Examining Cloud Usage within the Investment Management Industry. Presented by Eze Castle Integration

Transcription

1 Examining Cloud Usage within the Investment Management Industry Presented by Eze Castle Integration

2 Table of Contents Introduction Survey Methodology & Respondent Profile Current Cloud Usage Cloud Deployment Models: Public vs. Private vs. Hybrid. 6 Business Needs Driving Cloud Deployment Current Satisfaction Levels of Cloud Users.. 9 Concerns About Cloud Deployment Security in the Cloud 11 Interoperability of Multiple Clouds 12 Cloud Usage: Forecasting & Budgeting. 13 Outcomes Firms Expect to Realize from the Cloud 13 Conclusion.. 15 About Eze Castle Integration

3 INTRODUCTION Just five short years ago, the idea of cloud services was a new and daring one an infrastructure option that few firms knew about and even fewer were adopting. Hedge funds and investment firms were still leveraging traditional on-premise IT infrastructures or colocation services of third-party technology providers. Hardware management and ownership was still a critical component of any firm s day-to-day operations, and frequent refresh cycles caused firms to suffer through costly and labor-intensive infrastructure upgrades. Fast forward to today and the financial services industry has widely adopted the use of cloud services. In a 2012 survey of the investment industry, Eze Castle Integration found that nearly eight out of 10 investment firms were either using or planning to use cloud services in the near future. One year later, those numbers continue to increase, and our 2013 survey report will show that 87 percent of firms are currently using some form of cloud computing services. Beyond that, the majority of investment firms report that they are satisfied with the current cloud deployments. Whether a new or experienced investment firm, the pull towards cloud services is significant. As our 2013 survey results show, firms of all sizes can leverage the inherent benefits of the cloud, including increased efficiencies, simplified technology management and cost containment and predictability. Based on the results, we expect conversations will continue to revolve around the cloud for years to come. Following is a full report of the findings from the 2013 Eze Castle Integration Survey: Examining Cloud Usage within the Investment Management Industry. 3

4 SURVEY METHODOLOGY & RESPONDENT PROFILE Field work for the survey was completed by IDG Research Services between August 5 and August 15, A total of 101 respondents were surveyed via online questionnaire or phone interview. The audience was qualified based on several criteria. Respondents had to work at either a hedge fund, investment management firm, fund of fund or private equity firm. Organizations also had to either currently use cloud services or plan to use cloud services within the next three years. Respondents who completed the survey were of the following firm types: investment management firms (61%), hedge funds (21%), private equity firms (13%) or fund of funds (5%) [Figure 1]. The largest percentage of respondents (38%) came from firms with assets of less than $100 million. Twenty percent (20%) of firms reported assets between $100 million and $ million. Nineteen percent (19%) had assets under management between $500 million and $ million, and 20 percent reported AUMs of over $1 billion [Figure 2]. Titles of individual respondents covered a wide range, with the majority reporting from the financial or operations side of the business. The larger firms who completed the survey were more frequently represented by technology-related individuals. There was also a significant Other category, indicating the responsibility of IT is changing hands and may fall under many different departments. Following is a complete breakdown by title: Figure 1 Chief Financial Officer: 16% Managing Director/Partner: 13% Chief Operating Office: 10% VP/Director of Operations: 10% IT Manager: 7% VP/Director of IT: 6% Chief Compliance Officer: 4% Other: 35% Figure 2 4

5 CURRENT CLOUD USAGE In our 2012 survey, Eze Castle took an initial pulse of the market to determine what percentage of investment management firms were using or planning to use cloud computing services. Last year s results showed that nearly 8 in 10 firms (79%) were using or had plans to use the cloud within the near future. The benefits of cloud computing continue to permeate throughout the industry, and as a result we found that 87 percent of this year s survey respondents are using cloud services to meet some kind of business need today. The additional 13 percent indicated they had plans to utilize cloud services within the next three years [Figure 3]. Of current cloud users, 64 percent said they are currently using the cloud to meet their basic business needs, including , file services, storage solutions and disaster recovery services [Figure 4]. Firms with less than $1 billion in assets under management tend to rely on the cloud for these basic office functionalities more so (68%) than larger firms with over $1 billion in AUM (50%). Nearly half of firms currently using the cloud (49%) are leveraging it for application hosting needs, a figure remarkably similar to the results of Figure 3 last year s survey (50%). Cloud-based application hosting often makes sense for hedge funds and investment firms, giving them the ability to quickly and easily add users and new applications to an infrastructure that provides increased resiliency and requires less maintenance and upfront capital expenses. Survey findings show that 24 percent of current cloud users are outsourcing the entirety of their IT infrastructures a slight increase over the 22 percent of firms who reported the same in Mid-to-large firms tended to report this over their smallest and largest counterparts. Lastly, 42 percent of firms indicated they are using the cloud for other application services or infrastructure needs, a sign that the breadth of solutions offered via the cloud continues to expand and bring value to investment firms and businesses of all kinds. Figure 4 5

6 CLOUD DEPLOYMENT MODELS: PUBLIC VS. PRIVATE VS. HYBRID Based on these survey results, the financial services industry has clearly adopted cloud computing and continues to see value and reap the benefits of such services. Whether firms are building out their own clouds or relying on those designed by experienced third parties, cloud services have clearly found a home in the financial industry. That said, not all clouds are created equal. Survey respondents were asked to indicate which type of cloud was best suited for their industry. For the purposes of this survey, cloud deployment models were defined as follows: Private Cloud: This model of cloud infrastructure is provisioned solely for a single organization, whether managed internally or by a third party and hosted internally or externally. Hybrid Cloud: A composition of two or more clouds (private, community, or public) that remain unique entities but are bound together, offering the benefits of multiple deployment models. It can also be defined as multiple cloud systems that are connected in a way that allows programs and data to be moved easily from one deployment system to another. Public Cloud: This model of cloud infrastructure is provisioned by the cloud provider for open use by the general public. It may be owned, managed, and operated by a business, academic, or government organization, or some combination of them (e.g. Amazon Web Services, Google Documents, etc.). Nearly half (46%) said the private cloud was best suited for financial services, followed by 31 percent who selected a hybrid cloud and 24 percent who chose the public cloud [Figure 5]. For the smallest size asset class (less than $100 million), hybrid and private clouds were the top choices, garnering 39 percent and 37 percent of the responses, respectively. All other asset classes overwhelmingly selected the private cloud as the ideal choice for the financial services industry. When asked why firms selected a particular cloud model over the others, common themes emerged. Those who selected the private cloud as the optimal deployment model for investment firms most often gave security as the resounding reason why. Proponents of the public cloud cited its ease of use and low cost as the primary benefits. Respondents who selected the hybrid cloud naturally highlighted the combined value of security and accessibility. Figure 5 6

7 Security purposes. Greater control over accessibility. PRIVATE More control and more security. For security reasons. Security is the number one driving factor above everything else. I like the security of the private cloud and the accessibility of the public cloud. It satisfies the need for simplicity and security. I am small enough that I don t need my own special private cloud. I am relatively uncomfortable with something public because of security so hybrid would be best. HYBRID It is flexible and easy to use. No cost, easy to use. For easy access to data for consumers and service providers. PUBLIC Good value. 7

8 When asked what cloud deployment models their organizations were currently using, respondents provided answers similar to those they felt were ideal for their industry. Forty-seven percent (47%) of firms indicated they were using private cloud services, and this was the top choice for all of the asset classes. Hybrid cloud users made up 27 percent of the respondents, followed by public cloud users at 26 percent [Figure 6]. BUSINESS NEEDS DRIVING CLOUD DEPLOYMENT Figure 6 Next, our survey asked firms what they perceived as the top business requirements or needs driving cloud deployment within the industry. For this question, we invited respondents to give multiple responses. Simplicity is often one of the greatest appeals of the cloud, allowing companies all over the world to quickly and easily access general office and financial applications, shared files and other business requirements. Within this survey, the top driver according to respondents of nearly every asset class, is easy access to applications and simplified application management. Sixty percent (60%) of overall firms selected this as the primary driver to cloud adoption [Figure 7]. Another critical factor influencing cloud deployment is greater control and predictability of IT costs and budgeting, a factor that 55 percent of firms selected in our survey. Not only does the Figure 7 cloud benefit firms in the short term by reducing upfront capital expenditures and transitioning costs to ongoing, operating expenses its advantages also translate to the long term. Technology budgeting has long been a challenging process for hedge funds and investment firms, who have historically had to factor expensive hardware purchases, new applications and refresh cycles into the equation. Or in many cases, firms have not taken the time to create their budgets and have been surprised with unexpected costs on an unexpected timeline. With the cloud, however, IT costs are predictable and structured to ensure firms are not surprised in the short or long term. 8

9 Reduced complexity and management of IT is another critical factor driving firms to the cloud, according to 55 percent of our survey respondents. By leveraging the experience and expertise of a third-party cloud services provider, firms themselves no longer need to worry about technology maintenance or monitoring. Day-to-day cloud management, upgrades and other service issues are handled by the cloud provider, freeing up firms to spend their time on higher priority items. Disaster recovery and business continuity have become household terms for investment firms, with increased regulatory and investor scrutiny in recent years. Devastating disasters such as Superstorm Sandy on the East Coast of the U.S. have also prompted firms to take a closer look at their business recovery strategies and reevaluate their technology systems. Fifty-four percent (54%) of our survey respondents indicated improved DR and BCP was an important driver to cloud utilization. Additional factors motivating hedge funds and investment firms to adopt the use of cloud services include: enabling global support of local and remote offices (46%), meeting industry or government compliance requirements (41%), reallocating personnel resources to higher priorities and greater value areas (41%), and other (3%). CURRENT SATISFACTION LEVELS OF CLOUD USERS It s clear to see that hedge funds and investment firms are adopting cloud services for a multitude of reasons. And according to our survey, firms are generally happy with the results they re seeing. Of firms currently using cloud services, almost all respondents are satisfied with their organizations chosen deployment method whether public, private or hybrid. When it comes to reducing IT costs, nearly all firms (93%) reported that their chosen cloud deployment method either meets or exceeds expectations [Figure 8]. Ninety-two percent (92%) said their cloud was meeting or exceeding expectations by improving users IT experience; only six percent answered below or significantly below expectations. Current private cloud users found their model to be the most effective at meeting this need, with 98 percent satisfaction (meeting or exceeding expectations). In contrast, only 83 percent of public cloud users were as satisfied that their users IT experience was improved by use of the cloud. Hybrid users fell in the middle at 91 percent. Overall, 91 percent of firms believe the cloud is simplifying management of their IT, with the most satisfaction, again, coming from private cloud users (98% said it meets or exceeds expectations). Public cloud users said their cloud deployment model only met or exceeded this expectation 83 percent of the time. One benefit many firms see from the use of cloud services is the ability to reallocate internal 9 Figure 8

10 resources to more valuable activities. For example, if outsourcing cloud services to a third -party provider, a firm s internal IT department no longer needs to focus on the day-to-day management and maintenance of the cloud thereby allowing those employees to focus on higher-value areas of the business such as meeting regulatory and compliance requirements and improving security practices across the firm. Eighty -nine percent (89%) of overall cloud users believe the cloud is currently meeting or exceeding their expectations in this area, but once again, there are some discrepancies between cloud types. While 39 percent of hybrid cloud users say their cloud type exceeds expectations in this area, only 22 percent of private cloud users feel the same. One area where hybrid cloud users were less impressed was IT performance, scalability and resiliency. While 70 percent of users still believe their cloud solution meets or exceeds expectations in this area, that figure is significantly lower than the 92 percent and 95 percent that public and private cloud users provided, respectively. Finally, when asked if their chosen cloud deployment method provided a high return on investment, 22 percent of all users said their cloud exceeds expectations, followed by 66 percent meets expectations, 7 percent below expectations, and three percent significantly below expectations. Two percent (2%) of firms said they were unable to answer. Once again, private cloud users were most satisfied with their cloud models at 93% (meets or exceeds). Public cloud users were 88% satisfied, and hybrid cloud users just 78% satisfied. CONCERNS ABOUT CLOUD DEPLOYMENT Despite widespread adoption of cloud services, some hedge funds and investment management firms remain cautious about this type of technology deployment. When asked if they had any concerns about their current or future cloud deployments, survey respondents noted security, regulatory requirements and support as their top choices. About half of firms (51%) said they had concerns about security, including unauthorized access, data integrity and data protection [Figure 9]. Firms with assets under $100 million appeared slightly more concerned than firms of larger asset sizes. Figure 9 Thirty-nine percent (39%) of respondents said they had concerns about information governance or meeting regulatory or compliance requirements, followed by 36 percent who said they feared spending more than anticipated on support for the cloud. 10

11 Additional concerns expressed by firms include: Fear of vendor lock-in (34%) Fear of outgrowing or overpaying in the cloud (30%) Concern regarding unexpected hardware investments (29%) Inability to access/integrate financial applications (28%) Investors/clients are not receptive to private cloud computing solutions (26%) Nine percent (9%) of firms said none of the above mentioned factors were concerning to them. SECURITY IN THE CLOUD Security in the cloud has long been a topmost concern for businesses, particularly so for investment firms managing sensitive financial data. Following the economic crisis in 2008, investment firms have reevaluated their security practices, and investors have demanded stronger controls to secure and monitor data and assets. Security is no longer a minor add-on to a firm s general technology practices. Firms are now employing security experts and/or leveraging outsourced IT providers to manage security. For cloud users, security due diligence becomes critical as they evaluate service providers. Proper security in a cloud environment requires specialized practices at both the physical (data center) and virtualization (server) level. Common cloud security best practices include: Physical Security 24x7x365 manned lobby with visual verification of identity Multi-factor authentication of visitors (at least two factors) Secured access doors and elevator banks Monitored security cameras Additional door, motion and camera sensors Key-locked cages and cabinets Visitor and audit logs for cages Figure 10 11

12 Virtualization Security Secure separation Availability and resiliency Service assurance Management and monitoring Managed Security Monitoring Intrusion detection and prevention (IDS) Data loss prevention (DLP) Ongoing vulnerability assessments High service levels and 24x7x365 expert security monitoring According to our survey results, investment firms overwhelmingly believe that private cloud deployments are more secure (60%) or just as secure (33%) as an on-premise infrastructure [Figure 9]. Firms felt the opposite about the public cloud, with 61 percent citing it as less secure than an on -premise infrastructure. The hybrid cloud fell somewhere in the middle: about half of firms (47%) rated it just as secure as on - premise with about a quarter noting it was more secure and another quarter rating it as less secure. INTEROPERABILIY OF MULTIPLE CLOUDS In some cases, firms take a staggered approach to cloud adoption. A firm may start out with an application hosted in the cloud and, at a later time, decide to move office productivity solutions to the cloud. In an instance such as this, challenges could arise if hedge fund systems are suddenly running across multiple cloud platforms. A customer relationship management solution (CRM) could be operating in the public cloud while an order management system (OMS) runs in the private cloud. If desired, connecting said systems can become complex and oftentimes deliver a poor user experience. Just as with an on -premise technology solution, it is best for firms to plan for growth and determine if their cloud needs will change or increase over time. Of firms who selected the hybrid cloud as the best-suited cloud model for their industry, nearly three-quarters (74%) said they were at least somewhat concerned (if not extremely or very concerned) with the interoperability of systems and applications across multiple clouds. Only three percent said they had no concern at all with interoperability of multiple cloud platforms [Figure 10]. Figure 11 12

13 CLOUD USAGE: FORECASTING & BUDGETING With satisfaction levels relatively high for most users, it s not surprising that most firms reported they plan to maintain the same levels of cloud usage or increase them in the near future. Over the next 12 months, more than 4 in 10 firms (41%) expect their use of private cloud services to increase. Hybrid cloud usage is expected to rise also, with 39 percent indicating they will increase use of that deployment method in the future. Only 28 percent of firms overall say their use of the public cloud will increase [Figure 12]. Similar to projected usage, cloud budgets have either remained the same or increased for most investment firms in Overall, 37 percent of firms reported that their budget for cloud services increased from 2012 to 2013; 52 percent indicated that budget had remained the same. Only five percent (5%) of firm budgets decreased year over year [Figure 13]. Figure 12 The asset class with the largest increase in budget included firms with over $1 billion AUM. Half of these firms (50%) said their cloud budgets increased in The majority of firms in other asset classes indicated their budgets remained the same. There was little variation among public, private and hybrid cloud users. Firms who indicated their cloud budgets had increased did so at an average of about 40 percent, with 43 percent of firms reporting a budget increase of greater than 20 percent. The average increase was actually greatest for firms with the lowest assets under management. Firms with less than $100 million increased cloud budgets by an average of 59 percent, while firms with greater than $1 billion AUM only increased budgets by 23 percent. OUTCOMES FIRMS EXPECT TO REALIZE FROM THE CLOUD Figure 13 Without question, across the board, hedge funds and investment firms expect to see a lot of positive results due to their current or planned cloud usage. According to survey results, 60 percent of firms expect their current or future cloud usage to improve their data management abilities [Figure 14]. Other top outcomes 13

14 firms expect to realize from the cloud include improved ability to manage applications (55%), improved resource utilization (54%), improved disaster recovery/business continuity (52%) and simplification of infrastructure (52%). Hybrid cloud users most often cited improved ability to manage applications (74%) as a benefit to their cloud usage; private cloud users selected improved data management ability 66 percent of the time. Public cloud users identified improved resource utilization as the most common benefit of the cloud. Figure 14 Other outcomes and benefits hedge funds and investment firms expect to realize from their use of cloud computing services are: Cost-savings and lower total cost of ownership (TCO) (48%) Improved application service levels or IT responsiveness (accelerated service delivery) (47%) Lower support costs (46%) Improved scalability/flexibility (46%) Increased agility in bringing in new business applications (45%) None of the above (2%) 14

15 CONCLUSION We think it s fair to say that the adoption of cloud computing services is no longer a surprise, particularly given the high satisfaction levels cited by nearly all respondents. Hedge funds and investment firms are continuing to leverage the cloud to meet their day-to-day operational goals and maximize their business efficiencies, and the rate of adoption is growing at a rapid pace. Our 2013 survey clearly shows that investment firms of all sizes are looking to reduce complexities, simplify their technology management and control costs all while maintaining success on the investment front. Whether using public, private or hybrid cloud models, firms are generally satisfied with their cloud deployments and many expect to increase their cloud usage and budgets in the near future. The private cloud remains the top choice for investment firms of all sizes, bringing a secure environment to a cautious industry and alleviating many of the concerns firms have traditionally had regarding cloud computing services. Firms expect to achieve success in the coming years as the cloud affords them better data management capabilities and improved resource utilization ultimately giving them the tools they need to focus on their primary investment decisions. It will be interesting to see how the rate of cloud adoption grows in the near future and in what new and exciting ways firms begin to use the cloud to optimize their businesses. 15

16 ABOUT EZE CASTLE INTEGRATION Eze Castle Integration is the leading provider of IT solutions and private cloud services to more than 650 alternative investment firms worldwide, including more than 100 firms with $1 billion or more in assets under management. Our Eze Private Cloud is the most widely used hedge fund cloud spanning three continents and supporting over 2,500 users. In addition to our cloud services, our solutions portfolio includes Technology Consulting, Outsourced IT Support, Project & Technology Management, Professional Services, Telecommunications, Business Continuity Planning and Disaster Recovery, Archiving, Storage, Colocation and Internet Service. Eze Castle Integration is headquartered in Boston and has offices in Chicago, Dallas, Hong Kong, London, Los Angeles, Minneapolis, New York, San Francisco, Singapore and Stamford. The Eze Private Cloud is an enterprise-grade, private cloud infrastructure that provides hedge funds and investment firms a highly redundant, secure and available IT environment. The Eze Private Cloud is the backbone for Eze Managed Suite and Eze Managed Infrastructure. Eze Managed Suite is a fully managed IT solution for hedge fund and investment firms that provides flexibility and simplified IT operations. The solution combines a robust, highly secure private infrastructure via the Eze Private Cloud with key business applications and professional IT management. Eze Managed Infrastructure provides clients easy access to an enterprise-grade private environment with the latest hardware and software without capital expenditures, expensive upgrades or ongoing maintenance and monitoring. To learn more about Eze Castle Integration, visit or contact us at or sales@eci.com. 16

17 ABOUT IDG RESEARCH SERVICES IDG Research Services specializes in marketing and media-related research for technology marketers. As a division of International Data Group (IDG), the world s leading technology media, research, and event company, IDG Research Services brings the resources and experience of a large, global company to its clients in the form of a small, customer-focused business. For more information, please visit ABOUT CISCO Cisco Systems is the worldwide leader in networking that transforms how people connect, communicate and collaborate. Cisco hardware, software, and service offerings are used to create the Internet solutions that make networks possible providing easy access to information anywhere, at any time. Cisco was founded in 1984 by a small group of computer scientists from Stanford University. Since the company's inception, Cisco engineers have been leaders in the development of Internet Protocol (IP)-based networking technologies. Today, with more than 65,000 employees worldwide, this tradition of innovation continues with industry-leading products and solutions in the company's core development areas of routing and switching. To learn more about Cisco, visit ABOUT NETAPP NetApp creates innovative products storage systems and software that help customers around the world store, manage, protect and retain one of their most precious corporate assets: their data. Founded in 1992, NetApp has grown to more than 150 offices and 11,000 employees worldwide. NetApp creates innovative storage and data management solutions that boost IT efficiency and flexibility. Resources go further and business moves faster with a NetApp storage foundation. To learn more about NetApp, visit 17