Measuring the Operational Benefits of Embracing Emerging Technologies

In the first part of this five-part feature, based on a recent virtual roundtable dealing with the benefits and challenges around the adoption of emerging technologies, respondents discussed the offerings that fall under the emerging technologies umbrella. In this section we look at the typically low costs associated with experimenting with new technologies, and how cloud-based services have revolutionized consumption and cost models across the capital markets.  

To download a copy of the entire special report, click on this link.

Participants: 

• Carol Dow, principal, Vanguard Information Technology
• David Saul, chief scientist, State Street: 
• Patrick Angeles, chief architect, financial services, Cloudera 
• Todd Gottula, executive vice president and CTO, Advent Software 
• Oskar Mencer, CEO, Maxeler Technologies
• Roji Oommen, managing director, Financial Services, CenturyLink
• Anthony Tassone, CEO, Green Key Technologies 

Question: What are the drivers spurring capital markets firms to deploy technologies to address the business and operational challenges around, for example, big data, supporting firms' mobile strategies, and migrating certain parts of the business to the cloud?

David Saul, chief scientist, State Street: The cost of entry to experiment with some of the other technologies, particularly in the data, mobile and social networking spaces, is very low. That cost has come down because of the cloud, to the point where you can try out a lot more things that you wouldn't have done if you had to make a long-term, high-cost commitment to hardware and infrastructure. Speed is clearly a competitive advantage for everyone, and the ability to satisfy client requirements and deliver products and services quickly, is a competitive advantage. The cloud is an enabler for that.

"The low cost and flexibility of cloud-based IT enables new market entrants with disruptive business models; companies like Uber or Square simply could not have existed in the pre-cloud world. As barriers to entry lower, firms are exposed to increased competition, which requires them to rapidly evolve their business models to survive." ─ Roji Oommen, managing director, Financial Services, CenturyLink.

Oskar Mencer, CEO, Maxeler Technologies: We see demand for cost savings in finance, especially on the operations side, as well as consistency and simultaneity for financial transactions.

Anthony Tassone, CEO, Green Key Technologies: Much of 2013 was about putting in place the necessary compliance processes to comply with all of the new regulations. The marketplace has been forced to make new compliance purchases during a time of lower volumes and revenues. Out of necessity, the market has moved toward cloud providers as a way of meeting compliance mandates, such as disaster recovery capabilities, without incurring additional infrastructure costs.
However, these same customers are now scaling their cloud services because of the greater business agility cloud computing affords them in this very uncertain business environment. In addition to the regulatory drivers, businesses are moving to the cloud in order to manage their capacity in real time, which better illuminates resource allocation inefficiencies.

Roji Oommen, managing director, Financial Services, CenturyLink: We continue to see drivers around technology that are also common across most industries, such as new, on-demand models of IT consumption that are massively scalable, operating vs. capital expenditures, open source and flexible, to name a few.
However, within capital markets, regulatory changes and the erosion of profitability continue to add pressure, pushing firms to rethink their legacy architecture and business models.
The low cost and flexibility of cloud-based IT enables new market entrants with disruptive business models; companies like Uber or Square simply could not have existed in the pre-cloud world. As barriers to entry lower, firms are exposed to increased competition, which requires them to rapidly evolve their business models to survive. Big data is a good example. Software will inherently become more sophisticated over time, driving down the cost of both data storage and building an analytics capability. We believe this is a key driver in deploying technologies in the most cost-effective and timely manner.

Patrick Angeles, chief architect, financial services, Cloudera: We are an increasingly digitized and connected society. Our activities leave a data trail that, because of the network effect, grows at an exponential rate. Specific to capital markets, increased market participation and the rise of algorithmic trading have led to the creation of voluminous transaction data. At the same time, or perhaps consequently, the need to monitor, analyze, and report on market activity has never been so important. Regulatory compliance, in the face of big data, requires new solutions, and Cloudera's technology has been prolific in addressing a number of these big data compliance problems. Beyond regulatory compliance, market participants are also using Cloudera to improve operational efficiency by offloading from-or in some cases completely replacing-legacy systems that are no longer a fit for the data volumes of today.

Todd Gottula, executive vice president and CTO, Advent Software: The buzzwords in the industry continue to be cloud, big data, and mobile. When it comes to mobile, for capital markets firms and their employees, it's all about getting access to their data wherever they want it, whenever they need it. Mobile is serving as a major driver of cloud adoption, but it's just the tip of the iceberg in getting firms to move to the cloud.
We're also seeing a big push toward cloud deployment among the trading community as big data has found its place in algorithmic firms. There are now more efficient ways to get through immense volumes of data that was previously much too difficult to consume locally, like historical tick-by-tick market data. This driver has always existed in the world of trading, but now there are novel ways to solve the challenges of big data without having to spend millions of dollars, and one of the enabling technologies for this is cloud deployment.

Carol Dow, principal, Vanguard Information Technology: One of the major drivers is staying competitive, scalable, and cost effective. These technologies also bring the opportunity to have more informed decision-making and enhanced collaboration and communication among the investment teams. These initiatives will help capital markets be better, faster, and cheaper, which in turn allows more focus on the clients and employee engagement.