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max-bowie
Max Bowie, editor, Inside Market Data

Opening Cross: The Perfect Storm­—Cloud’s Reign Brewing at Last?

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Early evangelists of “the cloud”—that loose term for virtual compute power and other capabilities—have been telling their story for 10 years or so, often to blank looks from then-junior reporters like myself. But it seems that now, as the term has permeated language and understanding from the retail level (see Microsoft’s “To the cloud!” TV ads) to the highest levels of the financial markets, cloud is set for stratospheric takeup.

Though this change has been on the radar for a while, the full potential of cloud is only now being realized. Early last year, independent consultant John Akbari wrote an Open Platform for Inside Market Data predicting heavy cloud on the horizon as firms looked to expand services while still reducing costs. Last month, a Bloomberg survey of chief information officers revealed a shift towards managed solutions, with 45 percent of respondents saying that cloud computing yielded the most return on investment over the past year, while a Gartner survey from January shows cloud computing and virtualization rising to CIOs’ first and second priorities, respectively, for 2011.

One reason for this is simple: the perfect storm created by the recent crisis in financial markets is causing firms to investigate lighter-weight technologies that allow them to do more without associated increases in spend—particularly smaller, buy-side firms without the resources and budgets of their bulge-bracket rivals. “Smaller firms are almost certainly going to have to look at things they can take as a service rather than acquiring any technology to install on-premise and manage themselves. And given that they are liable not to have too massive a budget for IT, much less the IT staff to support an entire on-premise infrastructure, I would expect them to be looking to get as much as they can as a service,” says Rik Turner, senior analyst at research firm Ovum.

But it’s not just smaller firms that can benefit: Stanley Young, chief executive of NYSE Technologies, which announced a cloud initiative to access data and on-demand processing power in NYSE Euronext’s datacenters last week, says it should appeal across the board. “We have 1,200 clients, and I would like to see all 1,200 sign up…. If any company in this business isn’t buying services like this in a year’s time, their shareholders should be asking why not,” Young says.

There are already plenty of companies playing in this space—from those providing managed services such as OptionsIT to on-demand data vendors like Xignite, to niche cloud providers like CloudSoft and InvestCloud, to the many who utilize cloud computing as a component of the services they provide, such as analytics vendor StatPro, whose new Revolution platform utilizes cloud delivery. But cloud has always suffered from a lack of understanding and from security concerns, especially in light of recent service outages in Amazon’s cloud—one of the largest, if not the largest provider of on-demand cloud computing (the moral of the story is, cloud isn’t the be-all and end-all: you still need redundancy and backup)—though that doesn’t seem to have dampened Wall Street’s current enthusiasm for the cloud.

Nor does the question of how a cloud is partitioned between public and private areas, with dedicated areas for specific companies and services. This is due in part to vendors like VMware—one of the partners enlisted by NYSE Technologies to build its own cloud computing and access service—whose virtualization management technology allows users to not just partition space, but assign dedicated machines—even down to the specific configuration required by clients.

And with firms’ appetite for increased flexibility and reduced spend, expect more people—not just the daydreamers—to be sticking their heads in the clouds in the coming years.

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