FUNDS’ RUSH TO THE CLOUD MUST NOT BE A BOX TICKING EXERCISE

By Ed Gouldstone, Global Head of R&D for Asset Management at Linedata

 

The fund management industry has held up remarkably well against the strains of Covid-19 – from a dramatic spike in market volatility to the sudden shift to remote working. However, the quantum leap in digitalisation spurred on by the pandemic has underscored the disparities between fund houses’ journeys to cloud – some are quite far along, while others are quickly having to play catch-up.

However, the need to rapidly advance digitalisation efforts must not result in cloud migration becoming a box ticking exercise. Some managers may be tempted by the convenience of a ‘lift and shift’ approach. That is, simply building their cloud infrastructure as if it was their existing data centre without optimising it for cloud. This is by far the quickest option but, if rushed, it doesn’t necessarily bring the cost-saving and flexibility benefits that managers are looking for. Cloud provides for advanced levels of security that go beyond traditional deployed models, but only when the necessary tools are put in place. Fund managers therefore need to put in the required thinking beforehand, to ensure the optimisation and any necessary re-engineering of tools whilst accelerating shift to the cloud.

 

The risks of rushing cloud adoption

Elasticity is one particular area where cost savings come from in the cloud, because cloud is designed to scale up and down as and when you need it. When migrating infrastructure to the cloud, fund managers must ensure that the all applications are optimised in a way that enables horizontal scalability, as many legacy applications are built around a fixed number of servers. This could impede the potential to quickly scale up operations in rapidly changing markets, inhibiting fund managers’ growth ambitions and ability to compete.

Ed Gouldstone

Another risk of rushing the transition to cloud, is that a lift and shift approach can actually increase costs when computing and storage practises are not rationalised. Migrating existing infrastructure as it is also means migrating all existing inefficiencies along with it, such as zombie servers, duplicated workloads, and outdated records. By not doing the due diligence to ensure excess computing capacity is left behind, companies could seriously diminish the cost savings they would have otherwise enjoyed.

Building resilience into operations is of paramount importance for fund managers who are planning to migrate to the cloud. Although infrastructure is more secure with cloud, the greater accessibility it allows means that points of entry on the client side can be weak spots if not properly protected. This must not become overlooked in a rushed cloud migration. Unlike with private data centres and VPN access where hardware offers protection, extra layers of authentication need to be added to endpoints to ensure the security of the system, while enabling access from any device. This is even more necessary in our highly regulated industry, where fund managers are dealing with large client funds and processing vast quantities of real-time financial data.

 

Realising the opportunities provided by cloud

When handled correctly, a successful migration to cloud offers fund managers a great opportunity to drive digital transformation, scale their businesses and upgrade the technology they rely on. Perhaps the biggest driver for cloud adoption, the pay as you go, on-demand scalability offered by cloud providers, enables rapid growth and reduces costs. Previously, in order to scale up, businesses would have to install new hardware and pay for its maintenance, as well as acquire the physical space that new servers take up. This process is much slower and more expensive than the quickly scalable, pay-as-you-go cloud, but expert guidance is crucial to avoid the aforementioned risk of transferring excess computing power, and ensuring applications are scalable so that potential cost savings are realised.

Another major driver to migrate infrastructure to the cloud is the data analytics capabilities available. The cloud’s ability to support data lakes that can store structured and unstructured data at any scale and operate real-time analytics, provides unique opportunities to create new insights and therefore greater value. The data lakes enable better use of the artificial intelligence and machine learning technologies that are reaching maturity and are increasingly mission critical. This is crucial in a market where margins are getting smaller and traditional investment models are being challenged. Analytics can create value throughout all operations, from the front office through to the back office, whether it is sentiment analysis of client engagement, or reducing operating costs through process automation.

In terms of security, while moving to public cloud does imply some inherent loss of in-house control compared to historic ‘installed’ technology models, the bottom line is that cloud providers offer robust levels of security unmatched by in-house technology installations. But it is still critical that firms have the requisite knowledge about cloud deployment and cybersecurity, or partner with a technology service provider that does, who can protect endpoints with new identity and access measures such as two-factor authentication.

The need to migrate to cloud infrastructure has become more pressing at a time when fund managers are increasingly introducing flexible working for the long-term. While implementing a cloud first business strategy is now considered crucial for longevity, it must not be rushed at the risk of costly mistakes and the perpetuation of outdated operating models that limit adaptability. A rapid, productive cloud migration is still possible, but firms need to ensure they have well-considered plans and strong partnerships with experts in place to ensure success.

 

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