Hedge funds could reduce computing costs related to portfolio analysis by 50 per cent by switching to an enterprise cloud offering, according to a report from Greenwich Associates (GA).
Cloud Computing for the Buy Side: Moving Beyond the Myths finds that cloud computing and its predecessor technologies have been discussed on Wall Street since the early 1990s with many financial firms adopting variants such as vendor hosted solutions and software as a service offerings to replace local installations.
While these steps towards the cloud brought with them reduced cost and increased efficiency, investors have yet to embrace a broader move to the cloud held back by long held concerns that have now been addressed.
Annual technology budgets among the institutional investors taking part in a 2013 Greenwich Associates study averaged USD5.5 million. Hedge funds were the biggest spenders, with annual budgets averaging USD7.9 million. But with budgets holding steady or shrinking, many firms still do not see a guarantee that the long term benefits of switching to the cloud will outweigh the short term costs.
Increasing regulatory certainty, acceptance that many tried-and-true investment strategies have changed for good and a resurgence of structured products are driving up the demand for computing power while IT budgets have not bounced back. Cloud computing could provide an effective means of accessing needed computing power at an affordable price.
“Given the potential savings, the contraction of Wall Street IT budgets, improved cloud offerings, and a market that requires more complex calculations to be completed in ever-shortening timeframes with ever-greater accuracy, Greenwich Associates believes the financial service industry needs to embrace cloud technology on a much expanded scale,” says Kevin McPartland, head of research for Greenwich Associates’ market structure and technology practice.