Equinix: Are financial services companies embracing the cloud? – Stuart Turnham
With new regulation and cost considerations, the financial services industry is increasingly looking to leverage 'cloud' as a way of operating its IT needs. Future Banking talks to Stuart Turnham, director enterprise marketing, EMEA at Equinix, about the benefits and the barriers.
Could you start by introducing Equinix?
Stuart Turnham: Equinix provides co-location and interconnection services across more than 100 data centres globally. We now support more than 4,500 customers that choose to deploy their critical IT business systems with us, and use our co-location facilities as a platform from which they can connect them to their customers and supply chain partners.
How has your role within the financial services industry evolved over the years?
Equinix has grown with the rise of electronic trading. We have seen first-hand, and in many cases led the transformation of the data centre from back-office administrative factories and cost centers to front-office profit enablers. As each generation of market participants arrived, Equinix expanded and reconfigured its machine accommodation, and tightened its physical security and technical supervision. Now, the best places for meeting customers, component service providers and other market stakeholders are our network-neutral data centres that are expanding around the global financial hubs.
Today, across global capital markets, Equinix interconnects 800-plus execution venues, market-data providers, networks and technology services. These interconnected financial firms use Equinix's leading co-location and proximity hosting solutions to locate infrastructure within global data centres to support highly reliable, low-latency connectivity for a broad range of market participants across the world's top 16 financial markets, and form the world largest multi-asset-class electronic trading ecosystem.
Is it just the front-office electronic trading infrastructure that you are focusing on, or are more people now looking at co-locating middle and back-office systems too?
Historically, people in financial services have seen Equinix as the hub from which to position infrastructure to support low latency. What we're now seeing is that there are other lines of business within financial services organisations that are now looking to co-locate IT systems in multi-tenant data centres - middle office (such as market data and risk compliance) and back office (including hardware and application development) are just some areas that are now working with Equinix.
For example, we're seeing financial services organisations bring certain IT workloads and applications into our data centres outside of the front office to connect to cloud-service providers and build out a multicloud, a combination of public and private cloud technology.
Equinix provide secure and direct connection to multiple cloud-service providers over low-cost but highly secure cross-connects or ethernet technology. We believe that financial services institutions will continue to outsource middle and back office as enterprise IT continues to transform and cloud computing becomes the norm.
With the cost of replacing legacy infrastructure often being prohibitive, we believe buy-side organisations in particular may benefit from adopting cloud on an as-needed basis. Adopting cloud can lower the cost of trading by reducing infrastructure spend and reducing costs outside of the bid/ask spread, as well as lowering overall portfolio compute costs by up to 50%, according to industry estimates.
How is the regulatory environment changing the way the financial services industry uses the cloud?
With Basel III high on the agenda of the European banking sector right now, along with all its associated technology implications, it is perhaps not surprising that the wider community of institutional investors is looking beyond traditional technology models to ensure compliance. And while the increased reserve requirements of Basel III will drive higher costs of capital across the board, it is the new regulatory standards involving the holding of structured products, requiring more rigorous valuation processes and portfolio analysis, that will be particularly onerous for the buyside.
Although investment firms are adapting to these market conditions, many of their existing IT models - in particular those relying on batch jobs and excel spreadsheets - are proving insufficient for the task post-Basel III, as firms will require more computer power and data storage than their legacy equipment can provide.
From a compliance perspective, many firms are nervous about the issue of data storage - particularly customer data - in the cloud, especially where jurisdictional concerns or sensitive market data come into play, but how valid are these concerns?
The reality is that most cloud offerings do provide users with control over what is and is not acceptable regarding data storage, such as which data needs to be kept onshore for example. So, although users might not know the exact location of where the information is stored, or where specific servers are running applications and models, from a regulatory standpoint compliance issues around data can be addressed. In fact, on a wider level, regulatory bodies and cloud service providers are working more closely to address issues surrounding cloud use in financial services, particularly in the US and Europe.
In the US, the Securities and Exchange Commission (SEC) and the Financial Industry Regulatory Authority (FINRA) are leading the way among regulators using cloud computing, encouraged by the US Federal Risk and Authorization Management Program (FedRAMP), which provides standards for - and ultimately authorises specific cloud offerings as appropriate for use by - federal agencies.
Another US regulator, the Commodity Futures Trading Commission (CFTC), recently issued cybersecurity guidelines that, while not addressing cloud computing directly, set forth standards and put cloud squarely within the acceptable category. In Europe, the EU has also worked to help cloud adoption, recently releasing proposed changes to the existing 'Data Protection Directive' that would considerably simplify the process of moving data across borders. Such initiatives, viewed by cloud providers as positive developments and a signal that regulators are open to the technology, should help to address many of the buyside's concerns regarding compliance.
Can you tell us about some of Equinix's main activities in the cloud?
Equinix is working hard to enable our customers to directly access multiple cloud service providers inside our global data centres, providing faster, safer and smarter interconnection options to cloud-service providers, bypassing the public internet and leveraging our 'cloud connect' cross-connect and 'Equinix Cloud Exchange' Ethernet-based technology to improve performance and security, while reducing costs.
Essentially, we are assisting our customers in their design of cloud connectivity architectures, taking the risk of internet connectivity out of the equation, so our customers can experience all the benefits offered by cloud technology within a secure and safe data centre environment, near to where their business offices and end users are.
In fact, financial services firms are currently located inside Equinix data centres, directly connecting cloud service providers, including leading players such as Amazon and Microsoft.
We believe cloud computing's software, platform and infrastructure-as-a-service (SaaS, PaaS and IaaS) solutions can be used in a secure fashion if they are implemented correctly, as part of a balanced IT infrastructure model, and with securely controlled connectivity and access.