By Mash Patel CEO at Kurtosys
There is barely a single industry in the developed world that hasn’t in some way been affected by cloud computing in the last decade. Enterprises of all sizes in a variety of sectors are benefiting from the scalability, flexibility and efficiency offered by the cloud, and often making considerable cost savings as a result.
Cloud computing has transformed the way companies like Netflix – which struggled to meet demand while its capacity was limited by using a traditional data centre – and Heineken, which runs cutting-edge marketing campaign in the cloud, do business.
However, the financial services industry in general – and asset management in particular – have been somewhat behind the curve when it comes to cloud adoption. Indeed, it isn’t just cloud computing but technology in general that asset managers are struggling to get their heads around according to a survey commissioned by Dassault Systèmes and reported in the Financial Times earlier this year.
And if asset managers are reluctant to try and use technology to fight off the threat from young upstarts with robo-advisors and have barely even heard of blockchain, then it’s less surprising that many seem to be some way away from adopting the cloud.
Of course, there are some organisations that have been quick to understand and embrace the benefits of the cloud, but they are in the minority. In general, fears over the security of cloud-based systems, compliance issues and a reluctance to embark on genuine digital transformation strategies have held back many asset management firms.
Arguments over security, however, don’t hold water. The cloud is used by pharmaceutical companies when trialling new drugs and treatments, safely and securely handling the most personal kind of data. If the pharma industry can trust it, why can’t asset managers?
Those who argue that it is better to have core IT infrastructure in house where it can be managed by a dedicated IT team who are solely responsible for its security should also think again. Large cloud service providers such as Amazon, Microsoft, Oracle and Google have vast resources at their disposal to keep their platforms safe, as well as strong links to the global cybersecurity community, and are likely to be able to identify and eliminate threats much more quickly and efficiently than a small, in-house team.
When it comes to trusting third party cloud service providers with sensitive customer data, asset management firms need to be familiar with the levels of security protection (both physical and virtual), types of policies, identity management and backup procedures on offer. But they will find that complying with regulatory standards and industry best practice guidelines are perfectly possible – and after the transition is made, the total cost of ownership will be lower too, as the asset management firms won’t carry the burden of maintaining and updating the infrastructure.
Of course, when it comes to choosing a cloud partner the due diligence needs to be done, but let’s not focus too much on the pain points and challenges of implementation. Rather, we should think more about the benefits moving to the cloud can bring to the asset management industry. After all, despite the initial pain involved in implementing cloud solutions, surely the advantages outweigh the disadvantages.
Using the cloud means it will be potentially easier for asset management firms to add further digital products or services in the future. Less IT infrastructure on site means fewer people are required to manage it, and the cloud will also boost productivity of existing staff as they will be able to work collaboratively on documents. Currently, with no centralised hub for up-to-date information and real-time data, document distribution can be a messy, confusing business. Many different conflicting versions of documents circulate, with salespeople storing them locally on laptops vulnerable to theft.
A centralised, secure system based on dynamic information can save asset managers a lot of time when it comes to client servicing. The process of inputting data into client factsheets and reports can be automated, and based on real-time information. Salespeople, no matter where they are in the world or the last time they were in the office, can access the latest data, reducing the risk of providing clients with outdated information. They also don’t have to store sensitive data locally, meaning that the potential for damage caused by a stolen laptop or smartphone is greatly reduced.
There is no doubt, then, that cloud services offer levels of compliance and functionality that could make the industry many times more efficient. And given the need for asset managers to be more transparent about their fees while still meeting the ever increasing costs of regulation, the increased efficiency should be welcomed, as it affords asset managers the opportunity to restructure their organisations to be more sustainable in the long term.
Many businesses and entire industries have been transformed by the cloud. Some have taken longer to catch on than others, with legitimate concerns about reliability and data protection delaying strategic technology decisions. But there is no good reason for asset management firms to continue to resist the cloud. It will enable asset managers to both provide a better service for clients and increase efficiency in order to remain competitive. It really is a no-brainer.