5 Cloud Lessons Learned From Finance Industry Gurus
The advantages of private clouds and the lack of good IT talent gets Boston members of the Wall Street Technology Association talking.
The members of the Boston branch of the Wall Street Technology Association remain wary of public cloud infrastructure, such as Amazon's EC2, but some have started building out the private cloud.
The Boston chapter held its fall meeting Thursday to discuss "Cloud Computing in Financial Services." The main part of the organization is in New York, but Boston has a growing number of members. It's still home to a significant number of mutual funds, including Fidelity Investments; services for institutional investors, such as State Street; and asset management firms, such as EatonVance Management, all represented in the WSTA, noted meeting organizer Michael Maffattone, CTO of Harvard Management, the firm that supervises the $30 billion Harvard endowment fund.
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Maffattone said it was the second time the group had convened a seminar around the cloud topic; the first gathering was in April. One hundred members registered but attendance was dampened by an early morning downpour that was still going on as the event got underway at the Boston Park Plaza Hotel.
Amid scattered conversations related to TARP and Occupy Wall Street, members debated the merits of cloud computing, with opinions strongly divided. "We haven't had any need for the cloud," said Jeffrey Brody, VP and director of infrastructure services at EatonVance, which he described as a midrange asset management firm with a small IT staff. Nevertheless, he had come out on a rainy Boston morning because "we feel we need to understand what cloud computing offers and whether it needs to be included in our future plans."
[Want to understand why financial services worry about security? See Anonymous Threatens New York Stock Exchange Attack.]
Here are five other conclusions that stem from listening to what WSTA members had to say in Boston:
1. It's understood in Boston financial circles that State Street Bank was ahead of the curve in adopting virtualization and was about 72% virtualized by the time the topic of cloud computing became popular two years ago. State Street now operates seven racks of virtualized servers as its private cloud, with users able to provision servers for themselves. Virtualization was a big step but it was preliminary to establishing a highly automated operation governed by cloud provisioning, orchestration, and management software. Its private cloud is part of an overall $450 million, multi-year restructuring effort that will see the reduction of 1,400 employees, consolidation of real estate holdings, and an annual, pre-tax run-rate savings of $575 million to $625 million by the end of 2014.
2. Several fund managers, in addition to EatonVance's Brody, said they haven't yet seen a prospective ROI on an investment in cloud computing, whether public cloud or private. They have little use for public cloud computing, not only because of worries about maintaining the security of their accounts, but also because they want to keep secret the decisions they make on what they invest in and the distribution of their funds across those investments. One member of the audience, however, countered that startups are skipping the data center investment that the fund managers have already made and they see a different ROI from the cloud.
3. Robert Hegarty, global head of market structure-enterprise for Thomson Reuters, said the biggest challenge for IT staffs in financial services is the changing regulatory climate. "The wildcard in market structure evolution is regulation," with massive changes in the wind from the Securities and Exchange Commission, the European Infrastructure Market Regulation, and other agencies. One possibility: known security risks and exposures will have to be reported.
4. If you're building out the data center with servers optimized for virtualization, some IT staffs are turning to a little known Cisco-EMC founded firm, VCE (Virtual Computer Environment), with investments from Intel and VMware. The new New York Stock Exchange data center in Mahwah, N.J., was built using VCE "vBlocks," the pre-integrated rackmount servers with converged networking--storage and communications over the same devices--and storage built in. The units run VMware ESX Server, of course. VBlocks were also used to build the new Cyber Integration Center, the data center built by Harris in northern Virginia to process Health Insurance Portability and Accountability Act (HIPAA)-regulated healthcare information.
5. Heard in the Park Plaza hallways: You can't find talented young programmers to hire for financial services anymore. "Unemployment in Boston is 2%," said one CTO as he described his most promising prospects repeatedly saying "no thanks" to job offers and going to work for local offices of Oracle, Google, Amazon.com, or heading west to work for Facebook and Zynga. Zynga, the online gaming company, for heaven's sake. "What, financial services aren't cool anymore?' said another.
And one bonus point: In addition to worrying about losing programming talent to the big Web companies, financial services representatives worry that Boston is becoming an incubator for promising startups that later get acquired and become growth engines somewhere else, at the expense of the Boston metropolitan region's economy. "How do we keep those companies and their ability to grow jobs here?" asked Scott Swartz, CEO of Metratech, a Waltham, Mass., firm that helps companies monetize cloud services. For example, eBay acquired Boston-based Where, a mobile location tracking company, in April for $135 million; in February, HP bought Vertica of Billerica, Mass., for an undisclosed amount; and Cisco acquired Starent Networks of Tewksbury, Mass., a mobile infrastructure provider, in December 2009 for $2.9 billion.
Charles Babcock is an editor-at-large for InformationWeek.
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