Options, Derivatives, and Clouds - Oh my...

One industry that makes for interesting cloud projection is the financial services industry. Consider the amount of trading data that flies back and forth through cyberspace. Buys, sells, swaps, settlements, what-if scenarios and so on – millions of transactions a second – and that is just a small part of investment banking. With so much data comes of course a huge need for storage, backup, and disaster recovery (DR).

Recently, I had a very enlightening conversation with a few people, including an executive director (ED) at UBS in charge of supporting the Derivatives trading business, along with the middle and back office. It made for an interesting cloud case study if you will.  Here's the setup:

• Currently, the bank oversees a mixed environment supporting approximately 1400 servers. These multi-core servers (almost 900 are a dedicated internal cloud) are used for two things: 
• To store data and run the core business, which involves reporting and scenario development of equity trades. 
• Most of this operation isn’t in an organization-wide multipurpose cloud, it is on several dedicated sets of servers. But insiders see a real future for taking large parts of the current operation there.

This was a conventional data shop that originally resided in Zurich, Switzerland. In 2008, the operations were moved to New Jersey to be closer to the trading floor groups and their support teams. The next step of the evolution appears to be to a cloud environment that ensures data security. This will likely be a two-pronged approach:

• The first is how to replace the 1000's of mostly self-contained workstations that sit on the desks of employees. Answer: A staged transition to thin clients with the applications in the cloud. The advantages are costs are lower (far fewer licenses are needed), ease of upgrade (instead of support teams having to individually upgrade/service each desktop with its individual quirks, a simple upgrade can take place in the cloud at the source, then this is propagated to users quickly. There is precedent here: According to my contact, in the very near future, “…Royal Bank of Scotland is going 100% to thin clients with applications in the cloud.” 

UBS is not slated to go thin client on a corporate basis right away, but as various environments are due for major upgrades, they will be replaced by thin clients. All of the desktop applications go to the cloud. As a matter of fact, overall network performance is actually improved because there is an improved ease of load balancing.

Another “hidden” savings are the savings on UPS (Uninterrupted Power Supplies) units. A loss of power on a floor, or even the entire complex - is that crippling? Not really, as long as the server has a UPS there are no worries. Instead of restarting thousands of systems and support dealing with lost data from potentially thousands of users, the data can be recovered quickly from the cloud, in theory. And as an aside, the fewer power consuming appliances you have, the easier it is to develop a green environment.

• The second front will of course be with the data center and core business applications. Here is where things will be interesting. One possibility is a future cloud environment will feature a 3^rd party vendor setting up a private cloud – but one that is managed internally. Security for this set up will be two part: i) Human (UBS employees managing it), and ii) Multi-tiered in that security will be embedded in the API level. (Example: A token is required from anyone requesting a service, which will then be validated, plus authentication keys for users.)

I know what you're thinking: Can a scenario where the client is involved in the infrastructure be a "true" cloud infrastructure?

The answer is yes - in that the vendor will handle setup and any dynamic upgrades, maintenance and overhauls of the system. As far as a UBS is concerned, the hardware is invisible. As long as computing power and storage is there when needed and seamlessly, the rest is somewhat irrelevant.

In the words of my contact: “The third party will be responsible for all infrastructure issues, we give them our specifications for memory, and number of blade servers needed, etc…any hardware maintenance issues is for them to deal with. But UBS personnel will be the only ones handling the data and maintaining the software. When there are upgrades needed in the hardware, the vendor will be called in.”

From personal experience, I know that in a conventional environment, there is an expectation that you use the storage space allocated to you. Under-utilization is an inefficient use of resources, and almost as bad as not having enough space and having performance suffer. A flexible, but secure private cloud can potentially save millions of dollars hardware savings, infrastructure costs, reduced security issues, smoother performance and man-hours of maintenance time.

More later on the security aspects of a potential hybrid private cloud.