Scanning the Horizon: Are Capital Markets Ready for Multi-Cloud?

Scanning the Horizon: Are Capital Markets Ready for Multi-Cloud?

Over the past decade, cloud computing has transformed the face of business. With lower cost, greater flexibility and increased power, cloud technologies have been deployed in industries as diverse as entertainment, transportation and lodging in ways that have created large, seismic shifts. Changes have occurred in financial services as well, with consumer-focused companies such as Robinhood in investing or Upstart for peer-to-peer loans as standouts, but cloud utilization in the broader capital markets has lagged.

Research from Tabb Group that was recently unveiled at their Fintech Festival paints an interesting picture of cloud adoption in capital markets. While interest in cloud has grown dramatically, with nearly a third of survey respondents using some form of private cloud, this does not compare favorably to trends in other industries. Research from TechTarget, for example, found that 61% of companies surveyed reported using two or more public cloud providers, far higher than in capital markets (see below). Looking forward, Tabb finds that over one-quarter of capital markets firms expect to increase their use of public cloud, but approximately four out of ten see no imminent change to their cloud usage. Interestingly, there are as many firms (one in eight) that are using public multi-cloud as there are that use no public cloud whatsoever.1

Cloud usage is considerably higher in general than it is for capital markets firms.
Source: https://searchcloudcomputing.techtarget.com/definition/multi-cloud-strategy

While capital markets lag in adoption, advancements in cloud technology and deployment continue unabated and the focus over the past couple of years has been on the growth in multi-cloud. By examining the key attributes of multi-cloud it might be possible to see how this technology will impact capital markets and what the future might hold.

Taking a look at multi-cloud

Terminology can get a bit muddled2 but multi-cloud refers to the use of more than one public cloud provider for compute and storage resources. While public cloud was pioneered by Amazon Web Services (AWS), several other firms have stepped up their offerings, with Google Cloud and Microsoft Azure being the two main competitors to AWS. While the original impetus for multi-cloud adoption was to avoid vendor lock-in, numerous other benefits have been identified. Specific benefits include:

  • Increasing system resilience and avoiding data loss or service downtime caused by a failure with one provider
  • Ability to select a cloud that is best suited to the task, e.g. offering superior capabilities such as machine learning, being the least expensive for certain tasks, or delivering superior performance in terms of speed or scale
  • Potential to optimize performance in specific geographical locations as required by customer needs
  • Specific regulatory requirements such as data sovereignty that mandates where data must be domiciled

For all of the benefits, there are also areas of concern when it comes to multi-cloud. In terms of direct cost, it will be harder to qualify for volume discounts when using multiple providers but the benefits of resiliency will likely outweigh this cost. Of greater concern is the fact that security and governance are more complicated as multiple cloud providers are utilized and the demands on IT staff will be higher as deeper and more diverse skills will be required. Finally, workload or application management can also be a challenge as processes and data are transferred from one platform to another.

At the end of the day, it’s obvious that the emergence of multi-cloud is a next, natural step in how compute resources and storage are delivered. Just as the addition of cloud was superior to static, expensive and brittle private resources, taking the next step by utilizing the most economical or most appropriate tools only makes sense. It’s clear that the future is multi-cloud.

What does the future hold for multi-cloud in capital markets?

Just a few short years ago, the generally held opinion was that cloud would never find traction in capital markets due to concerns over security but events such as seen at Experian showed that private systems can in fact be more vulnerable than cloud-based solutions. As stated at the top, the power of the cloud has transformed whole industries so there can be no doubt that this power will also ultimately be brought to bear on capital markets. It’s only a matter of time. But how will these impacts be felt? Here are a few ideas of how that might look:

1) Issues and concerns are less daunting than they appear. Just as security was treated as an insurmountable barrier five years ago and then melted away, so too will resistance to public- and, ultimately, multi-cloud solutions in capital markets. The benefits are far too compelling to ignore.
2) The pace of change will be faster than imagined and it will come from multiple angles. The speed, flexibility and lower cost of cloud technology create a potent and dynamic mixture that will lead to an exponential rate of change that may well swamp flat-footed incumbents.
3) Just as the cloud enabled a firm such as Netflix to quickly become an entertainment industry behemoth, those capital markets firms that embrace multi-cloud will out-innovate their rivals and those that don’t will lag. Many areas of capital markets have relied on their seemingly impregnable markets but technology has proven time and again that ultimately no position is safe from disruption. It’s just a matter of time.
4) Looking for a common denominator for winning in the adoption of multi-cloud, culture is the single greatest predictor of success. It starts at the top but it is also imperative that attitude and incentives are aligned throughout the organization in order to maximize the pace and depth of change.

All in all, capital markets practitioners would do well to heed the rising tide of multi-cloud and learn from the results in other industries in order to both make the most of their own opportunities and, perhaps most importantly, ensure that they stay in tune with the times. The costs for not doing so are likely to be very high.

Maven Wave can assist you with your cloud journey. Please contact us at info@mavenwave.com for more information.

For additional information

Tabb Group’s Monica Summerville interviewed Maven Wave’s Andrew Dunmore in a video that touches on the keys to transformation and change in capital markets from the perspective of multi-cloud.

1 For further information on the research from Tabb Group, please contact info@tabbrgroup.com
2 Other frequent terms include private cloud (cloud infrastructure that is operated for a single entity), public cloud (offered by third parties like AWS and Google) and hybrid cloud (the combination of private and public cloud resources)

About the Author:

Andrew Dunmore
With over 15 years of solution delivery experience, Andrew Dunmore leads the financial services consulting practice at Maven Wave. Mr. Dunmore is one of Maven Wave’s thought leaders in capital markets innovation and delivery excellence. Prior to Maven Wave, Mr. Dunmore served as a Vice President at Bank of America in their global private equity investment office and an Assistant Vice President at LaSalle Bank in their credit derivatives servicing division.