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Scaling data management with the cloud

The UK’s FCA recently released its proposed guidance for “outsourcing to the cloud and other third party IT services”. While this clarification of the regulator’s stance on the use of cloud within financial services is welcome, many firms have already made the transition. A TABB Group survey found last year that six in ten capital markets firms intended to increase spending on public cloud over the upcoming 12 months.

There are a range of drivers for adopting the cloud within the industry. One of the most powerful is the dynamic, scalable computing capacity it offers.

Indeed, a recent Aite Group survey of capital markets firms found that 62% said ‘scaling to meet future requirements’ was the most important driver for selecting a cloud based data management offering.

This need for scalability is the result of the incredible growth in raw data being consumed across the sector. Estimated global data volumes have a CAGR of ~60% a year over a 5 year period, according to a recent CEB TowerGroup study.

By leveraging the cloud and concepts such as auto-scaling and spot computing, firms can easily scale up (or down) their data management services in a cost effective way. What’s more, they can do this without themselves having to make the upfront capital expenditure in IT or investing in new talent. 

Another driver is financial services regulations and the broad range of ramifications on the way data is stored, managed, governed and reported.

For example, under Mifid II and EMIR, the scope of data required to justify firms’ operational decisions has exploded. Increasingly, firms must also tag data with metadata to prove lineage and provenance at each point of time in the transaction lifecycle.

The front office search for alpha is yet another factor complicating the data ecosystem and driving firms to adopt the cloud.   

The quest for higher returns is leading to a proliferation of multi asset and sentiment driven investment strategies across the buyside. This, in turn, is driving further requirements for high performance computing, more unique data and sophisticated analytics.

As firms explore new strategies by investing in different asset classes, looking to emerging markets or researching signals from sentiment and big data analytics, the associated data volumes and data structures need the ability to scale and evolve with them.

With the FCA’s green light for regulated companies – in the UK at least - to use the cloud, we can only expect the uptake of cloud solutions to accelerate in 2016/17. With this uptick in mind, it should help alleviate one of the biggest challenges facing the industry:

Amazingly, according to CEB TowerGroup, 75% of capital markets firms do not have a data management strategy in place today. To me, that sounds like a ripe opportunity for scalable and cost effective EDM managed services.

 

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