Future-Proofing the Front Office: The Cloud

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    Future-Proofing the Front Office: Cloud-Based Asset Management

    Part 1 of a 3 part series on Future-Proofing the Front Office. 

    There are several key considerations in the pursuit of future-proofing the front office. In this first article of our three-part series, we’ll start with the cloud. The industry is in a state of change, impacted by emerging technologies. They propel front-office trends while delivering a competitive advantage to forward-thinking investment firms. Keeping pace with this requires a shift to cloud-based asset management.

    Having this as a foundation then prepares you for data analytics driven by application programming interfaces (APIs) and artificial intelligence (AI), which are the topics of parts two and three.

    Adopting cloud-based asset management software harnesses the power of data analytics and AI, and firms prioritizing this have an edge in future-proofing.

    You’ll want to understand cloud-based asset management, its current state, how big data created this need, and what to expect when adopting the cloud to ensure your organization can gain these advantages.

    What Is Cloud Asset Management?

    Cloud-based asset management describes using cloud-based software to manage assets. The application and data live in the cloud, which is accessible with a login. It’s the alternative to on-premises systems.

    The cloud, the catch-all term for cloud computing, is now part of most organizations’ IT infrastructure in some fashion.

    Before the cloud became accessible, governments and large enterprises were the original owners of large mainframe users accessed by renting systems from these operators. It was on-demand computing reliant on shared resources and data.

    In the 1990s, significant technological changes occurred with the proliferation of personal computing. Everyone had a computer and needed access to data and files. During this time, most companies shifted away from mainframe computing to on-premises networks with on-site servers.

    Then, the real revolution in technology launched with the internet. Then, people began to use this to collect and share information. 

    More than two decades later, the cloud has become something that most of us interact with in our professional and personal lives. Today’s cloud has three classifications: private, public, and hybrid.

    What’s the Current State of Cloud-Based Asset Management?

    Cloud adoption and leveraging for many use cases continue to grow, with spending projected to hit $724 billion in 2024. These investments seek to future-proof operations and should be a priority for wealth managers who want to stay ahead in how they apply technology. The increased spending isn’t reason enough to follow an industry trend. It does put things in perspective about how this shift is and why cloud-based asset management software is vital to transforming and modernizing your organization.

    How Big Data Led to a Cloud-Based Approach

    The rapid expansion of the internet also created another technology trend — big data. As the amount of data gathered grew exponentially, data storage became a challenge for companies of all sizes. Individual desktops and on-premises systems were too small to handle the flood of data and lacked the processing power to analyze it.

    A new industry emerged as businesses developed technology solutions to solve these problems. The concept of cloud computing reemerged with the advent of web access to cloud-based solutions. Why? These tools shifted processing back to the large computing providers with ample processing power. However, two critical questions remained:

    • How do you access data?
    • Is the data secure?

    While the cloud computing industry set out to develop resolutions to these challenges, investment firms stuck to managing software internally. Being the host of your own platforms comes with substantial buy-side IT costs. It quickly became apparent that this wasn’t sustainable, forcing the industry to reimagine the ideal scenario. Hosting providers and IT experts then came to the table ready to meet this demand, ushering in the age of cloud-based asset management software.

    The New Era of Cloud-Based Investment Management Begins

    Big data and the quest to analyze faster and faster for actionable insights continue to feed the demand for the cloud. All front-office operations — including trading, portfolio management, and compliance — benefit from implementing cloud-based investment management software. One of its most valuable advantages is how it streamlines business functions, which is sorely needed in today’s challenging market conditions, rising operational costs, and downward fee pressures.

    The key to driving down those operating expenses is the ability to retire costly legacy systems in favor of new front-office management software. Accessibility is no longer a concern, nor do you have to ration capacity, as clouds can scale up and down. Looking at all the advantages can muddy the picture and affect your entire team. Thus, as you embark on implementing new cloud-based software, you have to understand more about the nature of the cloud and its positive disruptions for the industry.

    Adoption of the Cloud Began Slow, Ramped Up as a Reflection of Valuable Advantages


    In a hosted model, a third party manages the physical IT infrastructure required to run your investment management technology. You are no longer responsible for the expense or expertise in this area. This isn’t your core competency, so it’s best left to the experts. You can then focus on what you do best — asset management and growth.

    Disruptor: the cloud

    Many firms believed for some time that maintaining their tech was a better option, giving them control and a misconception that it would be more secure. Since the data is confidential and identifiable, many hesitated to adopt the cloud. It was a slow start for a genre that had much to gain from advanced technology.

    As the cloud became more mainstream, secure, reliable, and proven to be compliant, there was movement. The latest acceleration was from the pandemic, which forced all businesses to run in a remote or hybrid space where employees could access applications from anywhere.

    Migration to the cloud also had another desirable outcome — improved business continuity planning (BCP) and disaster recovery (DR) capabilities. Redundancy in hosting ensures data backs up regularly and can be available in response to an incident. Improving BCP and DR are necessary to comply with regulations, an industry best practice, and a must-have for investors to feel confident working with you.

    In constructing your cloud-based asset management business model, which cloud is right for you?

    Private Clouds vs. Public Clouds

    Within the cloud-based asset management software model, there are private and public cloud options. In a private cloud, a third-party provider maintains your front office management software and data within its own cloud and network. With cloud-based maintenance of software, you don’t typically have to worry about updates.

    You can access cloud-based OMS, portfolio management systems, and other asset management software directly from the provider. Their architecture segregates clients to ensure there’s no commingling of data. This structure satisfies data privacy and fiduciary obligations, too.

    In a public cloud, large tech companies have networks available on-demand for users to store applications and data. The big difference is a shared infrastructure. Amazon (AWS), Microsoft (Azure), and Google are the biggest players in this space. There has been more public cloud adoption as a result of the following:

    • The ability to reduce IT costs
    • The flexibility of this option to be elastic and expandable as needed to power data analytics and AI
    • How simple it is to move from single-tenant solutions to multi-tenant cloud-based asset management software, such as Software-as-a-Service (SaaS) products

    How Are Single-Tenant and Multi-Tenant Solutions Different?

    Investment firms considering moving to SaaS-based solutions with private or public clouds can realize many benefits. However, organizations must carefully consider how to deploy these cloud-native or born-in-cloud solutions. Doing so means understanding the differences between the systems and the advantages of each.

    In a single-tenant model, cloud-based asset management applications, data, and resources reside on a dedicated private network. It can either live in a private or public cloud. Conversely, the multi-tenant model brings data from different clients onto one system.

    Many investment managers have concerns regarding commingling data with other wealth management firms that are their competitors. Factors to consider include data privacy, fiduciary obligations to clients, and data portability. Using a multi-tenant system often makes it more difficult to migrate data and transfer control exclusively to the software provider, creating undue business risk and expense.

    Moving to Cloud-Based Asset Management Is Critical

    The present and future are in the cloud. If you’re still using on-premise legacy systems and processes, they put you in a position of being less competitive and more risky from an industry perspective. The manual processes involved with manipulating data for analysis aren’t sustainable in the age of big data. Now is the time to modernize, simplify, and optimize.

    If you want to be at the top of the list for consultants & institutional investors, you’ll need the cloud to power the next generation of investment and wealth management technology. You can rid yourself of the cost and inefficiency of the old and welcome the new frontier with improved analytics and AI-driven insights. The experience is better for you and your clients.

    Learn more about how to develop and execute a cloud study by talking to our experts. Schedule a demo to learn how our IPM Cloud and other solutions can help your firm.

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