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Defining the Future of the Private Cloud
So what is a private cloud services platform, and what utility will it need to provide to the industry? A private cloud services platform will offer access to network, computing, storage and application management resources on-demand. Providers will need to offer low-latency market data and market access, as well as a fast, easy and secure way for technology and service providers to deliver solutions to their end clients.
At the end-user side of the market -- investment banks, brokers, market makers and asset managers -- consumers increasingly will look to push more sophisticated applications into the private cloud. For example, order management systems, portfolio accounting systems and enterprisewide risk management systems -- all of which are applications that were recently thought to be too complex to be deployed outside of the enterprise -- will find their way into the private cloud.
The primary drivers among this market segment will be cost reduction in terms of capital investment in the underlying infrastructure and the human resources needed to manage that technology footprint. Another driver for end users migrating complex applications into the private cloud will be the ability to access standardized application management resources and expert systems administration skills that are better suited to be provided at the service-provider level. Meanwhile, end users pushing their technology into the private cloud will speed the vendor community's movement into the cloud, creating a positive feedback loop that accelerates the industrywide migration into a private cloud environment.
The Financial Cloud Has Landed
These developments, many of which already are underway, are confirmation that cloud computing in the financial space has sufficiently matured and long-held industry concerns with security have been addressed and resolved through the customization of service offerings for financial market participants. Adoption rates should grow quickly, as the technology has hit its tipping point. Thus the long-held positive attributes of cloud computing -- cost efficiency, speed to market and flexibility -- will increasingly appeal to market participants creating demand for services and prompting new providers to enter the space.
Going beyond 2012, as the number of providers of financial cloud services increases, we anticipate an arms race of sorts to create a dynamic, application and service-rich environment, ensuring end users are able to choose on-demand the technologies and services they want to use to manage their businesses. Cloud service providers that bundle a suite of applications to their offering will likely be seen as being too restrictive to be a sustainable for the end user. The general trend will be toward flexibility and choice for the end user.
And as competition among private cloud service providers leads to a consolidation in the market, a few key providers likely will capture the majority of the market. Those providers will need to place flexibility, vendor diversity and speed to market as a top priority in delivering the service, as end users will increasingly expect to be able to access a broader range of services and markets from the private cloud.
About the Author
Nigel Kneafsey is founder and CEO of Options IT, which provides private-cloud deployed low-latency market data, market access and fully managed application hosting services to more than 100 firms globally. Kneafsey launched Options IT in London in 1993 to provide outsourced IT services to the investment banking industry. The firm quickly expanded its client base to traditional and alternative asset management firms, and brokerages.
