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The Business Case for Moving to the Cloud: A Hedge Fund Manager's View

By Jessica Sipprelle | Tuesday, February 19th, 2013

While the technology benefits of moving to the cloud are well known, the business case for moving to the cloud is just as important. The hedge fund industry is increasingly moving towards cloud computing not only for the vast technology benefits, but also for the enhanced efficiencies, high quality technology environment, and numerous cost savings.  Read on to learn the business case for adopting cloud computing technology at your firm.

Business Case for Clouds ImageTransferring from CapEx to OpEx
Today, many hedge funds are grappling with ways to achieve efficient operations while remaining as competitive as possible.  Companies are examining the costs associated with their IT departments in order to determine the best way to make their technology more cost effective. For many firms, this means moving to the cloud. One of the major benefits of adopting cloud computing technology is the resulting movement from CapEx to OpEx.

This shift allows a decrease in capital expenditures (CapEx) and an increase in operational expenses (OpEx), providing potential tax benefits. The tax benefit is the result of OpEx allowing for the deduction of expenses in the current year and the cutting of tax liability applied to net income. Furthermore, there are few upfront capital expenditures associated with adopting a cloud model as there with building out in-house comm rooms and data centers. This is because cloud providers deploy a “pay-as-you-go” service model. 

Enhanced Operational Efficiency
By going with a cloud provider as opposed to building out an in-house IT department, financial firms are able to achieve a higher level of operational efficiency. In addition to the high level of cost savings, cloud providers also allow for a streamlined and fully integrated technology oversight. Firms no longer have to undergo expensive in-house technology and hardware refreshes because the cloud provider takes care of updating to the latest technologies for them.

In addition, outsourcing IT to a cloud provider reduces a firm’s IT overhead because all infrastructure maintenance, monitoring, and management are fully taken care of by the provider. This enables hedge funds to refocus their investments towards more value added IT projects. Because all IT functions are managed by an outsourced provider, hedge funds no longer have to focus on the administrative responsibilities associated with running an IT department, such as managing vendors and contracts.

Seamless Opening of New Offices
Another added benefit of utilizing cloud technology is that it allows for the seamless opening of new offices at any time. If a fund is rapidly expanding on a global scale, it won’t have to worry about building out new IT departments in each new location, which requires a large amount of time and capital. Instead, the cloud will ensure that the firm’s technology needs are taken care of and fully managed in each new location. The cloud model also ensures that employees can always access their network remotely, enabling firms to perform at the highest level.

Application Hosting
Applications are easily added and integrated in the cloud. Enterprise grade infrastructure ensures that the application always operates at its highest efficiency, and the cloud provider’s highly knowledgeable management provides rapid application testing and deployment resources. The cloud provider also takes on the burden of making sure the application’s service level agreements are achieved, in addition to the ongoing maintenance, monitoring, and upgrades required by the applications.

Recently, a variety of application vendors such as Advent, Tradar, Ledgex, and CovergEx have made a move to certify third-party hosting providers such as Eze Castle Integration.

For more information on cloud services for hedge funds, download our Guide to Cloud Computing in the Hedge Fund Industry.

Hedge Fund Manager's Cloud Guidebook

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