If cloud computing needed an imprimatur that its time has arrived in financial services, it may have come in a survey released June 24 at the Securities Industry and Financial Markets Association's Technology Management Conference and Exhibit in New York.
Nearly half of the 350 Wall Street I.T. professionals responding to questions posed by Sifma and IBM said they believed that "cloud" computing is the technology with the greatest potential to force business change in an era of budget restrictions and skill shortages. Estimated cost savings, by one count: 70 percent in upfront capital costs and another 70 percent in operating costs.
Cloud computing allows companies to buy or rent computing from data processing and communication providers, as needed, as a service coming in over the Internet or a private network. Last year, 21 percent of respondents picked cloud computing as the technology that could potentially most disrupt how Wall Street firms operate. This year, 46 percent picked it.
Now ranked as less important: modeling operational risks and mobile communication technologies.
"With the kinds of challenges Wall Street firms face, a trend toward cloud computing might be expected," said Ian Hurst, general manager, IBM financial services sector, in a statement on the survey's findings.
Cloud computing can keep head counts down. As companies grow, they can add capacity "in the cloud,'' instead of in-house. The services are ready to turn on at any time, eliminating installation costs. And provisioning of new services can be handled by non-technical employees.
"Cloud computing specifically addresses each of these with compelling economics, self-service and virtualization," Hurst said.
Cloud computing, in effect, commoditizes technology infrastructure, allowing users to acquire capacity, services and other resources in units or on a subscription basis. The model has the potential to substantially reduce the costs, complexities and headaches of technology, since a company purchases only what it needs and only for as long as it needs it.
Amazon Web Services, for instance, offers "slices" of 1.0-Ghz x86 computing for 10 cents an hour, storage at 12 cents a month per gigabyte and bandwidth at 15 cents or less per gigabyte per transfer, according to a University of California at Berkeley report. It's the computing equivalent of "on-demand" service.
Kevin Haar, CEO and president of cloud provider Appistry, Inc., based in St. Louis, MO, said that IT executives are looking to broadly adopt cloud computing in 2009, as a cost-effective answer to increasing regulatory pressure and tightening economic conditions.
Haar said cloud computing is able to save large amounts of money because resources are shared: "You can get higher utilization of low-cost processing power. Also, operational models are much simpler. The end user is able to pay for just what they use, rather than for all the infrastructure needed for peak demand."
Appistry's CloudIQ Platform family of products delivers and manages a variety of applications and services for public and private clouds. Cloud providers that compete with Appistry include RightScale and 3Tera.
One Appistry client who did a cost savings study reported more than a 70 percent reduction in capital costs with cloud computing, Haar said, with operational costs showing similar savings.
The next stage, Haar said, is to bring public cloud environments inside a company's firewalls via private cloud solutions. Advantages with private cloud include the ability to control security and compliance issues, he said.
One cloud computing vendor, Ontario-based Platform Computing Inc., announced private cloud management software at the Sifma conference that that it called "the first end-to-end cloud management product for enterprises to build and run their private clouds."
Mark Harris, Platform's director of product management, said that Platform has "built a paradigm so that you can define your operation's specific requests and demands, and match them with the most appropriate resources."
Experts predict the imminent arrival of more choices in the public and private cloud computing space. In a May 2009 research note from Stamford, CT-based Gartner Research, "The Spectrum of Public-to-Private Cloud Computing," VP and analyst Tom Bittman says that going forward, "We will see large and very large enterprises - from the Global 500 to the federal government - using public cloud computing services, building private cloud services, and everything in between. These alternatives will fill market needs until cloud services from third parties mature, enabling an evolutionary approach to cloud computing."
Challenges remain, however.
In addition to the data and user security issues associated with public cloud computing, Haar said that there is a need for firms to get comfortable with the dynamics of sharing infrastructure with other companies.
The technology also has to continue to prove out its economic benefits, he said, which can be substantial. Still, "Once people experience cloud, they don't want to go back to the traditional way."
This article can also be found at SecuritiesIndustry.com.
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