Financial services are nearing a tipping point for cloud adoption. TABB Group’s latest research found that 61% of financial entities are planning to boost cloud spending in 2019, including exchanges and trading venues (71%), sell-side (70%) and buy-side firms (50%).
While perhaps slower than other segments of finance, capital markets firms are increasingly realising the benefits of running applications on the cloud, including increased agility and the ability to innovate at a faster rate than previously possible.
In keeping with the times, Bloomberg began its first foray into offering public cloud services back in 2018, with the release of its AWS-hosted real-time trading data feed, B-Pipe, for US clients — last month, it announced global availability.
Speaking to Information Age, Tony McManus, Bloomberg’s CIO for enterprise, said: “We wanted to make this advancement so we were ready for when the customers start to move. We didn’t want to be in a position where customers came to us and said ‘we want to go now’, and then we’d have to put a two-year project in place to support them through that process.”
But while the change in rhetoric and sentiment are encouraging, according to McManus, structural hurdles are making the pace of movement to the public cloud slow. In trying to break into this market, he came to understand these hurdles clearly and was willing to share his insights with IA.
Roadmap to the cloud
According to McManus, while the financial sector is growing more comfortable with cloud services by the day, firms are largely only at the initial or testing stage of cloud deployment as questions around, technical integration and governance permeate the industry.
“For example, we’ve seen when our customers want to move from A CapEx to OpEx model, it’s very often the case that they have to wait for their existing technology assets to decrease before they can make a move.”
McManus told IA that cloud adoption in financial services tends to be the back-office driven. More specifically, it’s overwhelmingly IT-driven, rather than business or compliance.
“It’s coming from this place because they have that hunger to get their hands on new technology,” he explained.
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What about the front-office?
This trajectory presents a challenge for Bloomberg as its B-Pipe platform is primarily servicing the front-office use cases; streaming real-time market data tends to be for trading and risk.
“The front-office is the area that’s moving the slowest; culturally it has the most reticence,” said McManus. “However, one of the things we are seeing is that as the cloud becomes more ubiquitous, people are warming to it. I don’t think it’s just about cost-saving anymore, people are seeing as the next generation of technology that they can leverage to the benefit of their business.
“At the moment, many asset managers are using third-party trading systems, but a lot of those providers are intending to move from a deploys software model to a SaaS model. It’s the same case for management systems providers and portfolio management system providers, they’re moving to the cloud. That to me is the obvious roadmap.”
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The decade since the global financial crisis has been one of huge disruption for the financial services industry; it’s a very different ecosystem today
Security concerns are diminishing
The trust and perception of public cloud services continue to improve year-on-year, but it’s been slower in the financial services sector.
According to McManus, as a whole, the industry is doing a good job of addressing many of these concerns and is putting to bed a lot of myths.
He said: “I think there has always been a nervousness from CIOs and CTOs in this community about the concept of outsourcing of their networks to someone else. But over time they’ve come to realise that the Amazons and Googles of this world are spending orders of magnitude more money on security than they could ever possibly do. Intellectually this sector is beginning to realise that these environments are very secure.”
Ultimately, migrating to the cloud requires a clear tactical vision, a good governance policy, strong processes and a well-designed delivery model. With these elements in place, financial services firms can accelerate operations and improve a whole host of functions.
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