Industry Sentiment

The UK-centric energy crisis continues to be a concern for the financial markets and industry stakeholders are monitoring the situation very closely. For some, the increased costs are not an immediate threat if they are fortunate enough to have multi-year contracts and hedged power in advance, however, will face some unexpected power-based contractual increases and be prepared for significant commercial increases in future contracts. Firms that are about to renew contracts will be less fortunate.

These energy costs are exacerbated by the war in Ukraine, the indefinite suspension of natural gas flows⁵ and the alleged sabotage of gas pipelines⁶ between Russia and Europe. The European bloc imported 40% of its natural gas from Russia in 2021⁷, escalating the energy crisis from being cost driven to a supply-driven issue.

Despite the largest importer of Russian gas within the bloc, Germany, managing to reach 90% of its storage capacity in the lead-up to Winter⁸, crippling blackout fears remain, evidenced by JP Morgan’s (JPM) reported relocation plans⁸. The plans align with doomsday scenario plans reported by Bloomberg⁹, the Wall Street Bank¹⁰ and contingency plans allegedly drawn up by other European banks¹¹ to ensure trading continuity should outages abruptly materialise.

Unlike potentially avoidable technology-led outages¹², a power supply-induced outage would be truly devastating.

Risk Mitigation

100% server availability, on- or off-premises, without blackouts and a solid foothold on commercials have always been a priority. However, when it comes to data centre migrations, most financial services firms have limited options when considering crucial variables like established networking to global sites, and low-latency connectivity to exchanges, vendors, and clients. The well-known expense of data centre migrations (emerging technology and a temporary co-existence of new/old data centres) can also lead to new contracts with much higher energy commercials.

Forced to either swiftly migrate data centres, move to mitigate future costs or both. What choices do financial firms have?

Mitigation Opportunities

Data centre migrations are sometimes unavoidable; however, new technological advances enable firms to potentially downsize or relocate server functionalities. By reducing server count, firms can reduce power consumption through known cloud capabilities and achieve commercial savings, while ensuring availability and maintaining a presence at strategic locations for latency and connectivity.

With multiple variables to consider (budgets, costs, purchasing and long-term server capacity, and cover for existing concerns and timescales), a data centre migration is a huge undertaking.

Tugrul Ozbay, a leading CJC Market Data Engineer, is frequently engaged in such projects and said, “We are frequently utilised to advise clients on the potential avenues at their disposal. No IT infrastructure is the same and is unique to every individual firm. Liaising with IT executives and their support teams, we review the servers directly and audit the application owners to truly understand a firm’s infrastructure before proposing the bespoke options available”. Tug continues to briefly outline how he approaches these engagements:

1. Review client Infrastructure, liaise with IT support teams and interview application/business owners.
2. Confirm if the infrastructure is in scope for modern software versions and techniques to optimise footprint without sacrificing resiliency, or if the functionality isn’t reliant on low latency.
3. Determine capacity requirements and projections for future state infrastructure.
4. Determine requirements (scope, cost, time, and resources.
5. Plan the data and application migration.
6. Plan new hardware requirements and commercials, including physical server and cloud platform.
7. Document and present a proposal that covers recommended migration strategies. Detailing:
   1. Any potential reductions in server requirements.
   2. Leverageable modern techniques/technologies.
   3. Project timeline and milestones.