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October 28, 2013

Finance Markets Think Cloud is a Capital Idea

By Doug Barney, TMCnet Editor at Large

Research house Ovum (News - Alert) thinks the cloud is the bomb for capital market, or so says analyst Rik Turner who covers this sort of thing.

Turner expressed this view in both a recent blog and an only slightly less recent research report.

Like most other industries, the capital industry is hot to trot for the cloud because services are more varied and plentiful, and security is ever improving.


Ovum's Turner

This positive attitude is reflected in both the buy and sell side of the capital markets equation. However, as it stands, cloud integration is higher on the buy side. “Order management systems (OMS) are increasingly hosted and managed services delivered by third parties, rather than in-house applications, although they are not yet wholly cloud services. Meanwhile, portfolio management systems (PMS) are now commonly hosted solely in the cloud,” Ovum says.

Turner believes the buy side is more into to the cloud because, as smaller firms, they need more IT help. “The buy side tends to be an easier target for cloud than the sell side, given that more of its participants are smaller firms with limited IT budgets,” said Turner, senior analyst, financial services technology, Ovum. “That said, the sell side is changing. With budgets and headcount under more constraints since the global financial crisis, there are clearly opportunities on that side of the business too.”

Oven and Turner don’t just analyze the capital market, but look at overall financial markets, and here cloud spending is increasing as well.

Capital markets are evolving in their cloud thinking. Because their data is so valuable, and often includes sensitive customer info, often the first move to the cloud is through private clouds. In addition to this, many shops are taking a hybrid approach. “As capital markets participants deploy more of their internal IT infrastructure in the cloud, some see the hybrid cloud as the next logical step. However, there are still obstacles to overcome before this can be utilized effectively, such as a lack of standards and deterministic latency,” Ovum said. “Another area with potential is the adoption of software-as-a-service (SaaS (News - Alert)) for vertical-specific functionality. This goes beyond generic applications such as customer relationship management (CRM) software, and companies are beginning to capitalize on this market.”

The public cloud, fortunately, has been proving itself, and now capital markets companies are starting to trust services such as Amazon Web Services (News - Alert) (AWS).

Capital markets do have some dedicated choices, including NYSE Technologies' Capital Markets Community Cloud. This service offers cloud-based access to NYSE data.

More detail can found by paying for the Ovum report, “Cloud in the Capital Markets: A Progress Report”, as the company only released a wee taste of its findings.

Another factor driving the cloud is price sensitivity due to the devastating financial meltdown earlier this decade.

But not all is rosy for the cloud. “Technology is a competitive differentiator in the capital markets, which makes the argument for delivering it as a service a harder one to make. That said, cloud has begun to gain traction on the buy side and now, increasingly, on the sell side,” the report said.

Broader Picture

On the broader issue of financial markets, Ovum this month released “2013 ICT Enterprise Insights in the Financial Markets.”

Here increased IT spending is a reaction to tough conditions. “The financial markets face the dual challenges of achieving profitability in volatile markets while complying with a tsunami of regulation all around the globe, in particular in North America and Europe, which are also the two largest trading regions,” the report said. “After a couple of years of constrained budgets in the wake of the global financial crisis, most capital markets firms are increasing their spending on IT infrastructure in 2014 in preparation for a more complex trading environment. This environment is characterized by the search for profitability in new geographies and asset classes, and a need to comply with ever more regulations, leading to more data to gather and analyze, both for trading and compliance purposes and to report to regulators.”




Edited by Ryan Sartor
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