Seeking clarity from cloud – how are hedge funds benefitting?
Hedge funds are evolving. New post-crisis challenges borne from regulatory pressures and tighter margins are causing a momentous shift in standard operating models. In 2016 we’ve seen cost reductions become paramount as top lines are attacked. Digital innovation has risen as the new player in the race to the top. And for those that are getting their nose ahead, agile operations are imperative to support that coveted growth. It’s an altered landscape and an exciting time in the industry.
IT managers are having to find new approaches to navigate through this evolution; and it has been no surprise to hear the Holy Grail of “cloud” become an increasingly hot topic at industry events as much as the pub.
In July 2016 HFM Technology continued its research into firms’ cloud usage, finding that almost half of those surveyed will be putting the majority of their tech into the cloud within three years.
There’s a clear shift underway then in how hedge funds are consuming technology, either transforming to a pure cloud model (for one in five of the organisations asked) or to a hybrid one, with the latter being the more common. This new normal involves blending cloud services with dedicated IT estates – both legacy and new – to create the optimal IT environment. In that way workloads can be placed into whichever environment is best suited.
Cloud is not a clear proposition though, coming in many different shapes and sizes and often shrouded by misunderstanding or disagreement of the terminology involved. Whenever I meet with a new client the first thing I do is make sure we’re talking about the same “cloud’ things. In its most general sense, cloud computing refers to pools of IT resources. These can be software (SaaS), platforms (PaaS), or infrastructure (IaaS). On top of this, these resources can be delivered internally, by a service provider, or consumed from the large public cloud providers (i.e. AWS, Azure, Google). That’s just the surface – there’s a labyrinth of cloud services to get lost in. So are there any real advantages of tackling the confusion and taking this new cloud era head on?
Industry pioneers who are already on their cloud journey are setting precedents for what can be achieved if the new dynamics of the hedge fund world are embraced. By leveraging a fusion of the cloud models above they’re realising a number of benefits that are nudging them inch-by-inch towards front-runner status. At the same time they’re creating a blueprint for others to see what is possible. Below are the three key benefits for hedge fund IT managers as I see it today:
If I entered a bar full of IT decision-makers and asked them to shout out the top benefit of moving to the cloud, I’d expect to hear back a chorus of “COST”. This is by far the first and foremost driver to the cloud.
The principle behind cloud computing is to abstract as much responsibility away from the consumer, leaving them with what is effectively a utility resource – like electricity or water. No datacentre overheads; no CAPEX servers and storage to buy; no in-house engineers to employ; just a simple, predictable subscription-based PAYG model that benefits from the economies of scale that underpins cloud.
What’s more, with the ever-increasing value of London real estate, hedge funds can recoup this by shifting their IT away from their premises and into the cloud.
2. Operational Agility
By removing the barriers of cumbersome on-premise IT deployments, hedge fund IT managers are able to roll out new services in a flash. You can scale your cloud capacity up and down based on usage, not investment. You can get access to enterprise-class technology and previously unaffordable software. You can be lean and nimble and barrier-free. There are no longer Davids and Goliaths, just lots of bendy rhythm gymnasts.
This operational agility has given hedge funds transformative powers, enabling digital business innovation to flourish more than ever before. Managers are able to accelerate the rate of change of their services. New services can be launched and new markets can be reached. What’s more, the outsourcing of back-end infrastructure means that skills can be focused on innovative value-add tech. All this comes together to give cloud-driven hedge funds the power to act with speed and focus to disrupt the market.
Naturally there are challenges about integrating cloud services with existing IT estates. According to a recent market study by the IBM Center for Applied Insights, over three quarters of the 500 senior technology decision makers asked reported that hybrid IT had introduced a greater IT management complexity into their environment. But, for those technology leaders who are reinventing themselves with the skills to manage this complexity, there is a goldmine of opportunity ahead.