24 October 2018 | Matt Ambrogi
Financial Services Journey to Cloud
Cloud migration is underway on Wall Street. A recent Wall Street Journal article quoting Goldman Sachs research stated that 18% of computing is currently happening in a cloud environments and survey responders expect that number to reach 34% by the end of 2019.
The best-known benefits from operating in the cloud are cost reduction and avoiding the hassles of infrastructure upkeep. Companies are now starting to appreciate the amount of innovation that takes place only in the cloud. Anything to do with a big data exercise, for example, is in the cloud or it’s not happening. Our DataArt colleague Yuri Gubin addresses technical aspects of cloud migration.
A recent FIX Trading Community meeting in New York highlighted cloud migration in financial services. Some feel that moving a big piece of infrastructure is the only way to show value and realize the actual benefits from a cloud environment. For these folks, converting only a small segment of business and data is a wasteful exercise. Trying to dip a toe in the water risks expending energy and time without much to show for it. This is particularly true when systems are simply moved unchanged, a so called ‘lift and shift’ to a cloud environment.
Alternatively, aiming to transform a larger and likely higher profile business unit will yield measurable benefits to an organization. Additionally, legacy systems refactored to be, at a minimum, cloud aware instead of simply ported unchanged to the cloud will also yield more benefits and facilitate innovation that is immediately available from other cloud-ready tools.
To mitigate risk, most companies create a cloud center of excellence long before approaching a cloud migration. Some organizations like Finra chose to populate the cloud teams with technologists and researchers from among their highest quality internal talent. This helped them to address uncertainties and questions along the way, and to ultimately ensure that their cloud transformation was a success. Finra chronicled their journey and this has become required reading for financial companies as they move out their own cloud learning curve.
Much to Consider
Technology leaders have a lot of decision-making to do here. They need to figure out which cloud platform is best for them if they’ll select only one, or if a hybrid model might be a better fit. Each cloud computing platform provider brings it own strengths to the table. For some it might be integration with a major specific third party platform, or a broad selection of parties and platforms. Others might bring scale, aggressive pricing, or DevOps tooling. Naturally, these factors change over time and cloud vendors continually and rapidly add services, tools and capabilities.
A large area for study is the decision around which corporate systems can be refactored or fully retired and re-written to exhibit native cloud behaviors. Tech leaders need to decide if they have the knowledge in house to even accomplish cloud application engineering, or if they need to acquire that know-how from outside, and from whom.
Banks continue to move with some caution, although they’re getting faster every day. The business areas first to migrate are in those focused on alpha generation, such as portfolio management and research. Operations projects that reduce costs and risk are the next functions likely to move to cloud environments.
In the meantime, regulators are increasing their own skill set, processing power and capability with large data sets. Regulatory investigations now include queries to broker dealers for disclosure of say, trading data within a time window. The query is for *all* data, full stop. This is new. Cloud is the only way to store and handle scenarios like this.
In conclusion, regulatory reporting and response is but one of the non-trivial areas where cloud computing provides the best solutions. Cloud platforms are rapidly growing, adding services and tools that accelerate the speed to market for areas like machine learning and complex computing, along with many other innovations from IoT to blockchain as a service.
The Street is quickly realizing that the future is in the cloud. Now it’s a matter of getting there.