Buy Side Goes Mobile
Phones, tablets and the cloud untether investment professionals from the office
Cloud computing for investment managers is a fait accompli, as institutions and hedge funds increasingly store data and apps outside their physical perimeters.
Add in the ubiquity of high-performance mobile devices such as Apple Inc.’s iPhone and iPad, and it’s clear that buy-side firms need to adapt their protocol for the dispersion of how and where company business is conducted.
The most immediate and direct implication of the ‘bring-your-own-device’ movement is a perceived loss of control by corporate information-technology departments. With the regulatory pendulum moving toward tighter rules, any loss of control is a worrisome development for compliance managers.
“As recently as five years ago, the corporate infrastructure was controlled by IT,” said Michael Radziemski, chief information officer at Lord Abbett, which manages about $125 billion. “That’s why BlackBerry was so successful—because it enabled centralized control of mobile devices. But with the influx of iPhones and iPads, and the expectation that people will use their personal devices for work, that model doesn’t work anymore.”
Corporate IT departments are therefore faced with a decision to either restrict such devices, or provide functionality and support.
Most are working with the mobile trend, rather than fighting it. “The model of locking down the device is dead,” Radziemski told Markets Media. “People want the freedom to choose.”
Closely tied to the bring-your-own-device, or BYOD, movement is the movement toward the cloud. As recently as two years ago, discussions about moving capital-markets apps to a cloud environment were mostly theoretical, but that has changed.
“More and more of the software packages that we used to run in our data centers are available through the cloud,” said Radziemski. “It’s cheaper and faster, and it offers economies of scale.”
For investing and trading firms, the challenge presented by cloud and mobile is to be flexible enough to enable employees to do their jobs outside normal business hours, while maintaining the same level of control and oversight as is found in the home office.
Specific areas of focus include internal security procedures and access controls on data movement, both internally and outside the firm, said Grigoriy Milis, chief technology officer of Richard Fleischman & Associates, which provides tech services to hedge funds. Mobile “also represents unique challenges to compliance regarding control, surveillance, and archiving of electronic communications,” he said.
Aside from concerns about running afoul of compliance, there are also technological hurdles associated with conducting business over non-company-issued devices.
“IT departments are challenged with isolating corporate data from personal data,” Milis told Markets Media. “The mix of personal devices between manufacturer and operating system may challenge standard, company-wide policies involving configuration and usage.”
“While it is (IT’s) job to ensure a secure environment for sensitive information, they are under increasing pressure to allow a multitude of mobile devices for the workforce,” said Neil Smyth, director of IT and marketing at StatPro, which provides portfolio analytics. “We are starting to see enterprise tools for the management of mobile devices arise, resulting in new technology adoption beyond the traditional BlackBerry Enterprise Servers…The industry needs to adapt and look at better management tools to help accelerate rollouts.”
Cloud works hand-in-hand with mobile, enabling lighter business travel, among other things. The days of dragging a laptop on trips have ended with the emergence of smartphones and tablets.
Mobile devices “are very well-suited to be the tools that interact with cloud services and applications,” said Smythe. “However, mobile devices have very different interfaces to desktop or laptop computers. Cloud applications for mobile use need to ensure they are well designed for touch screens and gestures, not mice.”
The cloud-mobile relationship is direct “in the sense that any data passed through the cloud is accessible globally on any device,” said Krassen Draganov, chief executive of Netage Solutions, which provides technology for front and middle-office. “However, the benefit of that accessibility is coupled with an inherent risk of both physical and user-based security of mobile devices.”
Vendors are increasingly tailoring their offerings to the cloud. In October, Nice Systems, a provider of trading-compliance software, acquired Redkite Financial Markets, a provider of real-time institutional surveillance technology, partly to boost its cloud presence.
“Redkite technology enhances our ability to analyze intraday trading activity in real time, a requirement that has been increasingly on regulator’s and customer’s agendas,” said Amir Orad, chief executive of Nice Actimize.
One senior executive of a large buy-side firm recently told Orad that advantages of cloud computing include rapid deployment and ease of use, and the technology is here to stay in the asset-management sector.
For heavy-duty number crunching, the cloud allows access to thousands of servers running in parallel.
Garrett Asset Management uses a cloud service to provide the infrastructure needed to conduct quantitative analysis. “We are a technical trading firm,” said Elliott Noma, founder of New York-based Garrett.
“We trade commodity futures and ETFs. Our emphasis is on extensive backtesting across millions of sets of models, and we spend a lot of time analyzing outputs of these backtests, and putting these strategies to work in portfolios.”
The move toward iPhones and other mobile devices represents “a paradigm shift from centrally managed services to a blended approach of centrally managed and user-managed within the corporate culture,” said William Haynes, chief executive of Sabai Technology, which makes wireless routers.
“This shift is allowing the corporate side to move the costs onto their employees and allow them to bring their own device,” Haynes said. “The downside of that is a relinquishing of control regarding the workflow and traffic that is happening through the device.”
Financial-services providers are increasingly moving to cloud applications. For example, FactSet and Bloomberg provide iPad versions of their apps, and derivatives-trading platform Quick Screen Trading connects to European and Asian exchanges through QST Mobile for iPhone and iPad applications.
Through a partnership with Continuum, a division of CQG that specializes in trade execution and data distribution, QST Mobile is able to offer streaming real-time market data, trade execution, support for multiple-order time frames and order types, and position monitoring.
“There are already some applications that are easier to access through the phone than through a computer; however, for corporate IT and business computing there is still a lot of ground to cover,” said Peter Wang, president of Continuum Analytics. “The challenge is how to integrate mobile applications with existing IT, governance and overall management infrastructure, since those are usually designed with traditional computing hardware in mind.”
Cleartrade Exchange, an electronic market for OTC commodity derivatives, earlier this year launched a mobile app in conjunction with OpenText, which provides enterprise content-management services.
The free app allows users to monitor a wide range of commodity and derivatives contracts, including intra-day and closing bids and offers as well as transaction prices, from their mobile device.
By using OpenText’s Mobile Wave Platform technology, Cleartrade can publish secure data feeds directly onto the iPhone, iPad, BlackBerry, Android and more than 900 combinations of device and operating system.
“We wanted to make market-critical data easily available to traders at all times, irrespective of whether they are near their computer terminal or if not through a secure mobile app,” said Cleartrade Chief Executive Richard Baker.
The migration to mobile is not unlike a similar evolution that took place a couple decades ago. Mobile technologies “are about a different and smart type of terminal for accessing the public Internet, just as PCs replaced dumb display terminals and teletypes in the old world of accessing mainframes,” said Chris Pickles, head of industry initiatives at BT’s global banking and financial markets division.
“Mobile devices let you use cloud approaches while you’re on the move,” he said. “That makes sense when it’s relevant—but not all uses or cases are best for mobile devices, and mobile devices don’t work everywhere. When we think of cloud, we also tend to think of ‘always-on’ technology, but mobile solutions don’t deliver that in reality—yet.”
The larger issue is that IT departments will need to be more agile than they’ve been in the past. “They will also need to accept that they no longer have the level of control they’ve grown accustomed to as usage leaves their tightly maintained office environment,” said Continuum’s Wang. “Users just won’t accept the constraints to the mobile devices that IT departments are used to imposing on computers.”
The growing use of mobile technologies in day-to-day business makes a strong case for investment in the cloud.
“As professionals rely on their smartphones to perform more and more of their business functions, the gap between the mobile and the desktop becomes increasingly apparent,” said Wang. “Users are looking to have the same experience and functionality on their mobile devices as they have on their computers. Unfortunately, mobile devices are currently better adapted for Angry Birds than business analysis.”
However, given that mobile technology is becoming ubiquitous, firms are exploring ways to support mobile as a primary method to access essential information. “Effective use of the cloud can unify a firm’s workflow across all of its technologies,” said Wang. “It will allow access to the same programs and information regardless of how they are reached. The key to this is IT management and infrastructure—both must be ready to support this push.”
As for cloud service providers, “Amazon is the default option,” Wang said. “In most firms you would have to justify why you would choose anyone else.”
As would happen in any emerging industry, there are a host of companies emerging to challenge Amazon’s supremacy, a competitive dynamic that holds implications for cloud- service users.
“There are newcomers on the scene and they are trying to create something that will top Amazon,” Wang said. “Since these alternatives will eventually grow to become more legitimate options, it is important to start programming that is not Amazon-specific. Firms need to have the flexibility to move if there are better options in the future.”
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