Dec 5, 2012

Bursting with Opportunity: Financial Services in the Cloud

Recently Mike Opal, Cloud Evangelist for Microsoft, stopped by the Numerix offices and sat down with Numerix host Jim Jockle, Senior Vice President of Marketing, to discuss all things cloud as they relate to financial services - from managing big data and bursting for compute power to harnessing the hybrid cloud strategy, and the impact of regulations and risk management on cloud approaches.

Listen in as they discuss the evolving field of infrastructure as a service: Watch the Video.

Numerix Video Blog Transcript – Bursting with Opportunity: Financial Services in the Cloud

Jim Jockle (host): Hi welcome to Numerix video blog, I'm Jim Jockle your host, and with me today Mike Opal, evangelist, cloud evangelist if you will, from Microsoft. Thank you for joining us.

Mike Opal (guest): Thanks for having me.

Jim: What is a cloud evangelist?

Opal: (laughs) What it is? Still trying to figure that one out for myself. So a cloud evangelist, we're going around trying to dispel some rumors and myths about cloud. And really to help people become users of early adopters and use cloud to their own advantage.

Jim: Ok so very good question. 64%, as reported in a recent IDC survey says financial services are looking at hybrid clouds as their early adopter use. What is a hybrid cloud?

Opal: So a hybrid cloud is kind of a middle step between owning your own gear and running a large infrastructure and leveraging a Microsoft Azure cloud or whatever sort of cloud. So a private cloud enables you to still have control over your assets, but also leverage a massive compute power available through the cloud.

Jim: And what use case are we starting to see in terms of that type of adoption?

Opal: I think there are two paths for use cases so far. One is storage and back up, which is kind of an easy and logical progression of cloud. People have massive amounts of data in storage that they have to have for regulatory purposes. It is very easy to migrate those towards a cloud environment and be able to recognize a cost savings as well as the ability to get that data very quickly for regulatory purposes. So that's kind of one area.
The other is we see it is in terms of massive compute. As people burst to the cloud, so as you're going to be running large algorithms, large models, the ability to elevate that up into the cloud, run that incredibly large job, and get results in real business time. That's where I think we're seeing the two most applications of cloud right there.

Jim: Now I think a lot of people on our blog are unfamiliar right in terms of the term infrastructure as a service.  That distributed calculation. Is that just a big system, is that something we don't touch, is that in Excel because we see Excel so much as being prominent still within the front office and trading operations.

Opal: I think infrastructure as a service is one of those words that means a lot of things to different people. In the ideal world, infrastructure as a service means exactly what it says, where you're able to really outsource that function of infrastructure to a provider who is probably better at it than you might be. That's really the ideal end game. But one of the things that's nice about hybrid cloud is that you don't have to go there from where you are today. You can kind of migrate there over time, and as you're comfortable with the applications and the date you want to put there you can do that on the gradual case.

One thing  I would say about the IDC study which I thought was interesting, is that it didn't really surprise me that financial services is really an early adopter for the cloud. And the reason being is that financial services is all about the search for alpha. Our entire industry is built around finding alpha. And I think savvy firms are recognizing that if they can utilize the compute and the capacity that the cloud brings, it's really going to give them a greater chance to get alpha verses their peers. And those that get there first are going to have a significant advantage over those that don't. So I think that's one of the interesting fun things about being in this place right now.

Jim: But one of the challenges is how are you bringing operations all together within that infrastructure to achieve different regulatory hurdles, and then take advantage of that capacity within that time frame. Are there any particular interesting use cases as it relates to regulation or changing regulations, whether Dodd-Frank or Basel II globally?

Opal: It's funny, when you talk about global regulations, I was in Germany a couple weeks ago, and their regulations, we like to think it's difficult here in the states, but it's just incredibly challenging there. Where everything has to stay within the borders of Germany, it's just very very rigorous regulations. And you know what I think one of the challenges that I've always seen people face in terms of risk and regulations, is people tend to chase a regulation. They're chasing Dodd-Frank or they're chasing Basel II, Basel III – whatever it might be, everyone's always chasing the next reg. And I think that that's a mistake.  I think the best practice there is to say we recognize we're going to have to have the ability to create reports for regulators in a very very short amount of time. We're going to have to store a tremendous amount of records and to be able to have access to them almost immediately. And when you start thinking about how to build a flexible architecture that can enable that, rather than chasing a specific reg, I think it's a better business case. And I think that's what I see in at least savvy firms in Europe doing. Where they use cloud where appropriate to be able to do that but then again not chasing specific regulations. Because as you know, they're constantly changing. But really the big picture of providing regulators with almost real-time access to data doesn't change.  I think if you focus on that rather than a specific reg, you'll be better off in your business. 

Jim: Now we talk about Basel III and Dodd-Frank a lot in this video blog, but when you say Germany, I think data privacy rules. And I see Canada's coming out probably next year, EU has come out with new privacy rules as well, and seeing some Asian countries. I'm sure you're getting this question all the time as a potential barrier to cloud adoption. What should we know about data privacy and Azure?

Opal: When I think about data privacy and Azure, I think one of the best practices I've seen, even though it is quite self-serving, is Microsoft itself. Microsoft itself is very much a cloud based environment and we're a globally dispersed company having to work in multiple regulations all the time. And the way Microsoft thinks about security is not really the old sense of security where you keep these in a locked file case and people have a key to get in and at night you lock the door. But rather we look at it in terms of access, because everyone needs access to the information at different points of the day. For instance, I'm not in the office today, I'm at your office, I'm still working and I need the important documents and data that I need to do my job all the time. So, we have to think about it in terms of access. So at Microsoft we think about who should have access to things, what things should they have access to and how we determine what devices they should have access on. So for example I have access on my mobile device to a tremendous amount of data, and it can actually help from a security standpoint because it can say well this is Mike in New York City, he goes here a lot we know this is probably Mike here. And maybe we don't want to give Mike while he's traveling full access to the data, but we can give him some access depending on the importance of that data. Whereas if I am suddenly in South Africa, maybe that's a warning signal. So I think we look at access to data, and then we look at layered security in terms of devices and location. And I think when you start layering in device and location, you start to be able to build a pretty robust picture of who it is who is accessing information and what they should be accessing.

Jim: So your role is cloud evangelist, but you mention mobile. It seems, just as we're talking, very integrated. Everything is connected in terms of the broader strategy. Is that what you're experiencing in financial services as you're having these conversations? 

Opal: Yes. So I think to look at cloud, big data, mobile and maybe even social as different things misses the big picture. I think it's all of them together. I kind of looked at it as cloud is almost the foundation that you use to enable a mobile enterprise, to enable big data decisions, and to leverage and engage in a social way. So I think you have to look at them all kind of simultaneously. And, it was funny. While I was actually in Germany, and I was on a plane, I was flying from Munich to Basel. And I got on the plane and I opened the inflight magazine, it was in German. I don't speak German, but I was looking through it. And there was one page that had quotes from around the world. And this one quote jumped out for me, and the quote was, "When I start running first, I appear to be running faster than the others." And I think that's actually interesting quote because if you can look at this big picture thing, and you can leverage cloud as appropriate to build out a successful mobile strategy, and give your workers the tools they need to be successful, and use that cloud technology, and that infrastructure and compute power to enable the big data decisions that in our industry are going to help people find alpha, and start to figure out how to leverage it with social, that's actually when you're going to start running faster and it's going to be very difficult for people to catch up. Because unlike technologies of the past where let's say mobile banking for example, it's not a question of building gear or buying software or hiring people. It's a matter of using your team's intellectual property, building better business models, better algorithms, and then continually fine tuning them. So what happens is, once you start first, it's very very hard to catch up.  Because it's the fine tuning of those models that are getting better every second of every day that are going to really enable that competitive advantage. And that's one of the reasons I think its so critical people get all in with cloud, big data, everything. Because I really thing that those that are in it first are going to be running much farther and faster, ahead of the other folks.

Jim: Well Mike, I want to thank you so much for joining us today. Again Mike Opal from Microsoft, Cloud Evangelist. Again, join the conversation. Follow us along @nxanalytics on Twitter or on our video blog. We'd like to hear your thoughts.  


What do you think? Weigh in and continue the conversation on Twitter @nxanalytics, LinkedIn, or in the comments section below.

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