lecture 1 - cloud computing in finance

7/27/2019 Lecture 1 - Cloud Computing in Finance

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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

*

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

lecture 1 - cloud computing in finance

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