Data centers are the new keystone for U.S. equity trading, said Tabb Group senior analyst and report author Kevin McPartland in a study released this month, “U.S. Equity Technology 2010: The Sell Side Perspective.”

The study, which McPartland discusses in a video presentation available at http://www.youtube.com/watch?v=lyVyJD2vXdM , is based on one-to-one interviews with CIOs, CTOs and heads of technology at 24 sell-side firms with bulge-bracket firms accounting for 25% of the participants--equal to two thirds of all bulge bracket firms.

For sell side technology managers, data center oversight was the top infrastructure concern of sell-side equity technology managers, with a focus on finding, consolidating, and efficiently using space and power.

“Expanding bandwidth, reducing latency, and working through organizational issues are still important to the sell side, but now that the data center is as important as the trading floor, it must take priority,” McPartland wrote.

At the same time, only 19% of study participants said they plan to add more data center space in the coming year, however, roughly half are looking to either consolidate or migrate their current data center portfolio. (Separately, he noted, the big data center providers are seeing a lot of growth from hedge funds and prop shops.)

"From a sell side perspective, it means that those guys--major data center providers such as Equinix and Savvis-- should look to expand current client footprints as the sell side looks to reduce server scatter (when firms use space in a variety of geographic locations)," McPartland explained to Securities Idustry News. "So if a major dealer is using three separate data center providers, they’ll look to use only one. Whoever wins that deal will see spending by that dealer grow significantly as they consolidate under one roof."

But this does not mean that data center providers should redirect sales teams away from the sell side, according to the study. “Although few sell-side firms are looking for additional space, the top infrastructure projects of the sell side show us that roughly half of the firms are looking to either consolidate or migrate their current data center portfolio due to either merger integration or server scatter," McPartland wrote. "Being selected as a strategic data center provider for a bulge bracket firm means long-term revenue.”

 

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