This is the first in a series of posts on the advantages of investment managers using cloud-based and SaaS solutions as their technology infrastructures.
Research reports and market statistics tell us that cloud computing and the SaaS delivery model have arrived in the enterprise and are here to stay.
One example is a recent report from IDG based on a global, cross-industry survey it conducted with 1,000 executives. Respondents said that by mid-2018, 80% of their entire IT budgets will be committed to cloud solutions.
While market data on cloud and SaaS adoption among asset managers is harder to come by, its probably not far behind the rate reported by IDG.
Several factors that are combing to accelerate this trend among asset managers and hedge funds are highlighted in a new report from Celent entitled The Path to the Cloud: The Buy-Side Front Office as a Service. The report cites the financial benefits as one of – if not the-most important factors motivating firms to transition away from in-house IT and toward SaaS and cloud alternatives.
All firms want the differentiation and competitive advantages that come with deploying cutting-edge technologies in their investment management processes. In the past, however, the upfront and ongoing costs of these systems, and having the IT staffs required to implement and maintain them, meant that those systems were reserved for only large, deep-pocketed firms.
SaaS delivery and cloud-based architectures have entirely changed this dynamic, giving firms of all sizes affordable and sensible options for obtaining highly sophisticated investment management technologies. The Celent report breaks down the various economic advantages of the SaaS model and cloud-based solutions, which include:
- Avoiding upfront IT costs, including the expenses of running multiple data centers, and buying and replacing servers, appliances and other hardware.
- Optimizing balance sheets by replacing CapEx with OpEx costs.
- Replacing fixed-cost investments with service-based models: Pay as you go, rent versus buy.
- Reducing or eliminating recurring IT costs, including software licenses, renewals and maintenance contracts.
- Leveraging cloud providers major investments across their deployment, infrastructure and information security teams
- Cutting disaster recovery, connectivity, and IT staff costs
As Brad Bailey, Celent analyst and the reports author noted, The case for the Cloud is now too strong to ignore, and today the vast majority of managers have begun to leverage it to at least some extent.
We see the same here at LiquidityBook, as virtually every manager we speak with has either adopted some form of cloud-based or SaaS-delivered technology, or is actively working to do so. Firms of all shapes and sizes are dipping their toes into cloud computing via solution providers that have become much more cloud-centric over the past few years.
LiquidityBooks solutions leverage the cloud for its simplicity, extensibility, flexibility and scalability. But the main reasons we deploy a fully multi-tenant, SaaS-based system are the benefits it provides our clients in terms of ease of management and lower total cost of ownership.
One of our customers, Peter DeCaprio, portfolio manager and principal at of Crow Point Partners, summarized the benefits of cloud-based systems in a recent interview with MarketsMedia. He said his firm wanted to avoid the infrastructure and management costs that internally hosted platforms typically incur.
That mirrors the strategies of many firms: get out of the IT business, stop spending on further expansion of internal technology infrastructures, and redirect those efforts and resources toward the firms core services and value add. With SaaS and cloud-based solutions, firms can rapidly scale up or down their compute resources as needed – flexibly and affordably.
Conclusion
Its clear that we have reached a tipping point with regard to managers opinions of SaaS and cloud-based options. More than anything else, its the economics of this new paradigm that has moved the needle. In large firms, the business case is so compelling that its chopping away the inertia that has kept the IT status quo in place for so long. For smaller firms, it puts next-generation, high-end technologies well within their financial reach.
Its a tremendously positive change, and were excited about what it holds in store for the industry and the broader investment community.
Sean Sullivan is Chief Revenue Officer for LiquidityBook
