Cloud Computing In Finance

Disruptive Innovation | Enabling Technology

Technology and Human Intelligence

Moore's Law o In information age, technology growth is exponential (not linear) o Financial system benefits from technology advances o Magnify both positive and negative outcomes (leverage, chainsaw) Murphy's Law o Whatever can go wrong will go wrong o Human behavior plays an important role in Finance - Feynman o "Imagine how much harder physics would be if electrons had feelings" Technology high complexity & high coupling o Use advanced technology to cope with Murphy's law (0 growth) o Steve Jobs (iPhone, WALL-e) encapsulate technology complexity o Decoupling Moore from Murphy: Version 2.0

Six Waves of Disruptive IT Changes

System wave from proprietary to Commercial off the shelf Device wave from dumb to smart Network wave from proprietary to open internet Content wave from voice to multimedia (big data) Service wave from general to personalized Architecture wave from centralized to decentralized and then to cloud
Cloud is end results from all of the above

Technology Evolution

What is Cloud Computing

Virtualized compute power and storage delivered via infrastructures of abstracted hardware and software accessed over the Internet. These shared, on-demand IT resources, are created and disposed of efficiently, are dynamically scalable through a variety of programmatic interfaces and are billed variably based on measurable usage. Making IT Services just like electricity, water, and natural gas services to household
Cloud computing delivers abstracted IT resources over the Internet

Abstraction of Hardware

Hardware as a device become smart It can be coded, therefore, it can be automated Reconfiguration lead to monetization of hardware

Presentation Summary
Benefits of Cloud Risks of Cloud Industry path of evolution to Cloud Components path of evolution to Cloud Financial Cloud and Future of IT

The Cloud = 10X Improvements

Agility Ease of Use Scalability Investment Risk Reliability Cost

Agility and Control

Securities firm operating environment external forces

o o o

Regulatory Environment: Relationship with government Market: Relationship with customer Competitive Environment: Relationship with peers

Changes are unpredictable Adapt to changes by repurpose system

Automatically adapting to unpredictable changes (not have to worry about investment obsoleteness, not to be locked in proprietary hardware and software)

Ease of Use, Faster time-to-market

Deploy infrastructure with a mouse or API
No cabling, screwdrivers, racking, unboxing, buying Middle of the night Do it yourself remotely from anywhere anytime

Scalability
Control your infrastructure with your app Nothing to purchase and take delivery on Instant

Scalability - Capacity Efficiency

Conventional model: acquire land; hiring contractors to build the property; purchase hardware; purchase software; hiring people to operate facility; Very capital intensive Only efficient in one day out of the whole life Capacity

Under Utilization

Capacity Constrained Time

Reduction of Costs and Financial Risk

Turn off the lights = turn off servers you arent using
Ex: Turn off development and test environments

Pay for only what you use No need to buy in advance Zero Capital Outlay No contracts
Nothing to buy, nothing to risk Cancel immediately Change instantly, even operating systems Rebuild it instantly after testing Better at matching cash flow (risk hedged)

Reliability - High Availability

Based on enterprise grade hardware Design for failures Fail safe:
Automatically spin up replacements Use multiple clouds

Disaster Recovery, business continuity

Stability and Security Regulatory Requirements of redundancy

Skill Acquisition and Global Reach

Instantly powered with all the hard to acquire skill sets Leveraging external expertise reduce project complexity (hiding intrinsic complexity from user) Relieve responsibility of maintenance, typically 70% of IT budget So that IT department can focus on what they do best in economic specialization, and innovation Instantly reach anywhere around the global, cross cultural, legal, and language barriers

The Evolution of IT
"It was not a cumbersome, laborious process. It was just click, click, click, and that was it," says IT Manager, WSJ

Risks of the Cloud Ecosystem

JIT availability creates high dependency, earthquake in Tokyo may affect NYC Community switching costs high, hard to leave the ecosystem, one way ticket (no exit strategy). Information privacy in a community ecosystem.
o Traders trading strategy, o portfolio managers position, o brokerage firm's customer data.

Privacy being compromised has legal and compliance implications.

The Scariest thing to tell a compliance officer is "we are taking our data to the cloud".

New Industry Utilities

Augustine's Laws

If a sufficient number of management layers are superimposed on top of each other, it can be assured that disaster is not left to chance The law of insatiable comfort: Decreased business base increase overhead. So does increased business base. Ninety percent of the time things will turn out worse than you expect. The other 10% of the time you had no right to expect anything. The optimal committee has no members. The optimal size is a small size

Cloud tap into the benefits of scale of ecosystem without costs of large system inefficiency as specialization possible

Outsourcing Services - Evolution to Cloud

Colocation 1st step to outsourcing Managed Hosting dedicated servers managed by 3rd party take some pain away Cloud Hosting Lower cost, easier, lower risk, more reliable

Traditional Hosting Costs Continue to Grow

High CapEx Low facility asset utilization (55%) High Depreciation (42-50%) Power/Cooling costs > Server Costs Not Green 30% hardware obsolescence
- Source: Forbes.com, Kenneth Brill, Servers: Why Thrifty Isnt Nifty
Source: Forbes.com, Servers: Why Thrifty Isnt Nifty

Would Cloud Computing Do Better?

A pool of abstracted, highly scalable, and managed compute infrastructure capable of hosting end-customer applications and billed by consumption1

1- Is Cloud Computing Ready for The Enterprise? Forrester Research, Inc.

Cloud Computing Is the Answer

More than SaaS
Prescripted & Abstracted Infrastructure Fully Virtualized Dynamic Infrastructure Software Pay by Consumption Free of Long-Term Contracts Application and OS Independent Free of Software or Hardware Installation

Cloud computing is a disruptive innovation that all IT professionals should pay attention, because it will transform how IT services are delivered.

Colo vs. Managed vs. Cloud Hosting

Colocation Time Scalability Cost Weeks to Months Slowest, Rigid & Costly High CapEx Managed Days to Weeks Slower, somewhat flexible, Costly Cloud Minutes Instant, Flexible, Payper-usage

Costly, sometimes No contracts, usage month/year contracts, based, no upfront no CapEx costs Low High - virtualized

Green Pricing model

Low

Buy Servers & Colo Rent Servers & Rent based on usage costs whether used or Hosting costs whether only not used or not

Hosting Industry Move to Cloud

Technology has evolved People demand more control Instant gratification In-house too costly from CapEx and Human Capital Colocation for those who want to be physically there Managed is not dynamic enough
Cloud Computing -Enabling Technology to move from Traditional Hosting to Cloud Hosting

Hosting Heads to the Clouds

Static Dynamic = Quick & Easy Scalability Cost Prohibitive Cost Effective = Cost Efficiencies Predictable Unpredictable = Innovations Stagnant Growth = Evolution
Traditional Hosting Cloud Hosting = FUTURE!

The Clouds Component Evolution

Maturation of Virtualization Technology Virtualization enables Compute Clouds

Compute Clouds create demand for Storage Clouds Storage + Compute Clouds create Cloud Infrastructure
Cloud Infrastructure enables Cloud Platforms & Applications

Traditional IT Pyramid
Build upon a foundation Layers equate structure Building blocks: Infrastructure, Platforms, Applications Breadth vs. Niche

The Cloud Pyramid Is Inversed

1000s of Cloud Applications currently Handful of Cloud Platforms Elite group of Cloud Infrastructure providers
# of Marketplace providers

Defining the Cloud Segments

SaaS
Software as a Service Storage as a Service

PaaS Platform as a Service IaaS Infrastructure as a Service

Cloud Applications - SaaS

Software as a service Google Docs "Drive" to share editing of lectures TurboTax Tax Preparation Salesforce.com A cloud-based Customer Relationship Management (CRM) platform that can be used by a firm to connect with customers and employees.
Most common Cloud / Many providers of different services
Disadvantages: No control or access to underlying technology

Cloud Platforms - PaaS

Platform as a service
Google App Engine A platform cloud that enables developers to build and host web applications on the same systems that power Google applications. SalesForce Dev Platform
Good for developers, more control than Application Clouds, tightly configured

Cloud Infrastructure - IaaS

Infrastructure as a service Provide Compute, Storage, Network Capacity on the clouds

Amazon EC2 NYSE Technologies COD (Computer On Demand)

Financial Cloud

Security level much higher than Amazon Security level of military cloud SFTI (Secure Financial Transaction Infrastructure) NY4 Center Not based on statistical availability 99.99% available is not enough

Power
Connectivit y

Licensing

Break-Fix

Support

Performance

Environmental
Cabinet Layout

Applications
Installation
Installation

Virtualization

Design

Timing Services

Automation

Scaling

NYSE Managed Devices

Traffic Capture
State Monitoring

Traffic Analysis Network Storage

Segmentation

Anti-Virus

Hardware/OS
Trending

Security

Procurement

User Auth.

Patching

Capacity

Config Standards

IDS

IPS

EVOLVE YOUR BUSINESS FROM COLO TO CLOUD

Managed Infrastructure Compute on Demand: Solutions Physical Edition Compute on Demand: Virtual Edition

Dedicated managed servers, storage, networking Tailored to customer needs Deploy in weeks

Dedicated blade servers Managed up through the OS Pre-provisioned for SFTI services Deploy in days

Managed or Unmanaged virtualized computing cloud Pre-provisioned resources with SFTI access Deploy in minutes

Cloud / as a Service Is the Future

Efficient delivery of IT services, faster

delivery of business capabilities Infrastructure Cost Reduction Headcount Reduction Elasticity and Scalability Speed to Market
Dominate Financial Services IT growth

Est. Spending ($B) on Cloud by Global FS Companies (CAGR: 47%)

next 20 years $4B in 2010 to $27B in 2015

Solutions (SaaS/PaaS/IaaS)
o

Cost pressure on IT to continue Demands from the business for

Source: The Tower Group

Future of IT - Strategic Partner to Business

Business changes is accelerating. IT must be a strategic partner in support change IT must evolve every aspect by adopting XaaS 50% of all new development done on Xaas Platform Have to manage legacy systems. Integration with Social Media and Mobility Technology Strategies Rethink Technology and IT strategies New Architectures Current architectures must evolve and adapt to new and emerging technologies Business Strategy IT as a true partner in strategy creation