lecture 1 - cloud computing in finance
TRANSCRIPT
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Cloud Compu t ing In Finance
Disruptive Innovation | Enabling Technology
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Technology and Human Intelligence
Moore's Lawo In information age, technology growth is exponential (not linear)o Financial system benefits from technology advanceso Magnify both positive and negative outcomes (leverage, chainsaw)
Murphy's Lawo
Whatever can go wrong will go wrongo Human behavior plays an important role in Finance - Feynmano "Imagine how much harder physics would be if electrons had feelings"
Technology high complexity & high couplingo Use advanced technology to cope with Murphy's law (0 growth)
o Steve Jobs (iPhone, WALL-e) encapsulate technology complexityo Decoupling Moore from Murphy: Version 2.0
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Six Waves of Disruptive IT Changes
System wave from proprietary to Commercialoff the shelf Device wave from dumb to smart Network wave from proprietary to open
internet Content wave from voice to multimedia (big
data)
Service wave from general to personalized Architecturewave from centralized todecentralized and then to cloud
Cloudis end results from all of the above
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Technology Evolution
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What is Cloud Computing
Virtualized compute power and storage delivered viainfrastructures of abstracted hardware and softwareaccessed over the Internet.
These shared, on-demand IT resources, are createdand disposed of efficiently, are dynamically scalablethrough a variety of programmatic interfaces and arebilled variably based on measurable usage.
Making IT Services just like electricity, water, andnatural gas services to household
Cloud computing delivers abstracted IT resources overthe Internet
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Abstraction of Hardware
Hardware as a device become smart It can be coded, therefore, it can be automated Reconfiguration lead to monetization of hardware
Presentation Summary Benefits of Cloud Risks of Cloud Industry path of evolution to Cloud Components path of evolution to Cloud Financial Cloud and Future of IT
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The Cloud = 10X Improvements
Agility
Ease of Use
Scalability
Investment Risk
Reliability
Cost
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Agility and Control
Securities firm operating environment external forceso Regulatory Environment: Relationship with governmento Market: Relationship with customero Competitive Environment: Relationship with peers
Changes are unpredictable
Adapt to changes by repurpose system Automatically adapting to unpredictable changes (not
have to worry about investment obsoleteness, not to be
locked in proprietary hardware and software)
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Ease of Use, Faster time-to-market
Deploy infrastructure with a mouse or APINo cabling, screwdrivers, racking, unboxing, buying
Middle of the nightDo it yourself remotely from anywhere anytime
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Scalability
Control your infrastructure with your app
Nothing to purchase and take delivery on
Instant
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Scalability - Capacity Efficiency
Conventional model: acquire land; hiring contractors tobuild the property; purchase hardware; purchase software;hiring people to operate facility; Very capital intensive
Only efficient in one day out of the whole lifeCapacity
Time
UnderUtilization
CapacityConstrained
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Reduction of Costs and Financial Risk
Turn off the lights = turn off servers you arent usingEx: Turn off development and test environments
Pay for only what you use
No need to buy in advance
Zero Capital OutlayNo contracts
Nothing to buy, nothing to risk
Cancel immediatelyChange instantly, even operating systems
Rebuild it instantly after testing
Better at matching cash flow (risk hedged)
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Reliability - High Availability
Based on enterprise grade hardware
Design for failures Fail safe:Automatically spin up replacements
Use multiple clouds
Disaster Recovery, business continuity
Stability and Security
Regulatory Requirements of redundancy
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Skill Acquisition and Global Reach
Instantly powered with all the hard to acquire skill sets Leveraging external expertise reduce project
complexity (hiding intrinsic complexity from user)
Relieve responsibility of maintenance, typically 70% ofIT budget So that IT department can focus on what they do best
in economic specialization, and innovation
Instantly reach anywhere around the global, crosscultural, legal, and language barriers
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The Evolution of IT
"It was not a cumbersome, laborious process. It was just click,click, click, and that was it," says IT Manager, WSJ
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Risks of the Cloud Ecosystem
JIT availability creates high dependency, earthquake inTokyo may affect NYC
Community switching costs high, hard to leave theecosystem, one way ticket (no exit strategy).
Information privacy in a community ecosystem.o Traders trading strategy,
o portfolio managers position,
o brokerage firm's customer data.
Privacy being compromised has legal and complianceimplications.
The Scariest thing to tell a compliance officer is "we aretaking our data to the cloud".
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New Industry Utilities
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Augustine's Laws
If a sufficient number of management layers aresuperimposed on top of each other, it can be assured thatdisaster is not left to chance
The law of insatiable comfort: Decreased business baseincrease overhead. So does increased business base.
Ninety percent of the time things will turn out worse than youexpect. The other 10% of the time you had no right to expectanything.
The optimal committee has no members. The optimal size is a small size Cloud tap into the benefits of scale of ecosystem without
costs of large system inefficiency as specialization possible
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Outsourcing Services - Evolution to Cloud
Colocation1ststep to outsourcing
Managed Hostingdedicated servers managed by 3rdparty take some pain away
Cloud HostingLower cost, easier, lower risk, morereliable
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Traditional Hosting Costs Continue to Grow
High CapEx
Low facility asset utilization
(55%)High Depreciation (42-50%)
Power/Cooling costs > ServerCosts
Not Green
30% hardware obsolescence- Source: Forbes.com, Kenneth Brill, Servers: WhyThrifty Isnt Nifty
Source: Forbes.com, Servers: Why Thrifty Isnt Nifty
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Would Cloud Computing Do Better?
A pool of abstracted, highly scalable, and managedcompute infrastructure capable of hosting end-customerapplications and billed by consumption1
1- Is Cloud Computing Ready for The Enterprise? Forrester Research, Inc.
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Cloud Computing Is the Answer
More than SaaSPrescripted & Abstracted Infrastructure
Fully Virtualized
Dynamic Infrastructure Software
Pay by ConsumptionFree of Long-Term Contracts
Application and OS Independent
Free of Software or Hardware Installation
Cloud computing is a disruptive innovation that all ITprofessionals should pay attention, because it willtransform how IT services are delivered.
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Colo vs. Managed vs. Cloud Hosting
Colocation Managed Cloud
Time Weeks to Months Days to Weeks Minutes
Scalabi l i ty Slowest, Rigid &Costly
Slower, somewhatflexible, Costly
Instant, Flexible, Pay-per-usage
Cost High CapEx Costly, sometimesmonth/year contracts,no CapEx
No contracts, usagebased, no upfrontcosts
Green Low Low High - virtualized
Pric ing model Buy Servers & Colocosts whether used ornot
Rent Servers &Hosting costs whetherused or not
Rent based on usageonly
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Hosting Industry Move to Cloud
Technology has evolved
People demand more control
Instant gratification
In-house too costly from CapEx and Human Capital
Colocation for those who want to be physically there
Managed is not dynamic enough
Cloud Comput ing -Enabling Technology to move
f rom Tradi t ional Host ing to Cloud Host ing
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Hosting Heads to the Clouds
Static Dynamic = Quick & Easy Scalability
Cost Prohibitive Cost Effective = Cost EfficienciesPredictable Unpredictable = Innovations
Stagnant Growth = Evolution
Traditional Hosting Cloud Hosting = FUTURE!
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The Clouds Component Evolution
Maturation of Virtualization Technology
Virtualization enables ComputeClouds
Compute Clouds create demand for StorageClouds
Storage + Compute Clouds create Cloud Infrastructure
Cloud Infrastructure enables Cloud Platforms&Applications
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Traditional IT Pyramid
Build upon a foundation
Layers equate structure
Building blocks: Infrastructure, Platforms, Applications
Breadth vs. Niche
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The Cloud Pyramid Is Inversed
1000s of Cloud Applications currently
Handful of Cloud Platforms
Elite group of Cloud Infrastructure providers
# of Marketplace providers
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Defining the Cloud Segments
SaaSSoftware as a Service
Storage as a ServicePaaSPlatform as a Service
IaaSInfrastructure as a Service
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Cloud Applications - SaaS
Software as a service
Google Docs "Drive" to share editing of lectures TurboTax Tax Preparation Salesforce.comA cloud-based Customer Relationship
Management (CRM) platform that can be used by a firmto connect with customers and employees.
Most common Cloud / Many providers of different services
Disadvantages: No control or access to underlying technology
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Cloud Platforms - PaaS
Platform as a service
Google App EngineA platform cloud that enablesdevelopers to build and host web applications on thesame systems that power Google applications.
SalesForce Dev Platform
Good for developers, more control than Application Clouds,
tightly configured
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Cloud Infrastructure - IaaS
Infrastructure as a service Provide Compute, Storage, Network Capacity on theclouds
Amazon EC2 NYSE Technologies COD (Computer On Demand)
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Financial Cloud
Security level much higher than Amazon Security level of military cloud SFTI (Secure Financial Transaction Infrastructure)
NY4 Center Not based on statistical availability 99.99% available is not enough
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NYSE
ManagedDevices
State
Monitoring
Trending Procurement
Storage
CapacityConfig
Standards
Traffic
Capture
Hardware/OS
Connectivit
y
Cabinet
LayoutInstallation
Break-Fix
DesignTiming
Services
Power
Environmental
NetworkSegmentation
User
Auth.Patching
Anti-Virus
IDS IPS
Traffic
Analysis
Security
Support
Installation Virtualization
Performance
Automation Scaling
Licensing
Applications
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EVOLVEYOURBUSINESSFROMCOLOTOCLOUD
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Dedicated bladeservers
Managed upthrough the OS
Pre-provisioned
for SFTI services Deploy in days
Compute on Demand:Physical Edition
Managed orUnmanaged
virtualizedcomputing cloud
Pre-provisionedresources with
SFTI access
Deploy inminutes
Compute on Demand:Virtual Edition
Dedicatedmanaged servers,
storage,
networking
Tailored tocustomer needs
Deploy in weeks
Managed InfrastructureSolutions
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Cloud / as a Service Is the Future
Efficient delivery of IT services, faster
delivery of business capabilities Infrastructure Cost Reduction
Headcount Reduction
Elasticity and Scalability
Speed to Market
Dominate Financial Services IT growthnext 20 years
$4B in 2010 to $27B in 2015
Solutions (SaaS/PaaS/IaaS)
o Cost pressure on IT to continue
o Demands from the business for
Source: TheTower Group
Est. Spending ($B) on Cloud
by Global FS Companies(CAGR: 47%)
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Future of IT - Strategic Partner to Business
Business changes is accelerating. IT must be a strategic partner in support change IT must evolve every aspect by adopting XaaS 50% of all new development done on Xaas Platform
Have to manage legacy systems. Integration with Social Media and Mobility Technology StrategiesRethink Technology and IT
strategies
New ArchitecturesCurrent architectures must evolveand adapt to new and emerging technologies Business StrategyIT as a true partner in strategy
creation