Jul 5, 2017

Technological Stability & Preparing for the Hype

Many trends come and go, but a few are staking their claim. In this video blog, James Jockle, Chief Marketing Officer at Numerix, sits down with Paul Rowady, Director of Research at Alphacution to discuss the tangibility of emerging technologies. They specifically focus on the cloud, and how hype cycles are applied to different forms of technology. Additionally, Mr. Jockle and Mr. Rowady discuss IT spending and how this is impacting corporate equity profiles.

Video Transcript:

Jim Jockle (Host): You brought up last year’s hype, the blockchain. We can go all the way back. Predictive analytics, big data, unstructured data, internet of things, and the list goes on. One of my personal favorites – cloud. Arguably the cloud is finally here. Out of the laundry list over the past 8 years, what’s real? What is the reality of these technologies that are coming into institutions today?

Paul Rowady (Guest): So, I think this is a great example of where we will likely find a topic like blockchain or distributed ledger technology 3-5 years from now. You’re just now beginning to see the early production versions of last year’s hype or the last 18 months’ worth of hype. So, if we were to take that template and place it on the cloud, you go back a few years and cloud had its day in the sun in terms of its early stages of the hype cycle. Now, there’s maturity and there’s real adoption and there’s a growing spectrum of use cases. There’s many, many firms now of all shapes, and sizes, and flavors that were born in the cloud. We’ve discovered at Alphacution, given the way that we’re modeling the ecosystem; I think that one of the things that has really caused a tipping point for the adoption is given the previous discussion about having the right-size, their spending models. And that with macro-drivers being as they were, low volatility, low interest rate, the profitability of a lot of the segments of a traditional banking platform, banking financial services conglomerate, was that the performance wasn’t there, it puts strain on budgets, and yet you have this regulatory interventionism. So, you have to find places to invest in risk and reporting and compliance and surveillance and what happened is that came out of the hardware budget because they had to expand their software budget and end up coming out of the hardware budget and it ended up sort of helping the tipping point into the cloud. Not only was cloud becoming mature enough, but the big players started to say, you know what, I can’t manage this proprietary data center myself. It really is a very complicated thing to do on a proprietary basis and I really need to find new sources of budget because I have these regulations I have to meet or I’m going to suffer potentially billions and billions of dollars’ worth of fines. So, I wrote a piece, I don’t know a while ago, called crowding out. Which is the need to expand certain software budgets crowded out the hardware budgets and forced or at least contributed to the tipping point of adoption into the cloud. Which, I think now you see a robust, roster of players big and small that are very active in essentially infrastructure as a service.

Jockle: So, we’ve now seen, 5, 6, 7, 8 years’ post crisis of significant IT spending. What are you seeing in terms of shifts in the league table. Who’s getting it right in terms of changing their return on equity profile?

Rowady: The leaders, and this goes buy-side, sell-side, and I’ve mentioned some names before in the past, leading hedge funds, leading asset managers, leading banks and financial services platforms, they tend to hold onto their lead, because they’re leading they tend to be looking out over their skis instead of laying back and being in a defensive posture and waiting for extraordinary levels of confirmation before they adopt. There’s a culture of innovation, there’s a culture of forward thinking.

Jockle: So, is there movements within the mid-markets? Or the mid-market players?

Rowady: I’ll have to reserve comment on that one because we’re just in the midst, like for instance we’re just starting to embark on a series of really cool studies and we’ll get to talking about this I think on the buy-side. What are the patterns with asset managers, what are the patterns with hedge funds and how is that all moving. Can we stratify from what we call the visionaries, the leaders, of which in any category there really aren’t that many? There’s really just a handful and though others will try and talk their way into that league, they just don’t have the culture and the capability to actually perform in that way.

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