The cloud has been around the capital markets for some time, and while it might be the delivery mechanism of choice for all applications and services in the future, the industry is still coming to grips with what’s possible, feasible, cost-effective, and reliable from a cloud perspective. Waters chats to Brian Cunningham, Bloomberg’s global head of connectivity and integration solutions, about the data and technology giant’s take on the cloud.
What specific advantages does the cloud have over other delivery mechanisms when it comes to acting as a business enabler?
Brian Cunningham, Bloomberg: Time to market and business agility are the key advantages cloud has over other delivery mechanisms. By providing managed services, pre-integrated data sources and service bureau connectivity, enterprises can more quickly provision new systems. When implemented as a physical onsite solution, we have seen that the implementation and commissioning of environments typically has a long lead-time in larger organizations, which is a capital cost, a risk, and can be an opportunity distraction. Moreover, responding to regulatory requirements, asset class changes and the evolving ecosystem of integrated applications are traditionally much slower with locally installed systems. Once up and running, the ability to scale up and down depending on business demand, and quickly react to changing market conditions in a controlled manner, is key to achieving enterprise agility. This is typically a complex and bureaucratic process when performed with in-house deployed systems, but very quick and easy to deliver as a cloud-based solution that is leveraged by thousands of clients operating in capital markets globally.
How do capital markets firms go about making the business case to move in-house-managed services to the cloud?
Cunningham: It’s typically a balance between cost of operation, security, perceived loss of control and the speed with which the environment needs to respond to changing market conditions. While it may be compelling to move everything into the cloud on a cost of operation play, the reputational and operational risk side of the equation might not stack up well. More commoditized and leveraged processes typically deliver a stronger enterprise ROI. Modern encryption and segregation techniques effectively mitigate the risk of data security concerns. Open and interoperable technologies also provide the ability to customize hosted solutions and make them feel as though they are locally installed. Lastly, experienced providers tend to have globally accessible managed service teams that are regularly exercised to changing market conditions and develop more mature solutions that hosted clients can leverage.
What areas are still “off-limits” in terms of moving them to the cloud? How can service providers allay buy-side and sell-side firms’ fears about moving sensitive information or business-critical services to the cloud?
Cunningham: As recently as a few years ago, there was still trepidation in moving certain data sets outside of the control of the client’s own systems and processes. This is understandable when dealing with the sensitive nature of certain types of information. However, the capital markets has always been a highly integrated environment with information commonly moving in and out of trusted providers for trade matching, administration and settlement purposes. Firms such as Salesforce, and a recent movement by a variety of vendors operating in the capital markets to provide hosted services, have also shown that moving sensitive data sets outside of the firm is becoming a more common and accepted industry practice. Moreover, more advanced segregation and encryption technologies have also provided the tools necessary for firms to leverage hosted solutions with the confidence of having control over the integrity and access of their data.
What are the types of services that most readily transfer to a cloud-based environment?
Cunningham: Firms typically move to hosted solutions where they see active investments into evolving solutions from a proven and committed partner that is also being leveraged and driven by industry-specific peers. These solutions become even more attractive when they are enhanced with pre-integrated market and reference data, and they come pre-packaged with globally hardened service bureau connectivity across execution, matching and settlement workflows.
What qualities should capital markets firms look for in a cloud service provider/partner? How do service providers differentiate themselves in a highly competitive market?
Cunningham: The key differentiator here is looking for a proven and mature industry partner with a track record of providing hosted solutions in capital markets. It is easy for any new entrant to set up with a virtualized cloud farm spread across datacenters, but not necessarily with the market expertise, experience with data security or track record of successfully responding to changes in a constantly evolving market. Key technical differentiators will be company-owned datacenters and networks, market and reference data and pre-integrated connectivity for front-, middle- and back-office workflows. On top of these solutions will be a proven capital markets-specific operating practice and discipline to respond to changes in the market and client needs. The cloud as a concept is simple; the real difference will be in the partnership between the vendor and the client. A service provider can also differentiate itself in this highly competitive market with solutions firms use to gain control of their enterprise integration. Connectivity & Integration solutions has introduced the Bloomberg Integration Framework using an extensive suite of connectivity products that makes Bloomberg hosted solutions feel as though they are locally installed, allowing clients to unlock the full potential of their enterprise workflows, while eliminating the friction typically associated with onsite system integrations.