Know it or not, most investment managers use the cloud every day. For example, the data feeds that appear in terminal-based analytics systems come to the business through the cloud; in that sense, most businesses already have been using the cloud for a number of years.
Now, however, cloud is increasingly becoming the basis for IT infrastructure, and that can fundamentally change the way that custodians do business. Cloud-based solutions significantly lower operational costs and enable more streamlined, productive relationships between custodians and their clients.
Cloud Solutions From Back to Front
According to a recent article in the UK’s Financial News about State Street, the main attraction of the cloud is that it supports the evolution of global custody as it becomes more of an information business.
Becoming an information business requires that global custodial firms provide their clients access to the information that fuels their awareness and drives their investment decisions (their compliance, risk management, and portfolio analytics). Due to the many disparate parts and redundant processes, legacy hardware and software simply can’t facilitate this transition to an information business.
In this context, data accuracy and consistency is paramount. One of the largest benefits of the cloud is that it can take the mission-critical calculations and applications that live separately in each part of the office and move them into one environment where the data and calculations can synchronize. For example, data regarding asset pricing and risk analytics have to be consistent from the front to the middle, where performance attribution and reporting typically occurs, and from the middle to the back office, where accounting and reconciliation of transactions/trades occurs.
The beauty of a cloud computing solution is that it provides immense flexibility to meet the needs of the firm by its ability to integrate with existing technologies. And when applications are based in the cloud, custodians benefit because they are immediately available, eminently accessible through the Internet and untethered from a hardware-heavy, terminal-based infrastructure.
Cost Savings in the Cloud
It’s not just about data consistency and operational efficiency. It’s about money. Cloud computing savings can range from 40 percent savings, according to an EEOC case study, to as much as 80 percents savings, according to Microsoft. Custodians who go to the cloud have lower operational costs that help support greater profitability to the business, for a couple of reasons. First, cloud-based applications require little to no initial capital investment and lower ongoing operating cost. Second, cloud technologies tend to be based on consumption, not on the number of licenses you buy.