For over a decade, integration service providers have played an important role in the IT industry as intermediaries for the integration of B2B e-commerce processes like order to cash among dozens and sometimes thousands of trading partners. The adoption of cloud computing is creating demand for a new type of B2B intermediary — the cloud service brokerage (CSB) — to aggregate and add value to cloud services. By leveraging their well-established role as B2B intermediaries for e-commerce, many integration service providers are well-positioned to expand their capabilities to include cloud computing and, thus, evolve into CSBs.

• Many integration service providers will evolve into CSBs, e.g., by adding native cloud-computing capabilities to their traditional e-commerce-focused B2B solution portfolio.

• CSBs will heavily leverage integration as a service (IaaS) to help facilitate cloud service consumption across highly diverse cloud service providers and consumers.

• Business process networks (BPNs) — prebuilt solutions for multienterprise processes that accelerate the integration of e-commerce and cloud projects — will be delivered by integration service providers and increasingly by CSBs.

• Stand-alone IaaS consumption will endure for decades, but during the next five years IaaS consumption will shift to a predominately embedded consumption model within other IT solutions, e.g., BPNs and CSBs.

• IT user companies should look for solutions from CSBs that address both traditional e-commerce and cloud services intermediation.

• CSBs should develop or partner to add strong IaaS capabilities to their portfolios so that they can efficiently address cloud-service-based and e-commerce-based B2B integration.

• Integration service providers should look for opportunities to add native cloud-computing capabilities to their B2B e-commerce capabilities and, ultimately, evolve into a CSB.

• Integration service providers should maximize their market potential by selling directly and through partners that embed IaaS in IT solutions, such as BPNs and CSBs.

In the last 10 years, Gartner has followed the evolution of electronic data interchange (EDI) value-added networks (VANs) into more general-purpose integration service providers. Integration service providers play an important role in the IT industry as B2B intermediaries that facilitate the integration of multienterprise e-commerce processes like order to cash among dozens, hundreds and sometimes even thousands of trading partners. The rapid adoption of cloud computing is creating demand for a new type of intermediary — the CSB — to facilitate the consumption of cloud services on behalf of IT consumers.

While the CSB role will be adopted (and aggressively targeted) by a wide range of providers across the IT industry, integration service providers in particular have a unique opportunity to leverage their well-established role and skills as B2B intermediaries for e-commerce, enrich those with native cloud-computing capabilities and, thus, evolve into CSBs. In this research, we explore the evolutionary path of integration service providers, explain why many are likely to evolve into CSBs via an explicit go-to-market strategy, what integration service providers need to do to successfully make this transition, why this change in the B2B market will ultimately benefit IT users, and the impact of this evolution on the emerging CSB market segment.

In the last 10 years, IT users — driven by IT innovation and a desire to increasingly automate B2B processes — have implemented more and increasingly complex B2B integration projects. This has driven IT providers to expand and evolve their B2B integration solutions to meet the evolving demand. In the next 10 years, IT users — driven by new forms of innovation like cloud computing and governance, and the increasing need to automate and improve more of their B2B processes — will implement even more B2B projects. We believe this will drive providers to substantially evolve their B2B solutions again to meet evolving demand. In Figure 1, we depict the evolution of B2B providers, from VANs into integration service providers into CSBs.

In the past 10 years, most EDI VANs have evolved from EDI VANs into integration service providers — a transition driven largely by IT users that wished to outsource the transformation of B2B documents in addition to outsourcing just B2B communications. To accommodate this changing requirement, EDI VANs implemented new features like in-network transformation and process visibility, and improved their community management capabilities. This allowed providers to selectively enable transformation capabilities "on demand," as customers required it, help customers better track B2B processes and implement process improvements, and to more efficiently provision such capabilities in scale across large projects and many customers. Providers across the board also invested heavily to modernize their IT stack — e.g., to "SOA-enable" their hosted functionality so that new capabilities could more easily be "plugged in" or offered as IaaS — and hosting strategy (e.g., to switch to more-reliable hosting providers and to harden their IT stack to improve data center fault tolerance and disaster recovery across data centers). Recognizing these changes in the breadth and maturity of hosted integration capabilities in 2004, Gartner formally defined IaaS (see Note 1) to label a more highly evolved form of cloud-based integration functionality than its precursor, EDI VAN services.

In addition to enriching their integration functionality and technology infrastructure to support more-complex B2B integration projects, providers also evolved their B2B integration service offerings. In the late 1990s and early 2000s, when an IT user outsourced its B2B integration project, the provider would offer "EDI managed services," i.e., a system integration project based on a highly customized statement of work, sometimes deployed on-premises, sometimes hosted, sometimes a hybrid, etc. However, in the last 10 years, as integration service providers enriched their IaaS capabilities and sought to scale up to support more B2B projects, they pushed nearly all outsourced B2B projects into the cloud, and dramatically simplified their statement of work and pricing models. We define this more highly evolved form of outsourcing B2B integration outsourcing (BIO) in Note 2. These improvements, combined with increasing user demand to outsource B2B projects (particularly after the worldwide recession in 2008 dried up many company's capital and head count to support new B2B projects), have driven BIO into an $800 million yearly market that we forecast to grow by nearly 20% over the next five years.

After modernizing their technology (now IaaS) and service offerings (now BIO), Gartner started calling the providers of these solutions, e.g., GXS, Sterling Commerce (now IBM) and EasyLink Services International, integration service providers, rather than EDI VANs. The new label was simply more accurate and helped acknowledge the changes that had occurred. The new moniker was also more suited to providers like Comarch, Crossgate, Hubspan, E2open, Internet Commerce (later acquired by EasyLink Services International), Tieto, etc. — that did not evolve from EDI VANs, per se, but emerged with XML and Web natives, and with solutions that were already more commensurate with our definitions of IaaS and BIO to begin with.

While nearly every VAN has successfully evolved into an integration service provider, it is worth noting that most still offer a combination of traditional EDI and more-contemporary combinations of IaaS and BIO services. In fact, the traditional EDI business is still a big market (we estimate $800 million per year, the same as for BIO), and EDI VAN customers are often good candidates for more-complete IaaS/BIO solutions. That's because it is fairly natural for companies that already outsource B2B communications to incrementally expand their service providers' responsibility to also do B2B transformation and project management. These market changes are good for IT users because they provide innovative, new B2B capabilities and a wider range of B2B integration project outsourcing options, while the older EDI solutions offer investment protection for older B2B projects. The changes also allow users to focus more attention on actually improving relationships with trading partners, instead of dealing with IT technology issues. These changes are good for IT providers as well, because they provide enduring new sources of revenue to offset declines in the more traditional EDI business.

In the next 10 years, many B2B providers will evolve again, from integration service providers into CSBs. In fact, by definition, i.e., by aggregating and adding value to cloud services on behalf of consumers, many integration service providers are already beginning to assume the role of CSBs, even if they don't yet have an explicit CSB go-to-market strategy. This is because many of their core competencies and IT assets — such as a B2B infrastructure, a large number of companies on their networks, a service competency brokering large-scale B2B integration projects, and incorporation of external cloud services — are commensurate with the CSB definition and role.

In the CSB reference model, we have identified three aspects of a CSB: the CSB business model, CSB functions and CSB enabling technology:

• CSB business model: The type of business model that is used for brokering, for example, ranging from simply a provider of cloud services (primarily a technology offering) to being embedded within a BPO service (with the emphasis on IT services).

• CSB functions: Value-added capabilities delivered on top of original cloud services, for example, consistent billing, security, integration and visibility, and a single provider relationship for any consumed services.

• CSB enabling technology: The enabling technologies that make brokering the CSB functions described above possible. These include governance, integration and community management.

Generally speaking, the integration service provider business model, functionality and enabling technology are a subset of those for CSBs. For example, the CSB business model involves brokering or playing an intermediary role between cloud service providers and cloud service consumers. Integration service providers play a comparable intermediary role, albeit usually for intermediating e-commerce processes between buyers and sellers, manufacturers and suppliers, and so on. CSBs, on the other hand, provide capabilities as intermediaries not typically found in integration service providers — for example, native cloud API support, providing billing services (so that cloud consumers can be charged in a consistent manner, regardless of what underlying cloud service the consumer requires) and governance capabilities (using explicate policy management and enforcement technologies). However, the core value proposition — helping facilitate interactions among businesses interacting through the cloud — is largely the same, and whatever distinctions there are between the focus of integration service providers and CSBs will fade as CSBs intermediate more-cloud-based, e-commerce interactions, and as integration service providers intermediate more cloud service interactions.

Although there are differences between the emphasis of what integration service providers and CSBs do, their similarities outweigh the differences, and it will be quite natural for integration service providers to evolve into CSBs, since they have a "head start" on many of the IT and business assets needed to assume the role of a CSB. The transition into the CSB role will provide integration service providers with enduring new B2B and cloud native solutions, and sources of revenue they can sell into their existing B2B customer base. To successfully evolve, integration service providers will leverage and build on their existing core competencies and IT assets, for example:

• Expanding their integration capabilities, e.g., adding support for cloud service integration

• Adding new technical capabilities commensurate with CSBs, e.g., governance technologies

• Implementing more-holistic, process-specific solutions, e.g., BPNs

• Aggregating and adding value to cloud services, e.g., using cloud storage for transaction archival

• Expanding their relationship with cloud-native IT service providers, e.g., enabling business process utilities

Not all integration service providers will choose to implement an explicit CSB go-to-market strategy; even when they do, the providers will vary widely with regard to what degree they successfully evolve into CSBs, and to what degree they balance their role as integration service providers and CSBs. Most providers will retain their role as an integration service provider even if they adopt the role of a CSB, since the integration service provider lines of business remain relevant. In fact, integration service provider customers serve as the basis for CSB upsell opportunities. But many will adopt explicit CSB go-to-market strategies, and many will assume a primary role as a CSB because there are many compelling reasons to do so. Drivers include:

• Increasing adoption of cloud computing: The worldwide market for cloud services — including various forms of IaaS, platform as a service and software as a service (SaaS) — was worth $58.6 billion in 2009, and is forecast to grow to $148.8 billion by 2014. From a macro-IT point of view, this has a material effect on the physical location of e-commerce application functionality that must be integrated when companies implement multienterprise processes, such as order to cash or procure to pay. For example, up until quite recently, whenever an integration service provider integrated such processes between a retailer or manufacturer and its many suppliers and customers, it was typical for the affected applications that must be integrated to be located on-premises at each company. But, over time, some of this functionality will be cloud-sourced, which means that integration service providers will develop a native competency integrating cloud-based functionality used by customers into their own networks. Doing so will make integration service providers increasingly "cloud native," as they (like CSBs) increasingly aggregate and add value to cloud services in order to implement B2B e-commerce projects.

• Cloud service API complexity and interoperability: Surprisingly, much like the EDI implementation guides of the last decade, many of the new, proliferating cloud API specifications published by cloud providers are long (commonly 25 to 75 pages; salesforce.com's is 500 pages) and highly technical. It takes special skills and IT infrastructure to natively consume them. Providers of cloud computing tend to overrely on their published sets of cloud APIs as the "solution" for cloud service integration and interoperability. Their approach to their own customers is often a simplistic "build it and they will come" mentality, where they assume that customers are willing and happy to implement their proprietary APIs — or rely on third-party technology companies to fill the "technology and knowledge gap." For this reason, there is a whole vendor ecosystem offering a broad array of solutions to integration cloud services. Nevertheless, many companies will balk at this cloud API complexity, and will look to service providers to help mediate cloud service interactions on their behalf. Gartner has explored the complexity of cloud service interoperability, and defined the conditions on which cloud service consumers should rely on CSBs. Integration service providers — with their long history of brokering complex, diverse forms of B2B interactions related to e-commerce value chains — are particularly well-positioned to also broker cloud APIs, and thus assume the role of CSB for that role. We have already seen leading indicators that integration service providers will begin incorporating native cloud service integration technology into B2B networks, and, therefore, begin the evolution into CSBs.

• Increasing governance requirements: Governance technologies are increasingly being deployed in B2B projects to define and enforce proliferating business and technology compliance issues involving regulatory issues (e.g., Health Level Seven [HL7], Health Insurance Portability and Accountability Act [HIPAA], Sarbanes-Oxley Act [SOX]), security (e.g., authentication and authorization for access to services), operational policies (e.g., cloud API response time) and business-process-level policies (e.g., monitoring and enforcing supply chain events). Because of their prominent role brokering cloud services, CSBs will inherently need to implement governance technologies to help define and enforce policy with regard to the cloud services they consume and deliver. Integration service providers have already begun selectively implementing governance technologies as part of their own networks, so this positions integration service providers well, as they deliver governance capabilities in conjunction with existing and future cloud-centric projects as they adopt a CSB role. In parallel, a consistent amount of SOA governance technology is evolving to provide as-good-as-it-gets governance capabilities for services in the cloud. The "SOA" in SOA governance technologies will soon be dropped, as the governance will apply in general to functionality embedding business logic and provided as a service — SOA is at the base of all that, but will be taken for granted and not talked about anymore.

• Emergence of BPNs (see Note 3): BPNs are a comprehensive form of packaged integration solution that combines IaaS with prebuilt or preconfigured adapters and translation maps, and a pre-existing B2B network — all designed to implement a specific multienterprise process. For example, BPNs are available for suppliers in retail or shippers in logistics to help them more quickly implement the order-to-cash or logistics track-n-trace processes. Gartner has tracked BPN adoption on the Gartner Hype Cycle for years, and they have evolved from a Technology Trigger just a few years ago to nearly the Peak of Inflated Expectations today. Increased BPN proliferation and use — from providers such as E2open, eBuilder, Elemica, GXS and IBM (Sterling Commerce) — anticipate the eventual emergence of BPNs into the IT mainstream, and we've seen IT provider partnerships that seek to capitalize on the opportunity. While integration service providers have already begun offering stand-alone BPN solutions to help large B2B communities more quickly and efficiently implement complex multienterprise processes, BPNs are also a useful enabling technology for CSBs that will be able to leverage them in order to more quickly deliver cloud-based IT solutions for specific industries or business processes.

• Emergence of business process utilities: Like other segments of the IT industry, the multi-hundred-billion-dollar IT service market segment — including system integrators worldwide — are rapidly adopting cloud computing to help innovate, potentially drive down the cost of their solutions and accelerate their time to market for new service offerings. Business process utilities (BPUs, see Note 4) are a relatively new cloud-sourced form of business process outsourcing (BPO), and providers of BPU will be seeking technology partners — such as CSBs — to help fulfill the cloud technology stack requirements, which include B2B integration capabilities. Already, some integration service providers are being leveraged by BPO service providers to fulfill complex B2B integration requirements, which makes them well-suited (as they evolve into CSBs) to also help enable future BPU offerings from system integrators. We have explored this emerging symbiotic relationship between the IT services industry and CSBs, which includes integration service providers.

• Integration service providers will cloud-source to drive innovation: The increasing availability of SaaS and other forms of cloud computing give integration service providers an opportunity to quickly incorporate a larger variety of more-diversified and innovative IT functionality that is cloud-based by aggregating these services into their own networks. For example, many integration service providers (e.g., IBM [Sterling Commerce], Crossgate, Elemica, GXS, Liaison and Tieto) have already incorporated third-party e-invoicing solutions. GXS has experimented with cloud storage as an alternative to more-traditional approaches to e-commerce transaction archival. Providers like RollStream and Aravo deliver sophisticated communication management capabilities "in the cloud," and resell those through integration service providers, which integrate their third-party cloud services into their own networks. As more cloud-based business functionality becomes available, integration service providers are well-positioned to adopt the role of a CSB by aggregating and integrating these cloud services with their own offerings, then delivering them as value-added services to their own B2B customers — like CSBs do.

• Capitalizing on the B2B "network effect": Over the last decade, B2B providers have built up networks of interconnected companies, in some cases, tens of thousands of companies on individual networks. While integration service offerings such as IaaS and BIO provide participating companies with real value, integration service providers are just beginning to "mine" their unique asset as the broker for millions — in some cases, billions — of transactions flowing through their networks each year. To date, some of the more compelling, value-added services include business activity monitoring, for example, layering data and compliance validation tools as an intelligent overlay to the order-to-cash or track-n-trace processes executed across a B2B community. While some early successes with intelligence in the network has driven B2B vendor merger-and-acquisition (M&A) behavior — the opportunity to capitalize on the B2B "network effect" has largely been unfulfilled. Given their large B2B networks and flow of transactions and messages, integration service providers will be tempted to adopt the role of a CSB — with its greater focus on "value" in the middle — with the hope of more thoroughly leveraging existing networks.

Given these and other compelling drivers, many integration service providers will be compelled to actively evolve into CSBs. So what's in it for IT users? Will the evolution of integration service providers into CSBs materially benefit users? We believe so, for the following reasons:

• Single sourcing: Companies with business relationships and connections into integration service providers (for e-commerce B2B) can benefit from leveraging those existing relationships and connections to also address CSB requirements. Over the last 10 years, IT users have relied on B2B service providers to routinely manage large B2B projects involving dozens, hundreds and sometimes even thousands of heterogeneous B2B connections involving diverse data formats and B2B protocols via their application of sophisticated technology infrastructure and subject matter expertise. As described earlier in this research, cloud APIs are similarly complex, and many integration service provider customers would likely welcome having the same provider, if possible, deal with the complexity of cloud computing connectivity as well. In other words, if a company has already outsourced its e-commerce B2B to a provider, it will be natural and convenient to also outsource management of cloud services to the same provider.

• Embedded Integration: As integration service providers evolve into CSBs, they will more frequently embed integration functionality within applications, BPNs, BPUs and other IT solutions. Embedded integration combines preconfigured integration software or IaaS with prebuilt adapters for applications and cloud APIs, prebuilt maps for translation, predefined choreography (e.g., process models, where appropriate — all delivered as a complete solution to a particular integration problem). Because it eliminates or at least minimizes the development effort to implement integration projects, embedded integration lowers the cost and accelerates deployment of integration projects.

• Obsolescence avoidance: In the early 2000s, many VANs were slow to adopt Web-inspired communication and approaches, which led to a period of business decline and turmoil. Some providers perished, others were acquired and many languished, which collectively shattered the IT user community's confidence in the B2B market segment and, in some cases, created transitional disruption, e.g., when vendors were acquired (sometimes by undesired vendors) and B2B infrastructures were consolidated (sometimes impacting B2B operations). It took over five years (and many millions of dollars) for some integration service providers to modernize their solutions and re-establish their relevance and viability among IT users. Proactive evolution into CSBs will help integration service providers avoid a repeat performance relative to cloud computing by offering a road map from B2B to cloud computing, and helping users retain their confidence that their existing integration service providers are indeed investing in the future for everyone's mutual benefit.

• Outsourcing B2B is a attractive to many companies: Via their IaaS and BIO solutions, integration service providers have proved that shifting B2B integration projects to service providers can save money (we estimate 10% to 30%, depending on what degree users benefit from not having to replicate their B2B providers' economies of scale) and shift B2B project deployment costs from a capital expense (hardware, software and full-time equivalents) to an operational expense, i.e., a subscription model (including recurring fees for managing integration projects). Despite the VAN industry turmoil over the last 10 years — a period in which prices for B2B services substantially declined — integration service providers have modernized their networks and service offerings and have become more efficient, and they are re-emerging with market-tested business models that prove the enduring value of their services and market-sustainable pricing. Perhaps even more importantly, shifting B2B projects to service providers helps companies scale more quickly at a more predictable cost — with better access to skilled resources. We have heard from users that originally implemented their own B2B projects but later, faced with increasing business demands to scale up operations to include more processes and external business processes, ultimately sought the assistance of B2B providers to help or take over the project. Unlike CSB startups and other less-proven providers, integration service providers that evolved from VANs and now evolve into CSBs are more likely to be successful implementing the CSB business model by applying the lessons learned from brokering e-commerce B2B to the emerging CSB business model.

Despite the compelling drivers and benefits to users enumerated above, there are some inhibitors and potential risks for both integration service providers and users as integration service providers take their next evolutionary step. These include:

• Possible overextension: Many integration service providers have devoted years and millions of dollars to modernize their services and position themselves to better serve customers of the IaaS and BIO B2B solutions. Investing to now evolve into CSBs could dilute limited R&D resources and cause some providers to "take their eye off the ball," failing to continue serving the needs of their more-traditional e-commerce B2B customers. At a minimum, integration service providers will need to carefully handle their transition into CSBs so that they don't alienate their existing B2B customers while pursuing the new CSB opportunity.

• Inadequate CSB commitment: In contrast with possible overextension, providers must also invest substantially enough to deliver a viable CSB offering. This includes investments in new technologies and infrastructures (e.g., governance technologies, native cloud API support, etc.), but also becoming a full and active member of the emerging cloud ecosystem. The latter point means, for example, that you must have a sufficiently good working relationships with cloud service providers so that when cloud APIs change, you have been given early access to updated APIs and specifications, and can implement and test any required changes in your network prior to those changes going live on the cloud provider's site.

• Inadequate governance: Users are particularly sensitive to security and governance issues, which range from ordinary SLAs around uptime to fine-graining policy management and enforcement and service life cycle management across cloud services. Most integration service providers today do not currently incorporate formal service governance technologies in their solutions, but will need to do so as they evolve into CSBs.

• Insufficient "value in the middle": One of the greatest risks for any CSB is not delivering enough value in the middle to justify whatever fees they charge for brokering cloud services. Although we believe that integration service providers are at an advantage specifically because they've fine-tuned their B2B business models over the last 10 years, and have developed a sustainable and growing B2B services brokerage model, this does not guarantee future success in the CSB business model. In particular, CSB users will be wary of cloud intermediaries that may underdeliver while shaving "value" in the form of fees for their brokering services. So providers need to ensure that they deliver enough compelling value in the middle to justify their fees, and they need to clearly communicate that value to the IT industry. The latter point is best explained by a lesson learned in the EDI VAN industry here; early providers of B2B integration software positioned EDI VANs as "expensive," relative to the cost of doing FTP or Applicability Statement 2 (AS2) over the Internet. What the EDI VANs failed to do early on was to communicate that even basic EDI transport services included much more that "just" communications; for example, it included strong security, document archival, end-to-end message tracking, transaction replay (for companies that lose messages), various reports and process visibility, business continuity (meaning strong fault tolerance and disaster recovery strategies), 7/24 support, etc. The point is that the value of EDI transport was not incarnate in just Web-based FTP or AS2 — there was a whole range of technology and business benefits to users that service providers were sometimes not communicating well to customers. The same risk exists for cloud APIs — facilitating cloud services consumption is about much more than just executing an API.

• Reluctance to disintermediation: This challenge applies to the overall adoption of CSBs in general and, by association, also to the potential evolution of integration service providers into CSBs. In particular, some providers of cloud services may be reluctant to have intermediaries such as CSBs get between them and their customers. And vice-versa, meaning that some cloud services consumers may simply prefer not to have intermediaries between them and their cloud service providers. This is a factor in the sourcing decision for companies that outsource their B2B projects to integration service providers, particularly when outsourcing integration projects involving their own customers — e.g., a supplier selling into retailers or manufacturers. As for e-commerce B2B, this will likely also be a factor in cloud services integration.

• Reputation/missing the boat: When the leading VANs of the late 1990s failed to accommodate Web approaches to B2B and at the same time raise their prices they alienated their customer base — and they have spent nearly a decade rebuilding their reputations and trust among users. Unfortunately, some integration service providers still have a reputation for not being in touch with changes in the IT industry, which may affect their ability to overcome remnants of their bad reputation in the early 2000s. Even if they overcome their prior reputations, many in the IT industry — particularly those native to cloud computing — may challenge whether integration service providers — previously focused on traditional e-commerce — have sufficient "cloud chops" to take on the role as a CSB. While providers can handle this to some degree via external marketing, e.g., attending cloud-native industry events, their decisive commitment to CSB and compelling CSB offerings will be essential to overcoming any reputation of not being relevant to the cloud industry.

Despite the risks and challenges enumerated above, we still believe integration service providers are well-positioned — and should consider — evolving into the CSB role, although they should do so with a balanced approach that also protects years of investments in their existing B2B solutions and customer base. Taking everything enumerated in this research into consideration, we believe many integration service providers will evolve into CSBs, and that, by 2015, 75% of the largest 25 integration service providers will have explicit CSB go-to-market strategies. Many will continue to grow their existing B2B customer base while developing new lines of revenue as a CSB.