Wall Street Moves Closer to Cloud

Terry Flanagan

Confronted by a whirlwind of technological, regulatory, and market structure issues, Wall Street is looking to get more bang for the buck on its IT spending, and outsourcing operations to managed service providers looks like a surefire way to do this.

“In response to changing technologies and the need for cost efficient real-time dynamically allocated resources, enterprises are looking for cloud based infrastructure solutions that are secure, flexible and cost efficient,” said Steve Francesco, CEO of Cohere Communications, a New York-based communications provider.

Cohere’s Cloud services deliver a managed services technology environment over a private line IP backbone that it says is infinitely scalable while being fully managed and supported.

“Our converged network solution allows you to consolidate infrastructure and access while more efficiently using bandwidth, reducing fees and overall costs while achieving an environment that is fully scalable.”” Francesco said. We manage it, support it and ensure that it meets all of your requirements in terms of uptime, availability and security.”

The value proposition of the cloud is simple and compelling: eliminate technology-related CapEx and replace it with OpEx.

“It is far better to assume that any and all IT can be outsourced than to assume none can be outsourced,” said Celent analyst David Easthope in a report. “It’s time for brokerage firms to favor services that can be managed elsewhere.

Telx’s NJR3, a 215,000 gross square feet three-story data center in Clifton, N.J. that opened in June 2013,, adds more than 100,000 square feet of high power density, energy-efficient space allowing for customizable colocation space to meet the growing requirements of capital markets firms for heavily networked, outsourced infrastructure solutions.

“The vertical that’s showing the greatest demand is financial services,” said Telx CEO Chris Downie. “In the New York area, we are seeing demand to be close to exchange access points at our 111 Eighth Ave. carrier hotel. More significantly, we are seeing demand for deploying enterprise applications in New Jersey, especially in the aftermath of Hurricane Sandy, which caused many firms to reevaluate where their critical infrastructure should reside.”

Chris Downie, Telx

Chris Downie, Telx

NJR3 is located outside the flood zone, Downie pointed out. Telx has invested heavily in state-of-the-art fiber connectivity between NJR3 and its Manhattan locations. “Firms are focused on leveraging connectivity to get them from the data center back to their central locations in Manhattan,” he said.

Radical restructuring through IaaS, managed services, and the cloud might not be news to some leading banks since many are already pushing on this agenda, according to Celent.

“If firms are already considering putting compliance functions in the cloud (like NASDAQ’s FinQloud), why not consider more functions?” said Easthope. “By thinking the unthinkable, broker-dealers can consider putting algorithm back testing into the cloud. Other firms, which consider algorithm development less proprietary, can follow the managed service model.”

Ultimately, broker-dealers have the choice of outsourcing hardware, connectivity, algorithm back testing and development, execution as a whole, market data, quantitative functions, support functions, and other functions through an outsourcing relationship.

“This involves the loss of control to some extent,” said Easthope. “But it can also entail powerful cost reduction, which the industry is beginning to calculate on behalf of prospective clients. In some sense, outsourcing is a moving target because some functions may appear to be differentiating but not actually drive advantage.”

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