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Deutsche Telekom births cloud broker

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The cloud computing market is not even really a market yet, but a startup spun out of Deutsche Telekom wants to set itself up as cloud buy/sell broker of cloudy resources.

The German telecom giant and its T-Systems subsidiary - which does systems integration and IT hosting and support - have had more than a passing interest in utility computing for years now, just like other telecom giants such as AT&T and Verizon. They don't want to see Amazon and Google, those Web upstarts, come in and take over the next kind of outsourcing and put a hurt on their profits.

But running clouds does not necessarily mean creating the technology to control clouds - or funding all of the development of such tools entirely by yourself. Which is why Zimory was spun out of Deutsche Telekom Laboratories as an independent subsidiary back in November 2007. It's funded by T-Venture Holding, a venture arm of T-Systems, and High-Tech Grunderfonds Management, a €272m venture capital fund created by the German government with backing from Deutsche Telekom, the KFW Banking Group as well as industrial giants BASF and Siemens in order to foster German high-tech startups.

The Berlin-based Zimory came out of stealth mode today, offering its cloud management tools to enterprises that want to set up their own clouds. Using a variant of these tools aimed at public clouds like Amazon's EC2 compute and S3 storage utilities, it's also positioning itself as a broker sitting between buyers and sellers of cloud computing and storage services.

Zimory actually announced back on January 19 that it had been chosen to participate in an Microsoft incubator program that involved hooking its cloud management tools into the Hyper-V hypervisor created for Windows Server 2008. So the launch today of the company is actually the company's second big announcement.

Thus far, Zimory has only two customers for its Enterprise Cloud tools. Yup, you guessed it: T-Systems is one. And Deutche Post, the German post office, is the other. But according to Behrend Freese - the chief executive officer at Zimory who has headed up venture capital operations at Deutsche Telekom Laboratories, Allianz Venture Partners, and JP MorganChase - the real opportunity is going to be bridging between internal and public clouds and between buyers and sellers of public cloud capacity.

The way he sees it, IT management is really a supply/demand problem, and virtualizing infrastructure and software and creating pools of capacity that people can buy and sell is the best and most efficient way to utilize computing and storage capacity.

"In the future, there are going to be hundreds of different clouds," explains Freese. "Customers do no want to be locked into to any one cloud, and they will want to be able to move around clouds."

To test the idea - and give potential future business partners a taste of brokered cloud services - Zimory has tapped T-Systems to set up a few hundred virtual machines inside two of its data centers, which has been equipped with the Zimory tools and opened up to the world to play with through the Zimory Public Cloud.

To sign up to be a user of the cloud, you can visit this link and buy capacity. If you want to hook your systems into the cloud, you can contact Zimory to set up a partnership arrangement. The business model that Zimory has developed is to distribute its cloud management tools for free and then charge for software and services at an hourly rate.

As a broker of public cloud capacity, Zimory will set prices, make contracts, set up and maintain security, migrate virtual machines and their software stacks around the clouds and enterprises, and bill customers for services rendered. The VMs that Zimory is peddling so far are simple Linux and Windows slices that can be equipped with various software stacks, such as the Apache-PHP-MySQL triple play or a full-blown content management system. The software can be packaged up for Xen or ESX Server hypervisors, and in the future, Hyper-V will also be supported.

On the sell side, where companies partner with Zimory to add their capacity to the Public Cloud, partners can use the tools for free. But Zimory gets a broker fee from the buyers as they in turn sell capacity to end users. Pricing for capacity on the cloud will vary depending on service level agreements, geographical area, and time restrictions, according to Freese. But since the Public Cloud is just getting rolling and is now available for free, pricing has not been announced. But you can expect something that looks like Amazon's prices for EC2 and S3.

"At the beginning, we think it is important to do it this way," says Freese, "but prices will eventually move based on supply and demand for different clouds."

Freese says that it has more than 100 beta testers on the Public Cloud already and "more than a handful" of DAX-traded companies kicking around its Zimory Enterprise Cloud management tools. ®

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