In the span of a few short years, cloud computing has gone from being an enigmatic and somewhat exotic technology management model to a dominant force that is changing how business heads relate to and value the underlying technology that supports business growth.

In the financial markets in particular, the implications of cloud computing on the business, however, have been neither clearly defined by the service provider nor clearly understood by the average consumer. Admittedly, early descriptions and definitions of cloud computing often relied on metaphors and analogies rather than concrete terms and value propositions. (By far my favorite analogy was the comparison to a "Mashup DJ" who blends multiple songs across various music genres into a continuous, uniform audio mix.)

The Rise of Financial Clouds

The economic downturn in 2008, often cited as the catalyst for greater adoption of cloud computing in the financial services industry, put cloud computing and its applicability in the industry under the spotlight. And while the downturn likely did create a number of new adopters of cloud computing services that were looking to achieve greater cost efficiency in a bleak market, the long-term trend of adoption already had been underway for several years among hedge funds and private equity firms. These earliest adopters in the alternative investments space generally had more-independent business models that afforded them greater agility to adopt new technologies and improve efficiency.

The successes of these early adopters--a group that includes some of the early high-frequency trading firms in 2007 that often leveraged private cloud services to deploy colocated strategies on dedicated hardware--led to a general validation and acceptance of cloud computing's applicability in finance. It was a tipping point that the industry hit in early 2010. Adoption rates continued to increase in 2011, and the market has indicated that it is ready to adopt cloud computing into the mainstream.

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