By Henk D’Hoore, Executive Director, Product Development, Financial Information at SIX
Google has just celebrated its 25th birthday, yet another milestone in its astounding growth story. While its market cap speaks for itself, perhaps the greatest testament to the company’s success is its introduction in the English language. The verb ‘google’ has become one of the most widely used globally, with The American Dialect Society even listing it as one of its ‘most useful words’.
Given its rapid rise to a leading position, you could be forgiven for assuming Google was the first search engine on the scene, able to remain one step ahead of the competition by cashing in on the many benefits of being first to market. But Google was not the first search engine, nor the most capitalized. Rather, according to founders Sergey Brin and Larry Page, a key tenet of its enduring success has been its willingness to explore new ground. In recent years, perhaps ‘new airspace’ is a more fitting phrase.
A key player in the development of cloud technology, Google’s cloud-based services – also known as Google Cloud Platform (GCP) – now contribute a considerable 10% to parent company Alphabet’s total revenue. This reflects the scale of adoption of cloud computing among business and consumers worldwide, with cloud use now ubiquitous across industries like retail and media, as well as much of the finance sector. And yet, pick-up in the capital markets space – one of the most data-reliant industries of all – may shock you. According to our recent survey with Coalition Greenwich, the industry currently stands at a mere 30% cloud adoption rate when it comes to market data delivery.
Against a backdrop of surging data costs, with 80% of fund managers expecting their market data costs to increase across all asset classes over the next year, the seemingly low take-up of cloud technology among capital markets firms is surprising. It is specially so when one takes into consideration the mounting concern around cyber-security among financial institutions, as well as firms’ ever-growing need to efficiently process vast amounts of data to adhere to stringent regulatory reporting requirements. All that ESG reporting paperwork isn’t going to complete itself, after all.
With this in mind, it seems high time capital markets firms followed Google’s lead, as well as countless other tech titans including Amazon, Microsoft and Oracle, and looked to the cloud. More specifically, they should consider where integrating cloud technology could offer the most value. To this end, transforming their approach to collecting, organizing and processing market data seems an obvious place to start.
Our research with Coalition Greenwich revealed that more than half (64%) of market participants expect the cloud – with its flexible, secure, and low-cost characteristics – will emerge as the dominant market data delivery method over the next three to five years. Moreover, 76% of respondents are now demanding access to real-time market data on top of other streaming frequencies – which can be achieved quickly and relatively cost-effectively through the deployment of cloud-based tech. For brokers and investment banks, this figure rises considerably to 94%.
The question then becomes, what is responsible for the surprisingly low adoption rate of cloud technology when it comes to firms’ market data operations? One of the key reasons has been the limited number of cost-effective connectivity options available to market participants. But this is changing, and fast. Several cloud technologies are emerging in the market that allow institutions to access data services from all major cloud providers with no vendor lock-in. By harnessing these versatile and cost-effective cloud connectivity options, firms can efficiently leverage and standardize multiple market data sets, empowering them to harness vast amounts of data and unearth winning insights – as well as more easily meet evolving regulatory reporting requirements.
If capital markets institutions glean anything from Google’s incredible success story, it should be this: integrating cloud technology must no longer be viewed as blue-sky thinking. Rather, it could be key to ensuring your business remains competitive in a fast-evolving market environment.
