Three Questions Every Hedge Fund Should Ask About the Public Cloud

Oct 20 2015 | 6:44pm ET

Editor's Note: Cloud-based technology is rapidly expanding into the alternative investment industry, but issues of security, reliability, and implementation can be overwhelming. In this contributed article, Bob Guilbert of EZE Castle Integration takes a look at the three key questions every hedge fund manager should ask themselves as they decide between public and private clouds.

3 Questions Every Hedge Fund Should Ask About the Public Cloud

By Bob Guilbert, managing director at Eze Castle Integration

There’s no doubt about it – the cloud can be a valuable asset to your organization, particularly in the financial trading space. For example, public clouds are low cost and flexible, while private clouds can offer increased security and industry-specific features. If you’ve decided to embark on a cloud initiative, it doesn’t matter if you’re a new hedge fund startup preparing for the growth of your business, or an established investment firm, weighing your options for an application upgrade or technology refresh initiative. In either situation, your decision doesn’t end with the choice to move to the cloud; it begins there.

Any decisions that directly impact your business should rely on fact-based predictions and careful consideration. If you’re going through the evaluation process while choosing between public and private clouds, try asking yourself the below questions about each strategy. You may find that the decision is an easier one than it seems.

With our new cloud strategy, will we be prepared for a cyber-attack?

Cybersecurity has become an executive-level concern in recent years, as security breaches and attacks dominate news headlines on a near-daily basis. Hackers are savvier than ever, and history proves that no business is safe – no matter how small or how large. While you’re working to protect your organization from this vulnerability, don’t forget that major public cloud enterprises like Google and Amazon are equally susceptible to an attack. Despite the resources being poured into security planning for these organizations, their actual response strategies and ability to withstand targeted attacks and significant amounts of downtime is an unknown factor.

Where will our data live, and can we rely on its availability?

In financial services, microseconds can mean the difference between a million-dollar trade and million-dollar loss. In other words, downtime is simply not an option. Seek cloud providers offering competitive service-level agreements (SLAs) that clearly outline expectations for availability and downtime. Don’t forget to do your research, either – in recent years, even top performing public cloud providers racked up hours of downtime. 

It’s also imperative to understand where your firm’s data resides in the cloud. Whether you adopt a public or private cloud strategy, ensure your provider can offer complete visibility into the location of your data and guarantee its compliance with any relevant regulations, such as the E.U. Data Protection Directive (95/46/EC). Keep in mind that public clouds manage significantly more data than most private or industry-specific cloud vendors, which makes transparency all the more important. 

Is application integration going to be a nightmare?

Many startup firms embark on public cloud initiatives due to promises of low costs and flexibility. However, as these firms grow to become global businesses, they tend to add portfolio accounting platforms and order management systems. They often face the task of migrating their data and infrastructure to larger, more tailored environments.

One of the most common roadblocks during this process occurs when the firm’s applications are incompatible with their cloud offerings. Currently, many public cloud providers are challenged to support custom application integration and host fund-specific tools such as market data feeds. Private, industry-specific cloud solutions, on the other hand, can incorporate financial-specific and custom applications, and many are building their lists of hosted applications in order to help firms reduce hardware costs and add new users. Unlike public cloud services, many private cloud solutions can guarantee seamless communication between these applications.

In any organization, there’s a time and a place for public and private cloud alike. For example, in testing and development situations, public clouds provide firms with an attractive option to build a low-cost development environment. In turn, these firms avoid traditional issues with overspending and underutilization of resources during the test and development phase. However, when the security, availability, performance and integration of your data is at stake – and in turn, the success of your business is on the line – a vertical-specific private cloud is the more reliable choice in the long run.

Bob Guilbert is managing director or marketing and products at Eze Castle Integration, a leading provider of IT and private cloud computing services, technology and consulting to hedge funds and alternative investment firms.

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