Benefits Hedge Funds Should Expect From a Transition to Multicloud

For more than a decade, enterprise hedge fund IT has undergone a transformation as the industry sought to balance the need for growth and flexibility with added security and cost efficiency. That journey has pushed firms to move away from delivering IT via on-prem servers and toward cloud IT delivery models.  

And now we find ourselves on the precipice of another major evolution in cloud technology: the emergence of a multicloud delivery model. But what is multicloud, and why should hedge fund CTOs and their C-suite leadership teams care about it?  

Each major shift in cloud architecture comes with benefits that make the move worthwhile within the limits of tech at the time of innovation. For example, switching from on-prem to private cloud offered advances in cost efficiency. Firms were able to pay only for the capacity they needed instead of tying up capital in overprovisioned hardware. However, these early private and hybrid cloud models have fallen out of favor in recent years as it became evident that public cloud could do better. 

The public cloud improved scalability, allowing firms to expand rapidly anywhere around the world while also benefiting from the extensive investments public cloud utilities have made in security. 

And while some hedge funds continue to run some legacy systems onsite or in private cloud environments, an increasing number of funds of all sizes are charting their path to the public cloud in 2022. (If you’re considering your own migration to the public cloud, you can read more about what to consider and what benefits to expect in our white paper, Public Cloud: The Future of Managed IT.) 

But if you are already in the public cloud, or if you’re wondering what additional benefits can be gained by moving from an on-prem or private cloud environment to a multicloud one, read on. Multicloud environments add new factors to the design and administration of your architecture, and it’s important to map your firm’s specific use case for strategically deploying across multiple cloud environments or risk failing to fully capitalize on the benefits. 

Why move to multicloud? 

We’re not at the point where multicloud is seamless and easy to integrate. So, CTOs need to make a strong case to their internal leaders and stakeholders that the investment is justified.  

We believe the most immediate (and obvious) reason for hedge funds to go multicloud is for added resilience. Leveraging multiple public cloud environments as part of your disaster recovery strategy will mitigate the risk of relying on a single entity to protect against business-critical outages. 

Everyone affected will no doubt remember the series of AWS outages in December 2021 that took down a wide range of platforms and products, from Netflix to Slack. Network admins reported errors when trying to connect to Amazon’s instances and the AWS Management Console. Two of the outages lasted hours, with cascading effects for online services. 

This unexpected downtime has sparked conversation and concern around AWS’s ability to maintain five nines—99.999%—availability. Firms that can’t afford to suffer another severe outage are evaluating whether a different public cloud would be more reliable, or if they should remove the risk of a single cloud altogether by going multicloud.  

In addition to increasing organizational resilience, many hedge funds are also excited about the opportunity multicloud offers for system specialization, which essentially means running systems in cloud environments designed to maximize business impact and minimize cost. For example, a data team may prefer the pricing and storage around compute in Azure, the machine learning functionality in Google Cloud, and the cost optimization of the AWS RDS database. By pairing systems and processes with their ideal cloud environment, technology leaders can be more efficient with technology spend and contribute more to business outcomes. 

And don’t forget, these multicloud benefits build on the scalability, security, and cost-effectiveness that come with any public cloud. 

The right way to go multicloud

The last thing you want to do is spin up a new environment as a knee-jerk reaction to a major public outage. If multicloud isn’t part of a larger digital transformation strategy that includes thorough and thoughtful assessment, you’re just going to add cost and complexity with little measurable value. 

First, you should determine whether the resilience benefit is significant enough for your firm. What frequency and duration of outages for what systems can you tolerate? If your trading platform goes down or you lose access to real-time data for decision-making, can you absorb the financial loss and the dip in returns? 

Then you’ll want to assess your current architecture to determine how to best leverage multicloud for your needs. This process involves getting input from key business stakeholders who understand your operations. Ideally, you will then engage with a partner or consultant who can help create a plan that pairs your business requirements with the right environment. To optimize ROI and maintain security and SEC compliance, you need external multicloud expertise. But you’ll also benefit from having cloud expertise on your own team to confirm those outside recommendations. 

The optimal architecture for your firm might involve using one public cloud for production and a different one for dev work or disaster recovery. Or you might decide multiple public clouds aren’t right for your organization and instead opt for a hybrid cloud model. You could keep some services in on-prem data centers that are locked to restrict external access (for example, Active Directory or databases), but also replicate those services to a public cloud for resilience and remote user access. 

If you are concerned about the additional maintenance effort and skill required to transition to—and take full advantage of—multiple clouds, find out what your managed service provider can take off your hands.  

Cloud will inevitably evolve to multicloud because there are just too many variables for all customers to be pigeonholed into one solution. Smart CTOs who can guide their organizations to make the move strategically will garner more of the benefits. 

If you’re ready to go deeper into cloud and multicloud options for your firm, connect with Agio for a conversation. Every situation is unique, so we’ll advise you on customized solutions to help set you up for success.