Industry Perspective is a regular Data Center Journal Q&A series that presents expert views on market trends, technologies and other issues relevant to data centers and IT.
This week, Industry Perspective asks Art Murphy about the state of the cloud for financial-services organizations. Art is Director of Client Development for Abacus Group LLC. With a distinct focus on company growth and customer engagement, he combines over a decade of business development and client-relations experience with a deep understanding of the hedge-fund and financial-technology markets. Before joining Abacus, Art was the vice president of business development at Linedata Services, a global solutions provider focused on the investment management and credit communities. At Linedata he helped design and build the company’s profitable business infrastructure and launch its software-as-a-service (SaaS) offering. Throughout his career he has held leadership roles at emerging and established financial software and infrastructure companies such as Nirvana Solutions, NorthPoint Solutions and Eze Castle Integration. Art is based in New York.
Industry Perspective: One of the major impediments to cloud computing for financial services is regulations. How would you summarize the current regulatory/compliance landscape with regard to the cloud and finance firms?
Art Murphy: Rather than hindering, regulation and compliance have actually helped to promote acceptance of cloud computing within the financial community. Increasing regulations and compliance requirements have driven funds to consider their infrastructure as an integral part of a sound business model, whereas previously, IT-related functions were viewed simply as a means to an end that added no alpha to their strategy. In today’s landscape, establishing a solid infrastructure in the cloud enables a firm to both raise more capital and cost-effectively scale the business as it grows.
IP: In what ways can the cloud be of particular benefit to financial-services organizations?
AM: The cloud allows organizations to spend less and do more with technology. It gives them one of the biggest assets a business needs when growing—nimbleness. The ability to scale up and down on the fly as needed without spending large amounts of dollars is key.
Firms are able to support their infrastructure at any capacity without the need to ever grow their internal head count.
IP: How are cloud-service providers catering to the needs of finance firms, particularly in the areas of security and availability?
AM: There are two sets of people who drive change in our space—the SEC and investors. Both continue to push for a more secure environment, while also wanting to ensure all employees can access it 24x7. This is where the cloud shines. We are able to provide the same enterprise-level security found at Fortune 500 companies for a fraction of the cost. We also take the time to acquire security certifications (SAS 70, SSAE 16) that simplify the funds’ investor due-diligence process. Cloud services additionally save money on real estate and cooling by eliminating the need for a large, dedicated, cooled server closet.
Last fall, Sandy was a devastation that wreaked extensive havoc on homes and office buildings through flooding and power outages. Yet data centers across the northeast all stood their ground and fared the storm just fine. Businesses in the cloud operated as usual both during and after the storm.
IP: Latency is a major concern for some financial applications; are cloud services for finance sensitive to such issues?
AM: The short answer is that it depends. Many factors go into determining whether latency is a concern. The application itself can be a factor depending on how it was architected. The location of the “cloud” (data center) can determine whether one will experience latency. A fund’s strategy can also determine whether bandwidth will play an integral role in success, as in quant and high-frequency shops.
IP: What are the main challenges today for cloud providers with regard to servicing the financial sector?
AM: One key challenge comes into play if an existing fund has a large, expensive network closet in place; it can be difficult to transition them to the cloud until their equipment warranty expires.
Another issue arises at times when funds don’t understand the difference between a private cloud and a public cloud like Amazon or Google. Though these public-cloud firms are very inexpensive, they lack the service and support needed in the financial space—the support line you would call at Amazon is the same one my grandfather calls when he can’t open an attachment.
The other hard truth is that some employees may view us as a threat to their existence at the firm. This is never the case. Partnering with a cloud provider actually enables a fund’s dedicated CTO to concentrate more on the bigger picture, and focus his or her time and effort instead on managing budgets and strategically scaling the business.
IP: Federal regulations are increasing, rather than decreasing, for most industries. What does the future look like for the cloud and financial organizations? Will the cloud be able to expand its role, or will it be squeezed out of the market?
AM: The cloud is like online banking. When it was first introduced, people outside of the technology space were hesitant to embrace online banking. It took a few solid years before it gained wide acceptance.
Look at everyday life—we are all moving to the cloud. Even kids: every current-generation videogame system on the market today allows kids to buy games via the cloud instead of physically going to the store. And they can travel to any friend’s house and access their saved games from the cloud. Or take e-readers as an example: if books are accessible in the cloud then I have to believe everything else will eventually follow. The cloud is clearly here to stay.