07.05.2018
By Rob Daly

Not All Cloud Linings Are Silver

The public cloud may not be the panacea that some hedge fund, family offices, and registered investment advisors may dream it is.

Cloud migration is only a meaningful consideration for those firms who develop many custom systems, Alexei Miller, a managing director at consultancy DataArt, told Markets Media.

Alexei Miller, DataArt

“For those relying mostly on packaged products, licensing costs of these, especially trading systems and data, far outweigh infrastructure costs, so savings from Cloud are almost irrelevant,” said Miller. “In fact, because many of those systems are resource-hungry, Cloud may be a financial loss.”

However, for those who do a lot of research and development, the cloud computing model offers incredible advantages in infrastructure agility and access to the ever-growing collection of cloud-native services and tools, he added.

There is still much education that many asset managers need when migrating to a public or private cloud environment.

Michael Curry, managing director, head of client services at private-cloud provider Infohedge Technologies still sees too many requests for proposals driven from a potential client’s board without a supporting strategy.

“They just know that it is something they need to do and they need two of them,” said Curry.

Firms may find public cloud deployments economical for instances when they need elastic computing and storage, such as disaster recovery, but more expensive for those platforms that consistently run at high computing cycles and throughput.

“If you are running dedicated trading servers, they actually get more expensive on the public clouds since they are usage-based,” he said.

The cost of not having a proper cloud-computing strategy in place also can hit a firm beyond an inflated IT budget.

Curry has witnessed firms placing their email servers into a public cloud and relying on separate vendors to provide compliance and encryption.

“They are breaking regulation without realizing it since they are sending encrypted messages into their seven-year retention that cannot be indexed or seared,” Curry explained. “So when they get an SEC investigation six months to a year later, they are going to come up with bad or false results because all the pieces could not talk to each other.”

Although private clouds and internal systems may not always be the most efficient or perfect, at least they are thought out, according to Curry.

“What we will be seeing is aborted public cloud products because they are not fully contemplated,” he added. “It goes beyond ‘Here’s a mailbox, and it works.'”

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