The great asset servicing cloud migration and its implications

The adoption of cloud computing, once thought of as too risky and something to be avoided, continues to accelerate across all aspects of our lives.

Cloud migration requires a considerable initial spend and some are simply not yet ready to commit.

In business too, more and more companies are starting to see the tangible benefits that cloud computing can offer and are boosting spending in search of greater scalability, lower costs and increased efficiency.

The business benefits of the cloud have never been more apparent than during the early stages of COVID-19. As businesses across the globe faced the prospect of their entire staff working from home almost overnight, they had to scramble to ensure their business continuity plans (“BCP”) would maintain full operational capacity. Those who had already begun taking steps towards cloud migration were in a far stronger position.

While cloud computing has represented a forcible technological evolution for some sub-sectors within financial services, one that had already started to see the benefits from migrating legacy systems to the cloud before COVID-19 was the asset servicing industry. Cloud technology has enabled asset servicers to create novel ways of working, which ultimately enhance their offering to the asset management industry.

The cloud gives asset servicers the ability to create, test, and manage new ideas and technology faster and to resize the environment on which platforms run. Updated legacy processes enable firms to move away from the traditional on-premises model, to operate in a comprehensive digital landscape, increasing accessibility and enhancing security for data storage and handling. COVID-19 saw abnormally high trading volumes from hedge funds, with some trading up to three times more than usual. The cloud allowed us to seamlessly move these managers onto larger hardware in a matter of minutes to better serve their needs.

Despite the clear benefits, the migration to the cloud has been slower amongst other industry participants. This is true for a number of reasons, including the concern around potential cyber-security attacks, which remain commonplace and have increased substantially during COVID-19.

However, while the risks are there, impressive technologies that spot attacks and encrypt all data can be used by industry participants through the main public cloud providers. As asset servicers, we also continually review and enhance our security posture in the cloud, taking a tough stance on encryption at rest and in transit.

In addition to the security concerns, the slow uptake of the cloud amongst some participants also reflects the different stages companies are in with regards to their technology investment cycle. Cloud migration requires a considerable initial spend, depending on how extensively companies choose to adopt the cloud; some are simply not yet ready to commit.

Even still, we are starting to see an increasing number of investment managers asking important questions about the ways their businesses can be transformed by the cloud, how their own systems will be affected by the migration of their asset servicer’s systems to the cloud, and how the cloud might evolve in the years ahead.

In respect of evolution, it is important to note that whilst migrating to the cloud has been a game-changer, it is a never-ending process. The constant evolution of new ideas and technologies will create new issues for investment managers and asset servicers to address and overcome.

In order for the cloud to be a continued success story, businesses must address challenges in keeping senior management in organisations engaged and well-informed, as well as providing extensive training to staff and ensuring a smooth transition from traditional workflows. Over the medium to long term, we expect to see a heightened demand for hybrid cloud environments, involving an on-premises datacenter and multiple clouds.

As the conversation moves to reopening global economies and loosening lockdown restrictions, the common consensus seems to be that the world is unlikely to go back to how it was before, with remote working likely forming a big part of the new normal. While cloud technology was always going to play a huge part in the future of modern work systems, COVID-19 has no doubt accelerated those conversations, with the industry witnessing first-hand the power of the cloud.