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TMCNet:  The cloud advantage in capital markets [Global Finance]

[April 28, 2014]

The cloud advantage in capital markets [Global Finance]

(Global Finance Via Acquire Media NewsEdge) Invest in cloud services for tangible, measurable value.

The capital markets industry has several moving parts and unknown variables. Firms need to be responsive to stakeholders, be it real-time access to data or compliance with regulatory mandates. In such a state of flux, capital market firms should adopt technology that increases their agility and reduces costs.


Owing to market volatility and increased compliance requirements such as the Dodd-Frank Act, Markets in Financial Instruments Directive (MiFID), and the Sarbanes-Oxley Act (SOX), capital market firms are gravitating towards cloud computing to reduce upfront capital expenditure and ensure sustainable growth. Advanced services offered by cloud services vendors help capital market companies adopt cloud computing across functions and asset classes. Cloud services can enable capital market firms to save up to 30% of their IT budget.

CASHING IN ON CLOUD COMPUTING * Can you free up resources for strategic initiatives? Increasing agility to focus on strategic initiatives is a business imperative for capital market firms. The cloud provides an opportunity to reduce head count, IT infrastructure investment, as well as software development and application support cost. You can offload infrastructure requirements to a cloud services provider, while your IT team retains oversight to maintain data security requirements and further free up IT resources. It will reduce IT and operational costs. In addition, you can avoid capacity planning for sudden spikes or month/year-end infrastructure requirements since cloud services are available on-demand.

Boutique capital market firms adopt the cloud to build and consolidate business: * Merrill Lynch adopted the cloud IaaS strategy to build and evaluate risk analysis processes * Morgan Stanley adopted the cloud PaaS strategy for recruiting applications * Do you seek a competitive edge by deploying products and services faster and more efficiently? Capital market firms are geared to adopt on-the-shelf products and services such as CRM products (SaaS) or secure platform (PaaS) available on the cloud architecture. By implementing cloud-based services, firms can launch new products or services within weeks/months rather than years. When you partner with a cloud vendor, you can plug in and configure cloud services without procuring hardware or developing applications.

* The NYSE Euronext capital markets community platform offers a range of cloudbased services. Financial service firm scan directly plug in and use cloud-based services without developing services locally.

* Can you innovate and adopt new business models? Cloud computing helps you focus on superior functionality to end users and devise new services and mechanisms of service offerings. For instance, an investment or wealth manager can keep in touch with clients via social media through a portal. The firm pays only for services rendered without owning the social media portal. Boutique capital market firms that could not offer rich functionalities due to uneconomical IT infrastructure and application support expenditure can now capitalize on cloud service models to reduce operating costs. The cloud provides a competitive edge for boutique firms to compete with established players.

* Have you felt the need for a common architecture across locations? Capital market firms are challenged to offer a unified view of the enterprise. It is a consequence of process modifications to suit local markets or noncompliance of processes after a merger or takeover.

The common architecture of a cloud vendor can reduce duplication effort for technology implementation across locations, while providing an enterprise view. In addition, a cloud environment enforces development lifecycle standardization across your enterprise since team members access the cloud through a common interface.

* Are you empowering wealth managers and clients with access to information, every time and everywhere? The dissemination of financial data is critical in the capital market ecosystem. Prompt and accurate information helps your wealth managers, traders and consumers take informed decisions. The exponential growth in the use of smartphones and devices makes access to information, anytime and anywhere, a business imperative. Bring your own device (BYOD) computing ensures that cloud services can be accessed from the web on any smart device. Users can access critical information such as trade quotes, trade processing information, or email hosted on the cloud.

* DGX, a cloud-based data, news, chat and analysis platform, delivers a wide range of cash and derivatives market data in real-time to the users' desktop, iPad or mobile device, * CME partners with Xignite to offer on-demand access for end-of-day OTC setdement, volume and open interest data.

* Are you exploring environment-friendly solutions? Capital market firms churn out voluminous data from trades, client reports and audit information, every day. Analytics powered by big data drives demand for more IT infrastructure. Cloud computing ensures optimal use of infrastructure and reduces the recycling of equipment. The cloud offers a cost-effective, sustainable and eco-friendly solution through smarter infrastructure utilization and energy consumption.

A STRUCTURED APPROACH TO ADOPTING CLOUD SERVICES Our survey of capital market firms reveals that approximately 70 percent of firms either seek to adopt new cloud services or replace their existing legacy systems with a cloud computing environment. However, firms face challenges before embarking on their journey: Deciphering the cloud: Successful adoption of the cloud requires a deep understanding of the characteristics and deployment models of cloud computing. Capital market firms should build a solid knowledge base and skills with the help of cloud consultants, cloud service providers, and cloud integrators.

Focus areas: A firm can adopt cloud across areas, but as a starting point, should identify areas that will deliver immediate return on investment (ROI) as well as address compliance requirements.

Security: Cloud services can be safeguarded by deploying stringent security encryption and authentication mechanisms, physical security of data centers, firewall, and malware.

Interoperability and portability: Vendor lock-in is a recurrent problem for capital market firms that outsource their operational processes. Since cloud services have matured, you can enter into agreements with cloud service providers for industry standard APIs/interfaces to transfer data smoothly to and from the cloud.

Service level agreements (SLAs): Financial data is critical for decision-making and needs to be stored and shared in a format that complies with regulatory norms. Consequently, SLAs should be incorporated in the contract with your cloud services provider.

STARTING THE CLOUD ADOPTION JOURNEY Based on our analysis the following are the areas that are suitable for cloud adoption. The areas have been chosen based on response to the following key factors 1) What is the ease of adoption? 2) Is a mature cloud service available in the market? 3) Is it an existing legacy system or new system/ enhancement? 4) Is it a strategic system or a generic system that is available to all? However, these areas may differ based on individual firm needs.

A CAPITAL MARKETS GALAXY ON THE CLOUD The cloud delivers computing in a utility or service model. Cloud computing is transforming infrastructure and application development, deployment and delivery processes. A parallel can be drawn to personal computers replacing mainframes and smartphones, or tablets reinventing the mobile industry. In order to successfully harness the benefits of cloud services while addressing security and compliance challenges, capital market firms should select a cloud integrator with proven expertise.

"Increasing agility to focus on strategic initiatives is a business imperative for capital market firms. The cloud provides an opportunity to reduce head count, IT infrastructure investment, as well as software development and application support cost." -Prabhdeep Singh, Principal Consultant, Capital Markets practice, Infosys "Capital market firms churn out voluminous data from trades, client reports and audit information, every day. Analytics powered by big data drives demand for more IT infrastructure. The cloud offers a cost-effective, sustainable and eco-friendly solution through smarter infrastructure utilization and energy consumption." *Darshan Ramadoss, Lead Consultant, Capital Markets practice, Infosys By Prabhdeep Singh, Principal Consultant, Capital Markets practice, Infosys and Darshan Ramadoss, Lead Consultant, Capital Markets practice, Infosys (c) 2014 Global Finance Media Inc.

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