Cloud Computing. Opportunities for Investment Managers

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Cloud Computing

Opportunities for Investment Managers

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Cloud Computing:

Opportunities for Investment Managers

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Cloud Computing

is rapidly changing the way IT is consumed



Spend growing at 19% rate, to $109 billion 2012

(http://blogs.wsj.com/cio/2012/08/15/cloud-services-drive-fast-growing-outsourcing-market/)



Compare to 3% growth in overall IT spend.



Hosted Infrastructure growing by 41%

250

Annual Cloud Spend

USD billion

Hosted Infrastructure growing by 41%



Hosted Software growing by 26%

100 150 200 0 50 2011 2012 2016

Why should Investment Managers care ?

How can we use this to our advantage ?

What are the pitfalls we need to be wary of ?

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IT spend by Investment Managers:

Large and Growing



Hedge fund IT spend in 2011 was $2.09 billion,

close to 9 basis points AUM for the industry.

We use hedge funds as an example for which there is data; these trends hold for

other asset managers



The growth rate in IT spend has recovered to

5% over the next few years

other asset managers



There are returns to scale; Smaller managers

consume closer to 12 basis points

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IT spend by Investment Managers:

Greater Demands, Increasing Margin Pressure

Investment Managers continue to experience pressure on

management fees:

At the same time, demands on IT and operations are growing:

This results in IT costs which disproportionally hit the bottom line of

smaller investment managers:

g



Small funds charge most IT to management,



Larger funds expense 20%-30% to the fund



In-house shared service costs (payroll, hardware)

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Value Drivers for Cloud Computing

in Investment Management

Cloud computing done right can deliver:

Lower Costs

Agility

Cloud operators are able to leverage their buying power and large investments in networks, operations,

datacenters to deliver hosted solutions at a lower cost than a small operation can approach.

Moving away from applications installed on physical hardware allows new services to be turned up much more quickly, often through self-service.

Subscription-based software enables quick and easy

Secure & Reliable

‘try-buy’ evaluations

Focus

Secure & Reliable

IT hosted service providers are able to stay on top of the constant drumbeat of security vulnerabilities and fixes and employ the experts who can deliver a quality service

Focus

Your staff can focus on making a better return rather than on operating IT infrastructure and applications on a shoestring

and employ the experts who can deliver a quality service without interruption.

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Cloud Computing Made Simple

Essential characteristics of Cloud Computing:

Your applications and supporting IT are accessed over a network, relieving you of many IT management tasks

Accessed over a network

You pay only for what you need, and can (relatively) quickly turn services on or off when your needs change on your own, without having to trouble (or even possibly employ) the IT staff

On Demand

Everything you need to use the service comes bundled: support, software, hardware, datacenters, etc. Clear accountability for delivery.

As a Service

The economics of a large provider to many smaller consumers mean you do not have to wait days after requesting a service to have it turned on: the hardware is already plugged in and waiting.

Scalable

have it turned on: the hardware is already plugged in and waiting.

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Cloud Computing Made Complicated

Other elements of Cloud Computing are less complex than IT

people make them sound:

“Service Models”

“Deployment

Models”

SaaS

Models

Private Cloud

SaaS

PaaS

Community Cloud

PaaS

IaaS

Public Cloud

IaaS

_{Hybrid Cloud}

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Cloud Computing made Relevant

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Every Silver Lining has a Cloud

That sounds great! What could possibly go wrong?

Things to look out for when evaluating a service.

Cost Effective?

Agility?

 Does this replace spend? Or add to it?  Do you still need an IT function?

 Are you locked in to a narrow choice of products?  Does the vendor really provide ‘scalability’?  Can you try/buy without excessive commitment?  What if you need to switch providers?

Reliable/Secure?

Focus?

 Does the provider understand your regulatory environment?

 Is the provider commercially viable?

 Does the provider understand how to provide a

 Does the provider understand the investment management business?

 Do all the parts play well together, or will you be left to sort out the mess?

 Does the provider understand how to provide a secure service over the network?

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FSI-Cloud: Asset Manager in a Box

We are partnering to bring the cloud to the

investment management community

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How to make technology work for you, not against you

Investors Limited Partners General Partners

Investment Registrars & Transfer Agents Advisors Investment Managers

Custodians Prime Brokers₍_{or asset custodians)}

Buy‐Side

Core

Functions &

Services

Legal Advisor Executing Brokers Clearing/Exchanges (OTC d i ti ) (OTC derivatives)

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Headwinds to performance

Sell Side Hedge Fund Sell‐Side Exchange Custodian FX Complex system integrations Investor

Relations Front Office _functions FX Portal Market Data Provider SaaS P id functions functions Back Office functions Middle Office functions

Complex data &

Depository Broker Provider STP with Custodians and brokers Shopping and swapping services

Complex data &

voice networks

Clearing Firm ECN Investment Manager FX Analytics Meeting compliance requirements Manager

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Disadvantages of legacy and

“do-it-yourself” models

Legacy Investment Managers, Inc.

• High CapEx capital spend

High CapEx capital spend

• High operational overhead

• Higher cost of compliance

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• Slow time‐to‐market for business

• Slow concept‐to‐market for products

• Static vs. dynamic infrastructure

• Limited access to global community

• Greater IT dependence

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Advantages of BT’s cloud roadmap and

outsourcing

Leaders Investment Management, Inc.

• OpEx pay‐as‐go to save capital

BT Radianz

Cloud

OpEx pay as go to save capital

• Lower operational overhead

• Lower cost of compliance

k

f

b

Depository

• Faster time‐to‐market for business

• Faster concept‐to‐market for products

• Dynamic vs. Static infrastructure

Asset Corp Client Clearing

• Broad access to global community

• Less IT dependence

Asset Manager Client Custodian _Broker

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Integrated and secure community, on‐demand and best‐of‐breed

Investment Management

Corporate Client

asset manager or fund asset manager or fund

manager 360 investor view 360 investor view

BT Radianz

Cloud

investor client

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About BT

moving the fabric of the market into the cloud

Financial Markets Banking & Insurance Financial Services Enterprise

Fast facts

•

170 + countries

• 30 year focus

in financial services

• 68,000+

trading turrets worldwide

Fast facts

68,000+

trading turrets worldwide

• 15,000+

BT Radianz member locations

• 400+

BT Radianz providers

• Sub‐millisecond

low‐latency trading

• £250bn

in transactions settled daily

• 29 million

card payments daily

Faster

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About Virtual Clarity

UK Company founded in 2009

Offices in London, Mountain View, Amsterdam and New York

We help businesses turn technology to competitive advantage:



Agile IT strategy and governance



Next generation Data Centres



Operating Models optimised for Virtualisation



Mission Critical Cloud Computing



Shorten time to value for new technology



Product and Service strategy for the Cloud

Virtual Clarity offers a compelling combination of:



Financial IT specialists spanning Funds Retail and Securities



Financial IT specialists spanning Funds, Retail, and Securities



End User Computing transformation and modernisation



Wisdom in putting Cloud Computing to work

Our mission is to help businesses virtualize their entire infrastructure and transition to the cloud, making these a core part of the enterprise strategy