How is Cloud Computing transforming the Financial Industry?

Technology is shifting to the cloud. It’s not just a trend — the shift aside from the conventional software models to software as a service (Saas) has steadily gained impetus over the last decade. Glancing ahead, the next decade of cloud computing pledges even more ways to amalgamate from anywhere, also using mobile devices.

So what is cloud computing? Cloud computing is a sort of outsourcing of software, data storage, and processing. Users access applications and files by logging in from any device that has an internet connection. Information and programs are hosted by eternal parties and reside on a global network of secure data kernels instead of on the user’s hard drive. This frees up processing power, expedites sharing, and collaboration, and concedes secure mobile access regardless of where the user is or what device is being used.

Characteristics of Cloud Computing:

The five salient characteristics of cloud computing are:

i.                   On-demand self-service: Unilateral provisioning of monitoring and managing computing resources as needed without the help of human administrators.

ii.                 Ubiquitous network access: Access to computing services willy-nilly of user location or device.

iii.               Resources pooling: Multi-tenancy capacitates the sharing of pooled resources and costs across numerous users, with varied physical and virtual resources dynamically assigned and reassigned according to user exigency.

iv.               Rapid elasticity: Expeditious scale up or scale down of resources through elastic provisioning or the emancipate of capabilities in near real-time.

v.                Pay per use: Accomplishment charged using a metered, fee-for-service, or advertising-based billing model to proselytize optimization of resource use.

How can the benefits of cloud span across the entire enterprise?

Cloud holds the embryonic potential to aid executives in tackling nexus business predicament. However, its espousal requires a well-defined strategy (including a roadmap, architectural design as well as an operating model) formulated after the evaluation and due diligence of business drivers, processes, technology landscape, challenges, ROI (return on investment), compliance, regulations, and security. A one-size-fits-all stratagem does not work. When deployed accurately, a cloud-based platform can usher in immense benefits across the enterprise, such as greater business agility, higher levels of innovation, increased simplicity and economies of scale.

1. Business agility: Cloud can amplify business agility and revamp operational scalability. It capacitates enterprises to curtail their time-to-market by introducing new services, products, or capabilities at the speed of changing market demands, thus targeting new opportunities and exalting customer engagement.
2. Compliance: Cloud computing succors businesses comply with required regulatory compliances efficiently and effectively. Today, major cloud service providers are compliant with various regulations as well as compliances.
3. Cost Efficiency: The service delivery model of cloud metamorphose the clichéd CAPEX model of financing to an OPEX model, that is, a pay-as-you-use cost model. Cloud can also abate costs through automation, consolidation, and standardization.
4. Improved Productivity: Cloud can meliorate business productivity by mitigating effort as well as investment in maintenance or support-related activities. It thereby shifts resources to accredit a greater focus on innovation.

Cloud for Financial Services

Current adoption of cloud in the financial industry

The financial services community is arrogating a coalescence of cloud service and deployment models for their business and information technology (IT) needs, with many business processes within financial services being budged predominantly to the cloud. Some noteworthy examples include:

a.     NYSE Euronext Capital Markets Community Platform: Recently, NYSE Euronext instigated a PaaS community cloud service for the financial services industry, focused at brokers, dealers, hedge funds, and other market makers.

b.     NASDAQ OMX Data on-demand: NASDAQ OMX, the world’s largest exchange company, recently implemented Saas cloud service with the support of Xignite to provide secure and flexible access to Brobdinganian amount of bygone level 1 tick data.

c.      Investment Banks using the cloud for risk analysis and non-core processes: Recently, a segment of Bank of America, Merrill Lynch started using IBM iDataPlex servers as part of an IaaS strategy to forge and evaluate risk analysis programs.

Road ahead

There were myriad opportunities for the financial services firm to leverage the fringe benefit of cloud computing by migrating a motley of applications to the cloud. Non-core applications and such business processes as billing, recruiting, organization-wide travel management, and billing can—and should—deftly move to the cloud. Several numbers of infrastructure operations, such as data storage, data center management, and disaster recovery, should also shift to a cloud-based system after a punctilious analysis of disparate vendors' offerings and based on the pliability of cloud vendors in documenting contracts.

i.                   Risk analytics calculation: Applications that calculate such analytics as cost of trade, yields, Greeks, current value, etc., at the level of individual security, position or portfolio are perfect postulants for a grid-based cloud. A cloud-based grid service can scale up or scale down depending on the magnitude of data without many intricacies.

ii.                 Performance attribution: Performance attribution provides a chassis for scrutinizing the reciprocal performance of a fund versus its benchmark. It is a modus that quantifies the success or added value of an investment strategy. Attribution countenances investment managers to ascertain the factors of the investment process that contributed (positively or negatively) to the performance levels highlighted by performance measurement. Hence, these data-intensive processes need to entail a large volume of neoterical data for decorously calculating metrics. So, these are quintessential candidates to be deployed on a cloud, able to optimize the utilization of available computing power and the scale-in and scale-out benefits of a regular grid.

iii.               Trade matching and reconciliation: A trade matching process gets trade data from numerous brokers and counterparties and then reconciles it. This process is prone to hefty volumes during periods of peak trading. The solution is to build a hybrid cloud where the reconciliation process can run on a public cloud for scalability, and the data can repose on consecrated database servers in a private cloud. This can also circumvent creating separate connectivity to the latest partners and maintaining all those connections concomitantly.

The continued proliferation of cloud computing inside the financial services industry will require vendors and firms to overcome its challenges concomitantly. Cloud Computing is a pledging paradigm for delivering computing utilities as services. Just as PCs (personal computers) and servers shook up the world of mainframes and minicomputers, or as smartphones and tablets metamorphosized the mobile commerce industry, similarly cloud computing is also causing similar overarching shifts to the licensing and provisioning of infrastructure and methodologies for application development, deployment, and delivery. Some firms have heretofore cognized the aids of cloud computing, which include scalability, cost savings, and time to market. Firms that are still pondering to leverage the cloud should commence by moving nonrevenue generating and non-core systems to the cloud. They should also contemplate developing a compendious cloud strategy to shift core applications to the cloud. Since radical changes in any technology can take years to create an influence, the V?lkerwanderung of core financial services applications to the cloud might take some time.