Received: 22 February 2018 Revised: 2 July 2018 Accepted: 3 August 2018 DOI: 10.1002/ett.3514 RESEARCH ARTICLE Optimization-based profitability management tool for cloud broker Denis M. Becker 1 Alexei A. Gaivoronski 2 Per Jonny Nesse 2,3 1 NTNU Business School, Norwegian University of Science and Technology, Trondheim, Norway 2 Department of Industrial Economics and Technology Management, Norwegian University of Science and Technology, Trondheim, Norway 3 Telenor Research and Future Studies, Trondheim, Norway Correspondence Denis M. Becker, NTNU Business School, Norwegian University of Science and Technology, Trondheim, Norway. Email: denis.becker@ntnu.no Abstract This paper represents a model that supports the choice of efficient service port- folios at a cloud service broker. Among the many types of different cloud service brokers, we focus on a firm that offers service bundles that are composed from different services of different internet software providers. The necessary inte- gration, aggregation, and customization of services can be time consuming and costly. Whenever the cloud broker can choose from many service combinations, but has limited human resources with critical time to market, it is essential to prioritize some of the service bundles, markets, services, and internet software providers. The purpose of this paper is to facilitate this kind of decision. More- over, both the time and resources required for creating service offerings and the customers' demand for these service bundles are subject to uncertainty. Because of this uncertainty, a cloud broker needs to be guided to potential service portfo- lios that give the best trade-off between risk and profitability. Our model helps the decision maker to identify efficient service portfolios, ie, service portfolios that for a given risk have the highest profitability or for a given profitability have the lowest risk. Our paper shows the application of this model to a cloud broker that mediates mainly software as a service bundled with mobile subscriptions for telephony (calling and messaging) and internet access. The model is inspired by the ideas from financial portfolio optimization and product-mix decisions under scarce resources. The model corresponds to a linear stochastic optimization problem with an objective function that balances risk and profitability. 1 INTRODUCTION In this paper, we report the development of a service portfolio and profitability management tool for a cloud service broker. Generally, a cloud service broker is an entity that negotiates relationships between cloud service customers and internet service vendors. 1,2 A cloud broker can be established on grounds of different business models with respect to the type of service (platform, infrastructure, and software), type of customers (businesses and households), functions carried out (identity management, accounting, billing, location, etc), degree of rebranding, degree of service aggregation, and other criteria. Because of this variety, different cloud brokers have different attitudes toward which decisions are particularly relevant for running their business. These can be pricing, capacity planning and utilization, coupled with issues like quality of service, security, scalability, and others. 3-5 In this paper, we focus on a cloud broker that mediates mainly software as a service bundled with mobile subscriptions for telephony (calling and messaging) and internet access. The targeted customer groups are both private households and small- to medium-sized enterprizes. Trans Emerging Tel Tech. 2018;e3514. wileyonlinelibrary.com/journal/ett © 2018 John Wiley & Sons, Ltd. 1 of 15 https://doi.org/10.1002/ett.3514