. And a non-broker CSP could be reluctant to enter into a formal working relationship with a CSP turned broker out of concern that its competitor would gain too many insights into its business practices and solutions. And once again, the customer agency's interests could suffer from the limited options.

Furthermore, what happens when service-level agreements are not met? Can you imagine the finger-pointing that would occur?

For the sake of government customers and CSPs, it is essential for organizations to stay out of the cloud "boiler room." Firms should be CSPs or independent cloud brokers, but not both.

FCW in Print

In the latest issue: Looking back on three decades of big stories in federal IT.


  • Anne Rung -- Commerce Department Photo

    Exit interview with Anne Rung

    The government's departing top acquisition official said she leaves behind a solid foundation on which to build more effective and efficient federal IT.

  • Charles Phalen

    Administration appoints first head of NBIB

    The National Background Investigations Bureau announced the appointment of its first director as the agency prepares to take over processing government background checks.

  • Sen. James Lankford (R-Okla.)

    Senator: Rigid hiring process pushes millennials from federal work

    Sen. James Lankford (R-Okla.) said agencies are missing out on younger workers because of the government's rigidity, particularly its protracted hiring process.

  • FCW @ 30 GPS

    FCW @ 30

    Since 1987, FCW has covered it all -- the major contracts, the disruptive technologies, the picayune scandals and the many, many people who make federal IT function. Here's a look back at six of the most significant stories.

  • Shutterstock image.

    A 'minibus' appropriations package could be in the cards

    A short-term funding bill is expected by Sept. 30 to keep the federal government operating through early December, but after that the options get more complicated.

  • Defense Secretary Ash Carter speaks at the TechCrunch Disrupt conference in San Francisco

    DOD launches new tech hub in Austin

    The DOD is opening a new Defense Innovation Unit Experimental office in Austin, Texas, while Congress debates legislation that could defund DIUx.

Reader comments

Mon, Mar 31, 2014 Greg Mundell

Sean - you can e-mail me at gmundell at infozen dot com

Thu, Mar 13, 2014 Sean M washington dc

I’m working with a government agency to help build them a cloud broker to get to multiple commercial CSPs. That said, the broker is almost entirely built (open source) and is going great. That said the Agency is having lots of questions looking at the long term roadmap to allow the themselves to set up multiple agreements with multiple commercial cloud providers down the road to compete against each other. The issue seems to be hung up on what type of contract would allow for such a path. FFP, multi-award allows a one-to-many scenario, but doesn’t let the Agency compete the multiple cloud providers against themselves nor necessarily allows them to scale/provision up and down according to their desired infrastructure. Do you have any thoughts?

Thu, Mar 6, 2014

Not just SI's but what if the broker is the Gov't and they also provide "cloud" services? Conflict of interest.

Please post your comments here. Comments are moderated, so they may not appear immediately after submitting. We will not post comments that we consider abusive or off-topic.

Please type the letters/numbers you see above

More from 1105 Public Sector Media Group