New York — In a new impact report issued today, capital markets research and advisory firm Celent examines the factors behind the buy side’s increasing move toward the Cloud for their investment management technology infrastructures. The report, “The Path to the Cloud: The Buy-Side Front Office as a Service,” finds that true SaaS-based platforms (i.e., systems with no locally installed application components) offer benefits across five key areas:
- Economic: Utilizing the Cloud allows firms to avoid upfront IT costs (data center, server, third-party management, etc.), as well as leverage the massive investments that Cloud providers continue to make across their deployment, infrastructure and information security teams. It also reduces balance sheet demands by replacing fixed CapEx costs with OpEx costs.
- Agility & Innovation: The complexity of managing software upgrades is a major cost and resource drain, but full automation of this process is built into the functionality of the Cloud. True multi-tenancy means faster deployments of applications, simpler tracking of changes and patch cycles that are orders of magnitude easier. In addition, the ability to rapidly prototype, test and deploy new technologies allows innovations to come to market much more quickly.
- Operations: With the Cloud, highly scalable computing resources are available on demand, anywhere in the world. Stability and failover risk is mitigated, especially during times of massive transactional volume and volatility. Disaster recovery and enterprise mobility issues are also solved.
- Security: The reality is that no buy-side firm, regardless of its size, can dedicate more resources to cyber and access security than Amazon, Microsoft, IBM or Oracle. Cloud providers offer highly automated access control, security monitoring and logging systems, allowing greater flexibility in controlling where data is held for new regulations such as GDPR.
- Data Processing: The amount of data firms must consume is growing exponentially, and the ability to quickly and efficiently add new data sets to the decision-making process will be a significant competitive advantage. Using the Cloud to process normalized data via APIs allows better decisioning across the trade lifecycle, and will also enable firms to easily incorporate advanced analytics and machine learning technologies as they continue to advance.
Brad Bailey, Research Director with Celent’s Capital Markets division and the author of the report, notes that several factors impacting the buy side – including the secular trend toward passive investing, fee pressures, increased demands from end clients, structural market changes and diminished support from traditional partners – are requiring active managers to focus on their essential value add and rethink everything else. Chief among the components that investment managers’ C-Suites are considering outsourcing is their technology infrastructure.
“The case for the Cloud is now too strong to ignore, and today the vast majority of managers have begun to leverage it to at least some extent,” he said. “This is especially true in the PMS/OMS/EMS space, where platforms like LiquidityBook’s that support the full trade lifecycle – risk, analytics, connectivity, order management, execution management, clearing/settlement and reporting – are becoming more and more popular.”
Starting with the re-architecture of the LBX platform in 2013, LiquidityBook has leveraged the Cloud for both the front- and back-end of its platform. In 2017, the firm completed the migration of the platform to AWS globally.
“We leverage the Cloud for multiple reasons – simplicity, extensibility, flexibility and scalability to name just a few,” said Chief Revenue Officer Sean Sullivan. “But the main reasons we deploy a fully multi-tenant, SaaS-based system are for the benefits it provides our clients around ease of management and total cost of ownership. We believe we’ve reached a clear tipping point with regard to managers’ opinions on the Cloud, and we’re excited about what it means for the industry.”
LiquidityBook is Celent’s exclusive distribution partner for the report. To download a free copy, click here.