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June 17, 2010

Cloud, Wall Street and the Low Latency Imperative

Nicole Hemsoth

In an article from earlier this week entitled “The Low –Latency Imperative: How Fast is Fast Enough” over at Wall Street and Technology, Daniel Safarik tackled the conventional wisdom that Wall Street success is tied to the lowest possible latency, suggesting that instead of this being the dominant concern across the financial services industry as a whole, the relevance of latency is not always at the top of the list—at least not for everyone.

The reduced dependence on super-speed interconnects and the calmer fronts of the battle for the lowest latencies in key areas of financial services can be seen as good news for cloud vendors since this is so often the major sticking point outside of security and privacy for financial services firms looking to the clouds. Furthermore, Safarik adds, “As the market saw graphically and frighteningly on May 6, speed, by itself, is not the ultimate goal. In fact, lacking business rules that acknowledge the full implications of instantaneous transaction speed is dangerous.”

What this means for cloud vendors of all stripes is important here—it’s time to go for the segments in the financial sector that are not as tied to speed as they might be to acceptable speed matched with tremendous accuracy and reliability. For Wall Street, this is just as important since for those to whom the latency is a little less of an issue there could be some benefit to cloud models. But who are we kidding, right?.. this is financial services. People’s money is at stake here. So needless to say there are some critical er,,,stopping points that are always at the heart of this “take a look” aspect of the cloud market for now.

With all of this in mind, If you’ve taken a moment to check out the Wall Street article, the best companion piece possible on the issue can be found in this descriptive piece from Dr. Casimer DeCusatis, Distinguished Engineer with the IBM Systems and Technology Group and Todd Bundy, Director of Global Alliances with ADVA Optical Networking. Sure, it’s from way back in the pioneer days (okay, 2009), but it provides a very suitable analysis of some of Safarick’s points when we think about financial services in the cloud.

Although financial services are usually the first to dive for new HPC technology, the cloud, for some very striking and obvious reasons, has been slow to catch on. This is especially true when we step onto Wall Street and take a look at how HPC has been serving its dependents quite well, thank you, without the added lag time of the cloud. So what if there are some potential cost savings? If the difference is between having the most accurate and timely results in order to remain the most competitive versus the concerns of IT spending, then so be it, right?

Cloud vendors need to look to the specific segments in the financial services industry that are not competitive based on low latency and who have prove beefed up security offerings matched with general performance success. The truth is, in an arena that is obsessed with latency, the cloud will might never replace the iron—at least not in crucial speed-driven segments. However, once these latency issues begin to be solved (and there is little doubt that will happen) wider adoption will occur. Until then, however, the race is on…as always.