By Mark Hermeling, chief technology officer at Alveo.
Financial services firms are increasingly moving their data management ecosystems to the cloud. This has huge implications for the sector as highlighted in a recent Market Research Future report that projects the financial cloud market will hit the $52 billion mark by 2028, growing at an impressive compound annual growth rate of 24% between 2018 and 2028.
Moving market and reference data to the cloud is not new and has been taking place for several years now. Among the benefits of moving market and reference data in this way is reduced infrastructure and maintenance costs, as well as increased scalability and elasticity. The increased flexibility in dealing with fluctuating volumes and catering to changing provisioning requests from the business makes for a more future-proof infrastructure. Moving market data management to the cloud has also helped reduce cost through appropriate-sized infrastructure, centralised licensing and more easily shared data sets.
Cloud computing is easily scalable depending on the intensity or volume of the data. Using cloud-based platforms also gives businesses a more flexible way of paying for the resources they use, including driving an organisation-wide standardisation of data charging and consumption. On top of this, improved data lineage ensures that source data and any transformation in the data’s lifecycle can be clearly captured. This transparency not only helps financial firms optimise and share their data assets internally and externally in a controlled way, but also reduces the cost of change.
Moving the ecosystem to the cloud
We are currently witnessing a tremendous shift in the market and reference data management process, with the whole data ecosystem moving to the cloud. This is allowing financial organisations to start reaping the rewards of improved efficiency and the lower costs that the cloud can bring as they move away from manual processes and fragmented on-premise systems.
Data vendors are starting to push their products directly onto cloud platforms such as Microsoft Azure, AWS, Oracle Cloud Infrastructure and the Google Cloud Platform. In addition, providers of portfolio management systems, trading solutions, risk and settlement systems and other applications are also moving to the cloud, again attracted by the enhanced security and scalability, increased efficiencies and reduced costs that cloud deployment can bring. Instead of financial organisations placing individual applications in the cloud or using a specific software as a service provider to host their data management platforms, the entire data ecosystem is moving to the cloud.
Data management systems
The implications are that data management systems need to be both cloud agnostic and cloud native to optimally source, integrate, quality-control and distribute market data. In other words, systems need to be designed and built to run in the cloud and to work effectively in that environment, but at the same time they should not rely on a single cloud provider’s proprietary service or in any way be locked into a single cloud vendor.
While this change is accelerating, businesses need to find new ways of moving data onto the cloud and into their applications. This is something that companies need to do quickly if they want to maintain that all important competitive edge.
Financial businesses need to consider everything from developing more robust information security, to keeping valuable data safe in the cloud and right through to enhanced permissions management, usage monitoring, and data quality, which is always a hot topic. The more a company automates to put more applications in the cloud, data quality becomes extremely critical. This is because the process removes what is typically a manual step in between cloud and on-premise, which acts as a safety net to prevent mistakes escalating into major problems.
This can all be made easier through the partial or full utilisation of vendor managed solutions offering a ‘one stop shop’ for the end-to-end provision of market data from vendor feeds all the way through to distribution to their clients. After all, it is essential that cloud environments are optimised to achieve the highest level of efficiency. And to be truly effective, these solutions need to be cloud neutral. Part of this involves being able to interact with data on any public cloud platform.
Now is the time to start the migration
While the ongoing migration of financial services market reference data to the cloud is nothing new, the process is gathering pace. It is no longer just data management solutions and processes that are moving to the cloud. Upstream, data vendors are also putting data on public cloud platforms and downstream, application providers are doing the same.
Therefore, there is a pressing need for financial services organisations to move their market and reference data to the cloud. Again, they cannot afford to wait if they wish to remain competitive. By adopting this approach, they will need to opt for cloud-native solutions that support both ease of use and ease of management. These solutions also need to be cloud-neutral and cloud-agnostic to deliver the scalability that financial firms need if they are to move forward.
By moving their entire ecosystem to the cloud, financial services firms will benefit from increased flexibility, scalability as well as new options of sharing data internally as well as with third parties. Opting for a managed services approach to data management will enable them to tap into all the benefits of the cloud while removing the everyday burden of data processing and platform maintenance. Given that market and refence data play a central role in business processes as well as finance and risk, firms that move their ecosystem to the cloud will be able to make the most of the data.
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