Obstacles to Cloud Adoption in Capital Markets Trading

Beware the onboarding nightmare in the battle for client order flow

By Mike Powell, CEO, Rapid Addition.

We’ve already talked about what’s driving capital markets’ growing interest in cloud technologies, and discussed what the real world currently looks like, in earlier blogs (herehere and here).

But practitioners accept that the journey to cloud isn’t entirely an easy one. Even for committed capital markets protagonists, cloud represents its own set of challenges. According to a survey of 20 capital markets organisations commissioned by Rapid Addition, respondents identified a number of obstacles to adoption that ranged from performance-related and practical issues to more strategic or political barriers. Here’s a scan of some of the key barriers to success:

Latency / determinism of performance. Across the board, latency and performance was identified as a potential deal-breaker when it came to deciding whether to adopt a cloud-based strategy. A common view was that cloud is not yet capable of supporting low-latency or latency-sensitive demands. That doesn’t, however, preclude the use of cloud for other parts of the trading value chain, which can be isolated and migrated using a hybrid model. This approach would be suitable for use cases where the data consumed or distributed is not actionable, one observer noted.

Data security / privacy concerns. Notwithstanding cloud operators’ state-of-the-art stance on data security, respondents were reluctant to place sensitive data into cloud environments. Many said their organizations were happy to designate their data as ‘hot’ and ‘cold’, the former of which would be kept in house where security could be controlled by the owner.

Need for control. Organizations feel compelled to maintain control over their trading infrastructure and feel that cloud infrastructure hurts their autonomy. “We want to have more visibility down to the tin with regards to bursts and determinism,” said one respondent.

Complexity of migration. Perhaps the biggest challenge is the initial move to cloud architecture. Respondents cited the complexities of their own organizations and legacy applications as a major barrier to migration. Along with a lack of requisite skills, the cultural change needed to execute such a transition can be a significant handicap. “Adopting DevSecOps and the requisite people, skills, processes, tools and cultural change needed to fully gain advantage from cloud, together represent a significant barrier,” opined one participant.

Cloud operators’ lack of clarity. Cloud operators have been criticized for providing too little clarity about the own technology and business plans, and that has been a hindrance to respondents’ efforts to assess the applicability of cloud environments.

Potentially higher operating costs. Cost and scalability are among the most common reasons cited for companies adopting a cloud-based strategy. But observers noted that once target levels of scale had been reached, cloud potentially ceased to offer value. Having helped to start up lines of business or to enter new markets, the elasticity offered by cloud has become no longer necessary for some respondents and from then on has represented an unnecessary cost.

Concentration risk. When data is concentrated in a single or a small handful of locations, it becomes potentially vulnerable to power outages and the loss of business that could entail. “Concentration risk is the killer – the more we load in, the bigger the impact of an outage,” said one respondent. “If we have 20 apps in the cloud, it feels like a data centre outage if it goes down. Fundamentally, the model is flawed. It’s like having everyone working on the same mainframe.”

Individual firms will ultimately need to decide their approach and carefully consider whether building and running their own infrastructure is really any more robust than leveraging cloud services (particularly when budget and resource constraints are taken into consideration).

We’ll be exploring which trading functions are best suited to cloud, and what the future looks like in upcoming blogs, so stay tuned. Or else you can register your interest in the full report here and we will contact you to let you know when it is available.

This article was originally published by Trading Tech Insight as part of our partnership with The A Team Group.