IBM: Increased Demand for Hosted Private Clouds, Community Clouds

Recently, Options IT announced a partnership with IBM that will leverage the software giant's BladeCenter technology. Buy-Side Technology asked Lauren States, vice president of cloud computing at IBM Software, if she is seeing increased demand for cloud services coming from Wall Street.

While there is little appetite for front-end trading applications to move to the cloud, States says she has seen an increase in demand for both hosted private clouds and community clouds coming from investment firms.

How will Options IT leverage IBM's BladeCenter technology?
Lauren States, vice president of cloud computing, IBM Software: Working with IBM, Options IT has built a private cloud that uses IBM BladeCenter technology located at each of its 18 global datacenters. When a client requires a new service or application via the Options Pipe platform, Options IT is able to quickly provision it in the BladeCenter environment. IBM's streamlined blade server design allows for the seamless expansion of the Pipe platform, allowing Options IT to quickly add server performance and capacity to existing BladeCenters in relevant regions.

From what you've seen, are investment firms coming around to the cloud?
States: Within the last few years, the notion of cloud computing has shifted from being regarded as a vision of the future to representing a strategic and viable option for a growing number of financial companies. In fact, TowerGroup expects that the financial services industry will increase its investment in cloud computing from $4.0 billion—or 1 percent of IT spend—in 2010, to $21.9 billion—or 5 percent—by the end of 2012.

IBM has been watching and working on cloud for years, with a eye toward making the model consumable for enterprises. We are now seeing an inflection point in businesses adopting cloud. Businesses are excited about cloud as a way to reach new markets and extend their capabilities to new clients. To take advantage of the model, they are seeking partners with deep industry expertise and vertical solutions that support the characteristics and requirements of their specific industries—whether its healthcare, retail or financial services.

IBM sees that clouds are increasingly being considered and embraced by a new class of smarter banks who are cutting costs and complexity from their organizations, while driving more agility within their enterprises.

In fact, IBM and the Securities Industry Financial Markets Association (Sifma) conducted a survey of 250 Wall Street business and IT professionals in June 2010 about their future IT spend decisions. Sixty-one percent of those surveyed said they would consider investing in cloud to innovate their business models. This indicates that banks and investment firms increasingly are getting more comfortable with entrusting disruptive technologies to fundamentally change the way they operate.

And IBM is partnering with banks like Nedbank in South Africa, Bank of Toyko Mitsubishi in Japan, and Sugamo Shinkin Bank in Korea, on cloud engagements.

Is there any interest in moving front-end trading applications to the cloud?
States: We are seeing banks think about and adopt cloud from different entry points depending on the work they are doing and the degree of criticality to their business. So, like most large enterprises, banks are looking to the cloud to improve employee productivity, deploy new products and services faster and reduce operating costs, starting with workloads that are ripe for this environment, technically and from a risk–reward perspective, including: development and testing, virtual desktop, collaboration and analytics.

It is still too soon to forecast how many banks will be interested in moving critical front-end trading applications to the cloud in the near-term, but we do see the technology being applied in new and diverse ways on a longer-term basis.

An example of how the use of cloud is broadening across the enterprise can be seen in a trend that we are seeing among financial organizations to run critical analytics applications on private clouds. Banks are investing in analytics to do three things: first, improve customer centricity; second, integrate risk management; and third, increase operational efficiency.

The majority of conversations we have been having with banks have been around applying the use of analytics in private clouds on-premise to facilitate the standardization agenda, crossing many internal departmental data silos and disparate business intelligence solutions. However, there is an evolving increase in both hosted private clouds and community clouds also forming.

IBM is having in-depth discussions and engagements with banks to help them individually, and potentially as a group, to lower cost and improve operations and customer care. In addition to private clouds—on-premise and hosted—community clouds may ultimately form to transform banks. For example, the opportunity to reduce fraud can be accelerated when multiple banks work together as community cloud to cross individual banking silos.