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Cloud computing is transforming investment management

Some best practices for investment firms to follow in adapting cloud technologies

By Tom Cole, Managing Director – Europe, Abacus Group

The paradigm shift towards cloud computing in the investment management business is exciting. Bleeding edge technologies are accessible to businesses and individuals, at relatively affordable price points. Cool-looking newcomers are frequently entering the market, offering a promise to drive efficiencies and productivity to businesses.

Don’t be fooled. This thriving marketplace with its creatively marketed products and a perceived ease of consumption can be a risky concoction. Managers must be shrewd at selecting cloud solutions, carefully weighing all of the costs and benefits.

If you are a business or technology manager at an investment management firm considering a move into public cloud IT, here are some considerations:

Try before you buy. Cloud services regularly boast benefits such as rapid deployment, self-service, pay as you go and others. Take advantage of this by signing up for free trials (where possible) and advance proof of concepts to wider audiences, absorbing feedback and tracking with key performance indicators (KPIs). Needless to say, approach with caution and be mindful of company policies and procedures for such trials.

Create and evolve KPIs. The term “benefit” is broad. Some benefits can be measured quantitatively, some qualitatively. To instill some structure and add consistency during the selection and evaluation process, KPIs should be firmly considered. It is rare that projects have a clear and straight road — so be nimble, accepting that a KPI may no longer be appropriate. Even better, uncover new KPIs as you evaluate.

Separate reality from marketing myth. A popular misconception about the public cloud is that it is a do-it-yourself proposition. The reality is you need IT expertise and a strong service layer to implement a cloud application and get the most out of it. There are a lot of promotional materials – including “explainer videos” – that make it sound easier than it is. A public cloud service may look simple, but when an investment management firm considers how it should be deployed – including layers of security, regulatory compliance, customer access, ongoing governance to name a few – it suddenly becomes quite complex.

Get buy-in from your key partners and managers. Like with any new IT application, make sure that key people in the organization not only buy-in to the idea, but that they understand how to use it properly. Technology is only as powerful as the consumers engagement and use. Your KPI’s will again be useful here to continually evaluate use and engagement i.e. is the solution being consumed in the real world as intended. Auditabilty is generally the norm for most solutions, such data points should be relatively straight forward to obtain and continually report with.

Take a holistic view. Standards differ from technology to technology; manufacturer to manufacturer; service provider to service provider. Yet there are many workflows and inter-dependencies between different systems. You need to look holistically to see if you can leverage existing technologies in your new cloud environment, and how using existing tools may impact the firm. Furthermore there maybe existing solutions already in place serving a purpose which can eradicate or dilute the requirement for another solution.

Understand the total cost of ownership. On the surface, a cloud product or service may seem to have a set cost. The challenge is understanding what the true cost is, looking at the time and energy you invest, not just for implementation but for maintenance, upgrades and additional security. There will always be underlying costs. Consider this: you buy a public cloud service that allots one terabyte of data per user in your mobile workforce. For staff to fully enjoy vast pools of data are their endpoints capable? Do these need to be upgraded imposing further cost?

Consider managed cloud services. In order achieve full control of your cloud technology, a managed services provider may be your best solution. A competent partner should help you piece together all of the moving parts in your cloud application – with a state-of-the art level of cybersecurity on top. An experienced cloud services partner also brings know-how gained from multiple business relationships to help you understand where everything fits into what you already have. And you won’t have to reinvent the wheel.

How accessible is your provider? With some public cloud environments, you may have limited access to support personnel. Technology does have wobbles and depending on your business, you may need rapid response to resolve. When opting for cloud services you have to accept that your level of transparency and control lessens. You need to ensure that appropriate service level agreements are in place. If these cannot be achieved via the larger cloud providers then the service provider intermediary is a solid consideration, whereby you can enjoy their service level agreements and relationships (at larger scale).

Security, security, security. The age-old saying that you can outsource responsibility but not accountability is even more prevelant with cloud adoption. Cloud providers often boast many information security certifications. Often the cloud provider is the foundation to which your solution is being built on. At time all the hard work and controls imposed by cloud providers can easily be unwound by a misconfigured solution. It is very important that you allocate correctly skilled resources or service providers to ensure the high levels of protection continue on past the cloud platforms offering into your business solution. The operational due diligence microscope is becoming more focused on what both technical and operational controls you impose as a business the compliment cloud providers robust offerings.

Participate in industry groups and forums. To stay up-to-date on the latest benefits as well as risks in cloud computing, it’s a good idea to get involved in user groups and industry events. The Cloud Industry Forum in the UK offers good guidance and advice. Furthermore within the alternative asset manager space AITEC and AIMA are popular consortiums offering frequent and sound advice as to how to tackle such business and technology challenges.