Architect As Cloud-Native As Possible For Better Cost & Functionality Outcomes
Contributors: Peter Williams, Chief Technology Officer at CJC.
Digital transformation in financial services and modernising legacy data infrastructure has been a long-standing debate, nothing more. That is until cloud-native disruptors like Starling Bank appeared. The financial industry has now been exposed to the cloud’s potential for a significant timeframe and this article leverages that exposure to discuss:
- The industry sentiments on the cloud;
- The challenges to cloud integration;
- Thoughts from a subject matter expert.
Against a backdrop of an expected 29.82% growth in cloud-based infrastructure expenditure of $150.2 billion, up from $115.7 billion in 2022 according to Gartner, the sentiments on cloud-based market data infrastructure is mixed. Some see the benefits of embracing market data in the cloud, while others remain hesitant.
CME Group’s Chairman and CEO, Terry Duffy, believes the biggest issue today is cybersecurity and is a cloud advocate as evidenced by CME’s 2021 high-profile 10-year partnership with Google Cloud. This move was echoed by LSEG and Microsoft a year later, which also announced a 10-year partnership.
Not everyone shares the enthusiasm towards the cloud, however, as ICE’s futures exchanges senior vice-president, Trabue Bland, reportedly said “I can’t even imagine the thought of outsourcing that critical infrastructure to the cloud” at the FIA International Futures Industry Conference earlier this month. Founder and CEO of DRW Holdings, Don Wilson, shares his reservations:
“If everybody puts their matching engines into AWS, and AWS goes down, then the global market infrastructure is going to break, and that seems pretty problematic.”
At its core, these reservations are underpinned by a lack of trust in the cloud’s security and operational resilience. However, Terry notes that “the cloud providers, in my opinion, probably have a better setup than some proprietary system as it relates to cloud security from the hackers.” A sentiment Aite-Novarica Group’s Head of Securities & Investments, Gavin Little-Gil, shares (below). It is worth mentioning the three leading cloud service providers (AWS, GCP, and Azure) offer a suite of security components for clients to leverage.
“Amazon Web Services (AWS), Google, Azure, and others have proved their security is superior to that of individual industry participants.”
The security aspect is seemingly addressed, the remaining concern remaining is resilience and is valid, given multiple exchange outages in 2022*. Mind you, these outages were avoidable with sufficient planning and testing before going live. A testament to the importance of quality managed service providers for market data infrastructure, underwritten by service level agreements (SLAs) as noted by Richard Balmer, Director of Network Product Strategy at IPC, in an earlier article on what was dubbed the “manifesto for the multi-cloud infrastructure partner.”
For those who are simply cloud adverse, Gavin believes that future industry leaders will leverage the current cloud for growth. An opinion shared by Andy Volz, COO at Clear Street, who questioned the sustainability of ignoring what he coins as a ‘tech debt’ that creates broken processes and operational inefficiencies as modern technology is continuously “layered on top of the antiquated infrastructure, only providing a temporary solution.”
To maximise the cloud’s potential benefits, Gavin Little-Gil writes it will “require a clear business and technology strategy coupled with the right application decisions. Firms that align their business and technology architecture to achieve this are positioned to build a competitively differentiating platform that supports the acquisition and retention of clients and employees as well as creates a scalable foundation for growth.” An argument echoed by an FISD panel that discussed the role of 'on prem’ in the advent of the cloud, sharing their respective ‘war stories’ as phrased by Peter Williams, Chief Technology Officer at CJC, and raising the notion of further cloud maturity within the financial services.
The notion of cloud maturity is similar to what Stewart Davies, Global SaaS Commercial Director at Temenos, said during a FinExtra interview with Helen Wallace, Head of FinExtraTV, stating “what we are seeing is a journey of progressive modernisation” to help businesses, regulatory obligations, and gain the trust of those with reservations.
This reinforces an earlier prediction of hybrid-cloud architecture being the preferred solution and is supported by Flexera’s survey, which found 89% of respondents have already deployed a multi-cloud strategy with hybrid cloud accounting for 80%.
Cloud Integration Challenges
The cloud’s challenges in the market data space for the global capital markets are multi-facet and unique to individual organisations. Before committing, it is recommended for organisations to speak with an impartial specialist consultant to minimise risks of failure and any unforeseen complexities**.
A recent survey of 753 participants identified 9 cloud challenges, with 85% of participants agreeing that security is a concern. Partially covering security above, at a high level, the reality is most reputable colocation facilities that host off-premise solutions, like Equinix, likely actively invest in and regularly audit multi-layered security mechanisms against recognised security frameworks.
On a granular level, TechTarget identified 11 cloud security challenges and respective solutions to tackle and mitigate risks. Peter Williams points out firms are ultimately responsible to ensure they secure their infrastructure, adding:
“Cloud providers may lock all the doors, but if you leave the windows (or Linux) open, then you will have problems regardless.”
Aside from governance and compliance, the remaining challenges can be divided into three tiers from a top-down perspective:
- Planning - Resourcing and Expertise; Cloud Spend.
- Managing - Central Cloud Team/ Business Unit Responsibility Balancing; Software Licensing.
- Operating - Cloud Migration; Managing Multi-Cloud.
Planning: Finding the necessary blended expertise between the cloud and market data has been widely acknowledged to be difficult and is one of the prerequisites to be successful, according to David Linthicum. In its absence, resourcing will remain an unknown variable that increases the risk of organisations over- or under-investing, potentially leading to failure.
IT planners will agree that infrastructure and technology budgets are typically meticulously projected and strictly set in advance. Planning for cloud costs will be increasingly difficult while resource needs remain unclear.
Managing: A solution to bridging the skill gap, as highlighted by Adam Uzialko, Editor at Business News Daily and Leong on Gartner in an earlier article, could be outsourcing to a trusted managed service provider for architecting and building the infrastructure. Afterwards, the infrastructure can be managed in-house or externally. Something Stewart Davies proposed during his FinExtra interview:
“Rather than focusing on managing infrastructure and networks, which are nearer the commodity end of the spectrum, actually what it [SaaS applications] allows them to do is focus on how they bring together different technology, how they do their API orchestration to understand how they deliver value for the end customer.”
Operating: Cloud migrations and operations are not a one-time project. It will be an ongoing challenge as capital market firms become progressively cloud-centric and outgrow initial architecture. Highlighting Gavin Little-Gil’s point on business and technology strategy, in the case of infrastructure management being returned in-house, will the operators (or alternative architects) be capable of successfully orchestrating upgrades in the existing system for maximum investment ROI and longevity?
This longer-term view brings us full circle to the idea of outsourcing infrastructure management to a trusted managed service provider that can design, build, and operate your infrastructure. In addition to the eventual upgrades required, it is also in the provider’s SLA interest to regularly fine-tune the system for resilience to avoid any outages like those seen last year - releasing in-house resources for strategic initiatives.
Subject Matter Expert Thoughts - Cloud
To summarise, we expect cloud expenditure to continue increasing (notably infrastructure and applications), hybrid multi-cloud solutions are already the preferred solution, and the cloud will drive a progressive journey of modernisation, despite mixed sentiments. We also covered a variety of cloud adoption challenges.
Ambushing CJC’s Chief Technology Officer, Peter Williams, by the coffee machine, he suggested:
RE: Designing and building - “Architect solutions as cloud-native as possible will result in better outcomes from both a cost and functionality standpoint.”
RE: Migrating and managing - “Understanding the user experience/usage profiles of end users will help to devise best-fit migrations strategies.”
RE: Spend and Resourcing - “Cloud solutions must be constantly optimised to embrace new technologies or methods to reduce cost or automate operations.”
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How CJC Can Help
CJC is a leading market data technology consultancy and service provider for global financial markets. CJC provides multi-award-winning consultancy, operations support (OaaS), vendor-agnostic cloud solutions, and professional services for mission-critical market data systems. CJC is ISO 27001 certified and is an industry-recognised, market data specialist consultancy with over 20 years of experience.