According to a new survey on cloud adoption in capital markets, an overwhelming 72.7% of respondents are not leveraging public cloud services to support trading, but 77.27% are thinking about using cloud in 2014. Clearly a year of change is ahead of us.
The survey released Monday was compiled by Louie Lovas, director of solutions at OneMarketData. "Despite an acceptance of cloud’s well-known benefits - lower costs, rapid scaling and solution flexibility the capital markets industry has overwhelmingly avoided cloud services to date. Yet the motivation is mounting," he writes.
[For more from OneMarketData, Trusted Analytics Biggest Obstacle in Social Media Adoption, see their social media survey.]
78.3% chose data storage as the service they consider most appropriate for cloud computing solutions, followed by large-scale trade model back testing, quantitative research, and transaction cost & post trade analysis. All data intensive use cases. Market data, news content and social media content were also deemed 3x more suited for cloud storage/deployment than orders and execution.
In an interview Lovas said these results were consistent across trading styles of respondents which come from the investment bank, asset management, prop trading and academic community.
So what's the holdup? Barriers to public cloud adoption were dominated by concerns of security, control, flexibility, performance and latency. At 41.3%, a lack of readily available integration to data sources (i.e. market data feeds, trading venues) is also a common barrier to adoption. Lovas believes this is consistent with the mere 13% of respondents who believe trade execution is an appropriate use for cloud computing solutions. "More likely they don't want to do trade execution because they just can't," he says.
Lovas explains this survey was designed to learn what aspects, over and above cost management and control, the buy and sell side financial firms are really after. "The results validated what we were seeing and hearing," he said. "Maybe to some degree a little stronger than I would have anticipated."
He finds the buy side, typically smaller and leaner, are more likely to jump to a public cloud. The sell side, larger and more data heavy organizations that typically have deployments siloed in databases, are more interested in a coalescent infrastructure, making the private cloud more appealing.
Simply put, private cloud makes current data infrastructure more efficient by virtualizing, and more self serviced, allowing for a cutback in IT staff. It's appealing for firms interested in privatizing and improving what they have already built. "Private cloud is going to have better use of trade execution by its very design," says Lovas.
Cloud adoption will evolve towards a hybrid model, concludes Lovas. Traders looking to capture alpha will be lured by the cost reductions of hardware infrastructure and IT, whether that be on a private of public cloud. 54.3% of respondents felt hybrid - a mix of public and private - is the most effective style of cloud for their organization.