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Hedge Funds Increase Use of Cloud

Hedge funds and investment management firms are increasing the use and spending of cloud technology.

Hedge fund and investment management firms are currently using cloud more than they were a year ago, according to a survey commissioned by Eze Castle Integration, a cloud services, IT solution and technology consulting firm for hedge funds and alternative investment firms.

About 87% of respondents reported using the cloud for easy applications, greater control over IT budgets, reduced it complexity and improved disaster recovery. This is in comparison to 2012, when almost 8 out of 10 organizations were using cloud for some of their infrastructure or application needs. Also, one-third reported their firms are spending more on cloud this year.

Read: Cloud Adoption Rapidly Gaining Speed in Financial Services to learn more.]

Of the respondents using cloud, 74% of firms are using private cloud to meet all or part of their IT and application needs. When asked about the ways in which their firms were using cloud services, 64% specified they were using cloud for basic business or office functionality like email, file services and storage. About half of firms are using private cloud exclusively.

According to Bob Guilbert, managing director at Eze Castle, firms switched to cloud for more predictability for capital expenditures and operation expenditures.

Guilbert adds, “they also believed, which is true, they would also receive greater or improved disaster recovery and business continuity by using cloud solution.”

However, some firms still remain cautious about switching to cloud. The top five concerns for cloud deployments include security and data protection, regulatory and compliance requirements, fear of overspending on support, fear of vendor lock-in and fear of outgrowing the cloud.

Over one-third of organizations surveyed managed assets of less than $100 million, while four out of 10 firms managed assets greater than $500 million. About half are using it to host financial applications and 42% use it for other services or infrastructure needs.

The survey was conducted to evaluate how alternative investment firms are adopting the cloud and the types of applications they were using. About 100 senior level individuals completed the survey, which ran from August 5 to 15, conducted by IDG Research Services.

Zarna Patel is a staff writer for InformationWeek's Financial Services brands, which include Bank Systems & Technology, Insurance & Technology and Wall Street & Technology. She received her B.A. in English and journalism from Rutgers University College of Arts and Sciences in ... View Full Bio

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Greg MacSweeney
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Greg MacSweeney,
User Rank: Apprentice
9/26/2013 | 11:18:26 AM
re: Hedge Funds Increase Use of Cloud
Good point. As you note, cloud just isn't for back or mid office technology and applications. Even front-office apps are moving to the cloud. The semi-private cloud (or industry-specific cloud) is an attractive option for smaller firms.
IvySchmerken
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IvySchmerken,
User Rank: Author
9/25/2013 | 8:53:30 PM
re: Hedge Funds Increase Use of Cloud
Increasingly, front-office applications like order and execution management systems are being offered via the private cloud. I can name several - Portware, REDI, Liquid Holdings.
Martin Jermakyan
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Martin Jermakyan,
User Rank: Apprentice
9/25/2013 | 12:48:38 PM
re: Hedge Funds Increase Use of Cloud
Sorry, I meant to say "disaster recovery" not "discovery."
Greg MacSweeney
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Greg MacSweeney,
User Rank: Apprentice
9/25/2013 | 12:24:15 PM
re: Hedge Funds Increase Use of Cloud
Agreed. Cloud is definitely a budget play right now. Capital markets execs need to figure out how to lower internal infrastructure costs. Cloud can do that once the security concerns can be addressed. The execs who shun the cloud and cling to the status quo won't be around very long.
Martin Jermakyan
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Martin Jermakyan,
User Rank: Apprentice
9/25/2013 | 11:53:10 AM
re: Hedge Funds Increase Use of Cloud
The cloudization of financial
industry is an irreversible process. It is dictated by the shrinking revenue,
increasing IT and other operational costs, requirements for increased
processing power, storage, scalability, availability, agility, disaster
discovery, etc.

The financial industry being a
conservative one will resist and fights the transformation for some time. But
at this end it will have no choice but to accept the paradigm.

Definitely there are security and
other associated with cloudization issues. But that means these issues need
resolution. Simply claiming that it is
not safe to reside in a cloud looks more like financial institutionsGăÍ security
departments defending their turf.

If one can trust their
transaction data to brokers he/she should be able to trust it to the
technologists who do not practice front-running or internalization of trades. Besides, a lot of the sensitive data doesnGăÍt
need to be migrated to the cloud and can stay on premise G㢠such as the client
information for example.

But transaction information can
be migrated to cloud and keeping it there can frequently be safer than on
premise G㢠I am willing to bet that a good quality cloud provider can guarantee
the security of the system and integrity of data better than the internal
security departments of most of the financial (and other) organizations.
IvySchmerken
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IvySchmerken,
User Rank: Author
9/24/2013 | 10:42:29 PM
re: Hedge Funds Increase Use of Cloud
Private cloud usage is increasing among hedge funds but it still seems limited to office support, email, file services and storage. Obviously with the one-year anniversary of Hurricane Sandy coming up in October, more companies could be motivated to migrate disaster recovery and business continuity to the private cloud. I am curious, as is Becca, does this survey talk about the potential for front-or middle office applications moving to the cloud?
Becca L
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Becca L,
User Rank: Author
9/24/2013 | 10:25:17 PM
re: Hedge Funds Increase Use of Cloud
Great piece, Zarna! Such an interesting migration towards cloud. I seems the ground floor (back office work) is finally filling out as more and more companies are getting comfortable with the idea. They certainly can't ignore the benefits! Now we get to go through the same process with middle office work, and dare I say front-office?
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