June 2012: Terrifying Stuff

There was a brief ripple of laughter that permeated the audience when Daniel Sullivan, executive director of the European operations vendor management group at JPMorgan Asset Management in London, described as “terrifying” the concept of the cloud and the technology underpinning the cloud model. Audience members laughed not in incredulity or derision, but rather in amusement at Sullivan’s hyperbole and the adjective he used to articulate the extent of his trepidation when it comes to dealing with what has effectively become the de facto future of computing.

In Sullivan’s defense, it’s not the cloud model per se that he finds terrifying—it’s the notion of “losing,” through no fault of his own or his firm’s, sensitive client information residing outside JPMorgan AM’s four walls that concerns him.

Sullivan’s stance is anything but unique. Appreciable numbers of financial services CIOs and CTOs have expressed similar fears regarding the integrity of cloud-based data. One such example emerged recently during a Waters cloud webcast, where Intel’s Daryan Dehghanpisheh broached the issue of brand risk and how security issues around cloud have the potential to undermine a firm’s brand value and reputation, and it is this fear to which Sullivan was referring during the CIOs’ panel discussion at Waters’ recent Buy-Side Technology European Summit.

And he’s spot on. A buy-side firm like JPMorgan AM relies as much on its reputation to attract new allocations from institutional investors as it does on the skills of its portfolio managers. After all, reputations are established over years, sometimes even decades, and can be shredded on the back of a single, high-profile data loss in a matter of minutes, and it is this reality that terrifies Sullivan.

But this doesn’t mean that cloud is going anywhere soon. Sometime in the future—in all probability sooner than most of us think—cloud-based applications and services will far outweigh their in-house-deployed counterparts. Financial services organizations, therefore, have no choice but to grasp the nettle and contemplate life in the cloud, although, as StatPro’s Neil Smyth warns, they should maintain the judiciousness and rigor with which they currently evaluate vendor services and apply them to their cloud providers. This doesn’t necessarily immunize firms from downtime or loss events—but it does sort the cloud provider wheat from the chaff, an exercise set to play an increasingly crucial part in all CIOs’ remits.