June 30, 2011

Editor's Note: This article originally appeared on InformationWeek

NYSE Euronext's new cloud services will open for business July 1, from its Mahwah, N.J., data center, letting companies buy pay-per-use computing with functionality and data honed to the needs of capital markets firms. The service's launch sparked speculation that more clouds will follow that are customized to the specific needs of different industries.

If the special-purpose cloud works in financial services, the thinking goes, would it work in healthcare, pharmaceuticals, public utilities, maybe even the airlines? Or will specialized clouds work for companies with particular technology needs, like security or high availability? "What we're seeing now is the first wave of special, fit-for-purpose clouds--community clouds--that are bringing together not just technology but the business intelligence, market access, and customer relationships, and truly delivering a full value set," says Howard Elias, president and COO of EMC, whose storage gear is used in the NYSE Euronext center.

Yet NYSE Euronext might be the exception, not the rule. Infrastructure as a service like Amazon's Elastic Compute Cloud did establish that companies want pay-per-use computing power, and it's true that general providers like Amazon can't deliver some of the more specialized--and higher-cost--services some industries need. But a close look at the special pivot point that NYSE occupies in financial services, and the new services it will provide, suggests that other industry-specific clouds will be tough to create. NYSE Euronext's plan is a bold move, but there are a number of reasons that approach may not work elsewhere. Instead, where specialized clouds do emerge, they're more likely to develop around technology or functions--like high security or data backup--than industries.

NYSE Euronext's cloud platform will provide online computing services for a number of capital markets functions. For example, by offering rapid provisioning of pay-per-use processing power combined with access to historical market data, it could be a platform for back-testing trading strategies, to see if they would have been profitable in past market cycles.

The platform might open a new market segment for NYSE. Already, it has a healthy colocation business, in which major trading houses rent space in NYSE's data center to be in close physical proximity to the exchange's trading engines, sparing the milliseconds it takes to go from a company's own data center to NYSE's. In automated trading, those split-second advantages actually matter.

Next: Expanding The Market