Patrick Lastennet, Director of Enterprise, Interxion
As we delve deeper into the age of the internet our businesses and industries continue to be disrupted by new innovations brought about by technology investment and digital transformation. Financial services has not been immune to these effects. Increasingly players in this sector are turning to new technology to position themselves as leaders in particular niches that competitors aren’t occupying, and so better serving their own corners of the market.
In some ways this investment is democratising the market, making the sector a more level playing field than it has been for years, if not decades.
However, digital transformation initiatives do not come cheaply. In many cases these projects are major undertakings that are central to the organisation’s long-term business strategy. It is therefore crucial to get the strategy right, execute the project well, and select the partners who can help you do that quickly, efficiently, and at a reasonable cost.
The role of tech in financial services
As technology has evolved over the years, so too has the delivery mechanism for that innovation. We’ve gone through several waves of centralisation and decentralisation, but many financial services business are now realising that in order to grow and thrive they need to move away from on premises infrastructure environments in their office buildings and embrace the benefits of external IT provision.
Smaller hedge funds in particular are finding that aggressive low-latency strategies are no longer yielding the same kind of returns they used to and new approaches are needed. They are becoming increasingly reliant on being smarter, not just faster, to deliver a competitive service to customers.
To become smarter, they are bringing in more data and more diverse data, and in-house IT systems can no longer keep up. To maintain optimal levels of performance, these financial services businesses are turning to colocated data centres. By partnering with them, they can add the high performance compute capacity and GPUs they need to glean better insights from increasing volumes of data, while maintaining close proximity and connectivity to cloud providers to spin up capacity for more elastic workloads.
While in the past it may have been viable to simply tinker around with IT infrastructure that you kept on the premises, in the fast-moving world of today this is simply too complex and costly for most. Unreliable power supply, expensive FTTP tail circuits, and poor security all pose risks to the business. A new model, incorporating colocation, needs to be adopted.
As such financial institutions are working ever closer with their data centre partners to design and configure the best environments to run the calculations and workloads that now power their business, enabling them to differentiate themselves, grow, and thrive in the market.
Where data centres come in
Data centre services providers can help firms ascertain the right combination of public and private cloud infrastructure needed to run an organisation’s workloads, maintaining the strong security and compliance regulators demand, without running up huge bills or locking themselves in to a single vendors’ ecosystem. In fact, an off premises model in a data centre can be up to 80% cheaper than the equivalent on-premises solution.
They can also help companies connect different parts of their IT ecosystem to deliver new innovation more efficiently. For example, with latency much less of a determining factor in FS success than it used to be, many firms are turning to the data they own and have access to tell them new things about the operating landscape. Looking at historic data and using predictive analytics to map what might happen in the future is certainly being applied widely already. But firms are also looking to a myriad of alternative data sets, using any intelligence they can get their hands on to spot correlations and causations of movements in the market to help them deliver better outcomes for their customers.
Predicative analytics and the kind of complex computation needed to glean intelligence from these data sets will often mean turning to AI techniques such as machine learning. But financial institutions don’t have the technology to design and run calculations or simulations like this in house. That capability will more often than not, sit in the cloud or in a hyperscale data centre in a location where energy is cheap and therefore the costs of spinning up lots of servers running specialised chipsets optimised for AI workloads are relatively low.
But that’s not the end of the story. Once these complex models are designed, built, and trained using large data sets in these hyperscale data centres, real world data needs to be fed in to the model and insights sent to the systems and decision-makers that can utilitise them for commercial gain.
Working with a colocation partner can provide a space to run these models much closer to the office, exchanges and liquidity venues where trades occur, enabling financial services firms to react much quicker than if their data was being sent half way around the world and back for computation.
Critical factors for success
Selecting the right data centre partner can be critical to the success of these digital transformation initiatives and the longer term futures of these firms. In a major financial services hub like London, for example, City firms will prefer their servers to be housed in a data centre that’s close to their offices in case they need physical access. They will want that data centre to be highly connected through a wide range of global carriers. They will also want that data centre to be close by and connected to the key trading locations that they operate from.
These factors combined allow financial services firms to not only operate effectively today, but in working collaboratively with their data centre services provider and other parts of their IT ecosystem, invest in the technology and digital transformation initiatives that will see their businesses thrive tomorrow.
