Klea Neza discusses the transition from traditional to cloud-based data management approaches
Against the continuously changing landscape of data management, companies face a difficult decision when considering what system is the most suitable to protect, process and make use of their data.
Moving into 2024, the industry questions whether the familiarity and control of a traditional data management system (TDMS) will enable companies to utilise their information as effectively as they could with a cloud-based data management system (CBDM), which offers the advantages of improved scalability and cost efficiency. However, some warn that a CBDM system brings increased risk that could be avoided if enterprises stick to traditional methods.
In theory, an investment in both would drive companies to success, but the costs of running both methods may be too expensive for most companies. Beyond costs, a greater challenge with this approach is the need to maintain parallel data sets and to reconcile data.
This begs the questions of which data management system has the most benefits going forward, and how smooth the transition can be from one data system to another.
The cloud
CBDM systems are built to help safely store, organise and manage data within a specific organisation, or in some cases to share a common database or book of record across a number of organisations.
These systems have developed over the years to offer a number of advantages, namely scalability, accessibility, cost efficiencies at a level that cannot be achieved through TDMSs, which has led to an increase in the number of users.
Guillaume Rondy, group product manager of data and communications at SimCorp, says: “CBDM offers a more scalable and accessible approach to handling data compared to traditional methods. This adaptability is crucial in today’s dynamic business environment, where data volumes, user needs and clients’ technological landscapes are constantly evolving.”
GoldenSource is one such company benefiting from CBDM, as articulated by Jeremy Katzeff, the firm’s head of buy-side solutions, who speaks about the advantages in cloud-based delivery that are absent in the traditional data management route.
“Cloud-based tools provide flexibility through both the infrastructure and by the modular nature of the technology itself. The infrastructure is more flexible as it allows for compute and storage on demand, compared to fixed infrastructure in traditional deployments,” he explains.
Due to the flexibility CBDM allows, the cloud can offer a “modular approach” to application development, enabling improved “interoperability of applications”.
This reduces the time needed to develop applications and allows them to be more accessible and easy to operate.
Katzeff continues: “This allows teams to address more effectively some of the common challenges previously associated with data management, enhancing the ability of firms to quickly onboard new data sets, provide for a strong, centralised data governance process, and allowing teams to quickly access the relevant data for their needs.”
Managed software-as-a-service company Snowflake, similarly benefits from CBDM, providing a single platform that enables data storage, processing, and analytic solutions.
Rinesh Patel, global go-to-market (GTM) lead of financial services at Snowflake, comments: “Cloud-native data platforms provide the flexibility to bolster performance and efficiency by allocating higher resources precisely when needed. This dynamic resource allocation enables asset servicing firms to scale up during peak demand periods and subsequently scale down to the minimum required level. This adaptive approach ensures optimal performance, thereby achieving cost efficiencies.”
Transition period
Simcorp, GoldenSource and Snowflake each indicated that they have benefited substantially from CBDM. However, the transition from legacy to modern technology has been a challenge for some market participants, in some cases exposing a company to new sources of risk. Although moving to CBDM may boost company profitability, data security concerns, lack of staff training and data privacy issues may arise as a result of this transition. This leaves companies with difficult decisions to make.
GoldenSource’s Katzeff comments: “These technologies are new and, as such, there is a learning curve associated with getting to grips with them. Teams need to be trained on how to best use the tools available to them, as well as how to create new system designs to incorporate these new tools and platforms.
“The move to cloud is [often] coupled with a wider technology transformation, so teams face difficulty with designing the future state operating model, and then securing budget and implementing those design choices.”
As GoldenSource suggested, a scarcity of skilled workers will lead to decreased output and a possible cut in the company’s revenue. There’s certainly a risk from moving from TDMS to CBDM, but how many companies are willing to move forward with this change in the year ahead?
Snowflake’s Patel sheds light on three main challenges that can occur as a result of transitioning between TDMS to CBDM: prioritisation, risk and migration, and governance and compliance.
“Many businesses require an in-depth review of business priorities,” he notes, “to accurately assess use cases which are critical to strategic business goals, and where the business growth outcomes have sufficient margin to offset the migration and modernisation cost.”
Patel also highlights the significant migration cost of moving from TDM to CBDM. “Any migration or implementation incurs cost and stability risk, but many organisations lack the cloud maturity or expertise to mitigate the risk of cloud components,” he says. “Therefore, financial institutions must carefully consider talent management programmes or external consultants, together with cloud spend management and project milestone derisking.”
The third challenge is governance and compliance: “It is imperative that the cloud does not have a net-negative contribution to platform consolidation and governance processes. While cloud consolidation offers the opportunity to governance and compliance teams to consolidate and certify a single source of truth for the organisation, all too often the organic nature of development can lead to a larger, more fragmented data surface, potentially even eroding standards of governance and compliance process within the organisation.”
The numbers
Despite the challenges that may come with the transition of TDMS to CBDM, the latter is a more modern way to manage data that is increasing in demand. SimCorp’s 2024 InvestOps survey, ‘Embracing a New Operating Reality: Perspectives from 200 Global Buy-side Operations Leaders’, demonstrates the need for better data management globally. Nearly half of the respondents reported that they wanted to improve data and operations support for multi-asset investment strategies, with 32 per cent of respondents wishing to migrate to cloud based applications.
“At GoldenSource, we have seen that firms can achieve up to a 30 per cent reduction in current total cost of ownership by taking advantage of the benefits afforded by adopting cloud based data processing,” says Katzeff.
“We have built a cloud data warehouse and have partnered with Snowflake to develop a native application, which allows clients to deploy our cloud data warehouse directly on Snowflake, leveraging our robust data model and data pipelines. We look forward to further enhancing our cloud capabilities in 2024 to meet the evolving needs of our global client base.”
CBDMing your way into 2024
As new technologies develop and firms expand their data use cases, companies continue to refine their use of CBDM for specific use cases and practical challenges.
Maintaining parallel data sets whilst switching from one data management to another remains challenging, but the benefits that come from a quick and efficient database appear greater than the overall costs and losses.
