The Small Revolution of the Data Center

In the never-ending search for more effective and more efficient ways to process their workloads, financial services firms are rethinking how -- and why -- they build data centers, turning traditional data center models on their heads.

"Hosting applications is the major trend that I'm watching -- data centers with hosted applications with cloud computing," he relates, pointing out that offloading server maintenance to someone else is a big draw. "For everything that surrounds trading -- analysis, research, data storage -- that opens us up to a whole new world that can be outsourced."

Nabicht acknowledges, however, that there still are some questions around hosted applications and outsourcing that his firm must iron out. "As people branch into new areas, is it going to make us more profitable?" he poses. "Does controlling it give me a greater edge?"

But while Allston is actively looking into outsourcing, the firm's enthusiasm, for now, has been dampened by the thought of being restricted to someone else's timeline, according to Nabicht. "If you do it yourself, you have more flexibility," he says. "So you have to ask yourself if you're OK with losing flexibility and control over the timeline of completion, if you outsource."

Clouds on the Horizon

The next step beyond virtualization and hosted applications is cloud computing, and while the cloud may not be ready for trading and other critical operations, firms increasingly are moving development and testing to the cloud. At the recent Wall Street & Technology Capital Markets Cloud Symposium in New York, State Street revealed that it adopted a cloud-based architecture that is now the basis for 20 cloud-based projects. Other major Wall Street firms that are actively leveraging cloud computing include NYSE Euronext, which recently unveiled a capital markets-specific cloud (see page 5 for more information), BNY Mellon and Citi.

"When we created a private cloud a year ago, we wanted a technology refresh, standard stacks, benefits of scale and rapid provisioning," Mordechai Finkelstein, an architecture and engineering executive with Citi, said at the WS&T Cloud Symposium. Citi's goals in implementing a private cloud, he explained to the audience, were to gain agility by reducing time to market from 45 days to less than an hour and by automatically scaling to meet demand, and to reclaim unused resources.

Like other experts, he emphasized that speed to market, not cost savings (which vendors tend to emphasize more), is the cloud's biggest draw. Using traditional approaches, IT server provisioning takes six to eight weeks. But the cloud enables firms to speed up the process to a matter of hours.

Peter Johnson, chief technology officer at BNY Mellon, which started tapping cloud computing for users who required massive computing resources, reported at the Cloud Symposium that deploying analytics in the cloud enabled the firm to cut provisioning from months or weeks to a few hours, "or sometimes even less." "We're focused on infrastructure as a service," Johnson said at the May event. "There's money to be saved, and you will save on automation; but our real focus is on time to market from a development perspective."

David King, head of production platform engineering at Barclays Capital, agreed that time to market is the key cloud benefit. "We are now running a large infrastructure-as-a-service offering," he said, adding, "We were really trying to save on the time-to-market issue."

And while capital markets firms generally shy away from the public cloud due to security concerns -- recently exacerbated by a series of incidents including the crash of Amazon's cloud service and a data breach at Sony that compromised 100 million customer accounts -- Wall Street executives seem to be warming to private clouds. "The [private] cloud can be more secure than companies' internal controls," BNY Mellon's Johnson said, asserting that firms actually can improve security by running applications in virtual private clouds rather than in-house. "The idea that no one can do security like we can is a fallacy."

Melanie Rodier has worked as a print and broadcast journalist for over 10 years, covering business and finance, general news, and film trade news. Prior to joining Wall Street & Technology in April 2007, Melanie lived in Paris, where she worked for the International Herald ... View Full Bio