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Cloud Computing: The Growing Competitive Advantage for Hedge Funds

By Katie Sloane,
Thursday, July 31st, 2014

The competition amongst firms in the financial services industry is ever burgeoning, and in order to achieve differentiation, it is imperative for firms to create and maintain robust, manageable, scalable and reliable technology infrastructures. Increasingly, we’re seeing more than just emerging managers opting for a cloud solution and established hedge funds and alternative investment firms shifting gears from traditional on-premise IT infrastructures to cloud services.
 
If you missed our webinar yesterday on Why the Billion Dollar Club is Going Cloud, read our recap below or scroll down to watch the full webinar replay, featuring Eze Castle’s Managing Directors Bob Guilbert and Vinod Paul.

The Business Case for the Cloud: Why Established Firms are Making the Move

Why the Billion Dollar Club is going CloudAcross the industry, established firms that have been in business for several years are moving away from physical infrastructures and adopting the cloud. Traditionally, investment firms would allocate substantial capital budgets to build on-premise Communication (Comm.) Rooms. These cost-intensive infrastructures can take months to build out, and specific expenses can vary depending on a firm’s unique needs. For example, at minimum, investment firms require file services, email capabilities, mobility services and remote connectivity, as well as disaster recovery and compliance. Beyond those, many firms also require systems and applications such as order management systems (OMS), customer relationship management tools (CRM), and portfolio management or accounting packages. 

To run all of these systems and build out an on-site Comm. Room (with proper power, cooling and connectivity requirements), firms will spend upwards of $200,000 to $300,000. With the cloud, those upfront capital costs are no longer a concern.
 
Beyond moving firms from a CapEx to OpEx model, the cloud also allows firms to reduce their spend on additional technology expenses such as software licensing, hardware upgrades and technology infrastructure refreshes, and rudimentary patch management.

The Right Time: When Established Firms are Making the Move

Although no two firms are identical, we believe the following three scenarios are key triggers for firms to go to the cloud:

  1. Office Relocations

  2. New Applications

  3. Technology Refresh

Read more about when firms typically opt to make the move to the cloud here.

The Cloud Advantage: Architecture, Access, Operations

For most financial services firms, IT services and resources are managed at an offsite data center, typically situated in a more cost-effective location rather than a high-rent office building (think New Jersey, not Midtown Manhattan). Cloud service providers use a similar architecture for the cloud, but offer the following additional advantages:

  • Rapid Provisioning: Adding resources to the cloud (storage capacity, computing resources, etc.) is much quicker than with on-premise environments.

  • Consistent, Guaranteed Performance: Providers enforce strong service level agreements and employ robust monitoring tools to ensure the operating environment remains optimal for users.

  • Professional Management and Operations: The cloud helps to solidify IT processes (e.g. adding/removing users) and moves the burden of management and monitoring to a third party, allowing internal users to focus on higher-level projects.

  • Application Support & Integration: Professionally-managed private clouds can generally support a wide variety of applications and integrate them seamlessly onto one environment (something not easily achieved with public cloud platforms).                                                                  

The Cloud Advantage: Stronger Security, Lower Risk

One of the most important considerations for firms is risk mitigation, specifically when it comes to cybersecurity. Due to the increased emphasis that the U.S. Securities and Exchange Commission (SEC) is placing on security mechanisms, hedge funds and investment firms operating in today’s environment are often turning to cloud providers to leverage their robust networks and infrastructures.
 
A first-rate cloud provider can create a level of security that only the largest financial firms in the world can afford to implement, manage, and maintain. From the careful implementation of best practice principles and procedures to comprehensive auditing to enforcing robust authentication methods, rapid deprovisioning, 24x7 monitoring, vulnerability testing, and strong physical security methods with biometric access, and more – the cloud provider bolsters and fortifies a hedge fund’s security and offers a level of comfort that investors are desperately seeking.
 
Watch the full replay from our webinar, Why the Billion Dollar Club is Going Cloud, below.

Additional resources you might find valuable: 

Categorized under: Cloud Computing  Disaster Recovery  Security  Hedge Fund Due Diligence  Hedge Fund Operations  Hedge Fund Regulation  Infrastructure  Communications  Outsourcing  Trends We're Seeing  Videos And Infographics 



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