For Wall Street Firms, Cloud Computing to Gain Momentum in 2011

December 26, 2010 Off By David
Object Storage
Grazed from Wall Street & Technology.  Author: Melanie Rodier.

Why It’s Important: Cloud computing is gaining momentum quickly on Wall Street. In a 2010 Wall Street & Technology/ InformationWeek Analytics survey of 144 capital markets executives, 40 percent said their firms already use some type of cloud, while an additional 31 percent said they are considering it. "The current trend is how to optimize your footprint and minimize what you have to expend in capitalization, while maximizing performance," says Mark Popolano, a senior advisor with Ineum Consulting and a former AIG CIO. The cloud fits the bill perfectly, he notes.

Where the Industry Is Now: The debate over what exactly cloud computing is continues to rage on Wall Street. Tellingly, in our 2010 cloud survey, 54 percent of participants tagged cloud computing as "a marketing term used haphazardly."

Cost savings often are cited as a driver by firms using the cloud, as at any one time firms may be actively using just 80 percent of the platforms in their physical data centers, notes Miles Davis, senior manager with LECG. "Rather than have the others lying idle, [the cloud enables] you to have them online only when required, so it frees up computing power and pushes down costs," he says. But the benefits of cloud computing extend beyond cost savings. In fact, the ability to scale up or down quickly was cited in the WS&T survey as the No. 1 driver behind cloud use.

Still, myths regarding the cloud continue to pervade. "Clouds do not necessarily cost less," Forrester analyst Frank Gillett warned at a Savvis/Forrester cloud computing industry event in October. "Cloud computing is not the same as server virtualization, hosting or outsourcing, and not all cloud computing platforms are created equal." In addition, some firms remain reticent — at least publicly — to use the cloud because of security concerns, even though many experts assert that the cloud is more secure than a physical data center.

Nonetheless, the cloud is becoming mainstream, suggests Bart McDonough, CEO of Agio IT, a provider of technology infrastructure and application management services to hedge funds. Right now, he relates, most firms are using the cloud for CRM applications and online back-up, but some are moving more than CRM to the cloud. For example, hedge funds are starting to leverage the cloud for back testing in risk analytics and high-frequency computing.

Adds Bob Guilbert, managing director of products and marketing at Eze Castle Integration, "There are more front-, mid- and back-office applications that can be delivered through the cloud, from order management systems to risk platforms."

Focus in 2011: Large firms will continue to build internal clouds within their own data centers and firewalls while the industry continues to work on standards for both private and public clouds. "I don’t think firms will start using cloud computing for execution in 2011. But there will be a lot more integration with cloud providers," says Agio IT’s McDonough. "We’ll also see hybrid clouds where firms will have private clouds for internal use and connectivity with large public clouds such as Intel and Google."

Meanwhile, the Open Data Center Alliance — a coalition led by Intel of more than 70 businesses (representing more than $50 billion in annual IT investment) — is working to determine the hardware and software requirements of its members in the hope of obtaining more open and interoperable cloud solutions. The Enterprise Cloud Leadership Council (ECLC) is another industry cloud group working on standards. "We see it as a way to give vendors a view of what end users want," says Andrew Feig, an executive director at UBS and a member of the Open Data Center Alliance. "Hopefully it will speed adoption in the whole space."

Industry Leaders: Morgan Stanley and Goldman Sachs have extensive private cloud implementations in analytics and strategy, according to Terry Holliday, who retired from Goldman Sachs in 2009 after a 30-year career with the firm. And UBS, JPMorgan Chase and Deutsche Bank all are on the steering committee of the Open Data Center Alliance.

strong>Technology Providers: There is a lot of vertical integration in the vendor space. "A vendor wants to sell you everything," says UBS’ Feig. "I’d rather have a choice of different vendors." Some prominent vendors in the cloud space include Savvis, Verizon, Microsoft,, Amazon and Google.

Price Tag: Varies by the number of application users, the amount of storage, etc. Pricing for Amazon’s Elastic Compute Cloud (Amazon EC2) ranges from approximately 12 cents per hour for a standard small instance, which includes 160 GB of storage, to $1.60 per hour for large cluster compute instances, which include 1,690 GB of storage and quad-core Nehalem architecture. Large-scale internal clouds can cost millions of dollars to build.