Power the Future of Finance with Cloud Transformation

The potential benefits of cloud are clear, but financial firms need a strategy to help them do cloud the right way

Bill Ruvo
Power the Future of Finance with Cloud Transformation

Financial services firms have reached an inflection point; they can’t continue to rely on legacy IT infrastructure, no matter how well it’s served them in the past. They need a digital transformation strategy to help eliminate technical debt and create a future-proof IT infrastructure, and they need it now. Looking toward the future, firms will have to handle progressively larger volumes of data to enable the latest business capabilities and keep up with always-changing customer demands.

Advanced digital applications like AI, automation and quantum computing require more data, which in turn requires more infrastructure in more places. This is one of the key factors driving the trend of digital transformation. Firms that want to deploy new technology or leverage existing technology in new ways won’t be able to do that just by making small incremental improvements to their existing infrastructure. To future-proof their business, financial firms must deploy a forward-looking IT infrastructure, and cloud services should be an important part of that.

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The benefits of cloud are real, but not universal

It’s clear that in general, moving workloads away from traditional on-premises infrastructure can provide the scalability and efficiency needed to increase infrastructure capacity and unlock the full potential of transformative new technologies. And it’s also clear that financial services firms can benefit from getting out of the data center business altogether, allowing them to focus more closely on their core business, customer experience and their digital transformation.

Several high-profile partnerships between capital markets firms and cloud providers have been announced recently, including:

These announcements indicate that many IT leaders in the capital markets space see real value in moving infrastructure to the cloud, and that there are multiple cloud providers available to help them. And on the flipside, they indicate that cloud service providers see great opportunity in developing solutions to meet the needs of the capital markets participants. We can assume cloud adoption will continue to accelerate as these announcements inspire other firms to look closer at the possibilities of cloud. This trend is backed up by statistics from the most recent Equinix Global Tech Trends Survey, which found that 71% of IT leaders worldwide said that they expect to move more functions to the cloud over the next 12 months.

Cloud can also help financial services firms pursue their sustainability goals. Enterprises increasingly see sustainability as a top priority for a number of reasons, including corporate responsibility, investor and customer demand and their ability to continue delivering long-term business value. Many firms see cloud as the more energy-efficient option, helping them scale up their infrastructure capacity without also scaling up their emissions.

Cloud can help financial services firms with many of the business challenges they face, but that doesn’t mean it’s a panacea that can instantly solve any problem. Some workloads are better suited to remain on-premises to meet requirements such as low latency and data security and sovereignty. Also, getting the right mix of cost-efficiency, flexibility and best-of-breed services will require firms to design a multicloud strategy, where they choose services from different cloud providers for different use cases.

Cloud has potential drawbacks that must be mitigated

Financial services firms tend to pursue cloud adoption for its perceived benefits around performance, scalability and cost-efficiency. There’s certainly some basis for this perception, but firms won’t necessarily experience all those benefits evenly across every workload they might run. For instance, the cost benefits of cloud dissipate as firms handle progressively larger volumes of data. This is particularly true if they’re placing data directly in cloud-native storage. Getting data into the cloud is generally cheap and simple, but getting it out incurs data egress fees that could become exorbitantly expensive—not to mention contributing to vendor lock-in.

Also, while cloud can drive performance benefits in certain situations, it generally can’t provide the kind of deterministic single-digit microsecond latency required by high-frequency trading (HFT) firms. This is one reason HFT firms have struggled to integrate crypto assets into their trading strategies. The idea of working with born-in-the-cloud crypto platforms is typically a non-starter. One could make the case that crypto’s complete reliance on cloud has limited its growth as an asset class by keeping potential high-value customers—such as HFT firms—out of reach. The inverse is true as well: Traditional high-volume exchanges and execution venues that operate in colocation environments face significant challenges moving their matching engines to the cloud. Without deterministic latency, customers are hamstrung in their ability to effectively execute trading strategies.

The good news is that hybrid and multicloud strategies can help capitalize on the benefits of cloud while also mitigating the drawbacks. Businesses around the world clearly recognize the benefits of not going all in with a single cloud provider: The GTTS found that about 79% of IT leaders reported working with two or more cloud providers, while hybrid cloud was the most commonly named deployment approach. Equinix is the ideal colocation partner to help simplify your journey to hybrid or multicloud.

Equinix has the roadmap for hybrid and multicloud success

Colocation can be the happy medium between remaining on-premises and going full cloud, essentially getting the best of both worlds. For one thing, it can provide many of the efficiency and sustainability benefits that firms look for when they move to cloud—especially if you work with a colocation provider that has expertise in sustainable data center design.

Platform Equinix® is also home to the largest and most diverse digital ecosystems on the planet—including but not limited to the world’s leading cloud providers. In fact, Equinix hosts more cloud on-ramps than any other data center company. Equinix has worked alongside our cloud provider partners to help hundreds of financial services customers get the best results from their cloud adoption strategies. For example, we’re helping Nasdaq scale its digital infrastructure inside our NY11 Equinix IBX® data center while simultaneously accelerating their cloud journey in partnership with AWS.

Firms can leverage our global footprint to get closer to the cloud providers of their choice, without exposing themselves to the higher costs and vendor lock-in that often go along with cloud data storage. Instead, they can take a cloud-adjacent approach, where they maintain control over their data within their colocation footprint, only moving it into the cloud when needed to enable specific workloads.

Equinix digital services also help pave the way to cloud success, whether it’s Equinix Fabric® software-defined interconnection for simplified hybrid multicloud networking, Network Edge for on-demand virtual network functions that integrate seamlessly into multicloud architectures, or Equinix Metal® for single-tenant compute and storage capacity with speed and flexibility.

For a closer look, read the guide to cloud-adjacent data and storage. You’ll learn more about why cloud adjacency represents a secure, high-performance and cost-effective way to tap into the power of cloud.

 

[1]CME Group Signs 10-Year Partnership with Google Cloud to Transform Global Derivatives Markets Through Cloud Adoption

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Bill Ruvo Business Development Senior Manager, Finance
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