Heather McKenzie looks at how Snowflake’s cloud technology is changing the way financial services companies use data.
Contrary to the common view that buyside firms have been slow to adopt cloud technology, Rinesh Patel, industry principal, financial services at US-based data cloud company Snowflake, argues they have led the movement to cloud. This is because buyside organisations have less legacy technology, faster procurement practices and smaller organisational structures than their sellside counterparts.
In November, Snowflake announced a deal with Northern Trust and Equity Data Science (EDS) to improve data sharing and onboarding for users of Northern Trust’s Investment Data Science platform, which combines Northern Trust data with data science and behavioural analytics.
Speaking when the deal was announced, Paul Fahey, head of investment data science at Northern Trust, said Snowflake’s ‘game-changing’ technology replaced the old way of exchanging data. “Our goal is frictionless onboarding of new clients within 24 hours, and Snowflake’s Data Cloud puts that within reach.” The technology will enable Northern Trust and EDS to quickly update or change data elements and layout, making the solution agile and attuned to individual client needs.
Founded in 2012, Snowflake has been steadily building a presence in financial services, establishing a network of service, data and technology partners. Its Financial Services Data Cloud is a connected network that enables data sharing on a single, integrated platform, removing the need to physically extract and deliver data files. Data provider partners include S&P Global, Acxiom and FactSet.
“The Powered by Snowflake programme, which includes BlackRock, Fiserv and State Street, is designed to accelerate the ability of companies and application developers to deliver differentiated applications by supporting them across all stages of the application journey in Snowflake’s Data Cloud,” says Patel.
He adds, “For the financial services sector, we are enabling investment management solution providers to modernise by consolidating their data assets and transition to a platform as a service. We are also enabling them to migrate to the cloud to distribute data and services and grow business operations by transforming their services while also retaining their customer base and revenue streams.”
An example of this approach is BlackRock, he adds. Its Aladdin Data Cloud, which is powered by Snowflake, is a managed data solution that enables companies to combine Aladdin portfolio data with non-Aladdin data, analyse it quickly and create customer applications and dashboards using Aladdin Studio, BlackRock’s platform for developers.
“Ten years ago, only a few of our more sophisticated buyside clients of S&P Global had fully adopted cloud technology,” says Warren Breakstone, chief product officer for data management solutions at S&P Global Market Intelligence. The majority, he adds, were interested in harnessing cloud for data management.
This led S&P to Snowflake, says Breakstone. “Our clients use different cloud infrastructure providers such as Amazon Web Services, Microsoft Azure and Google,” he adds. “So, we have to be cloud agnostic to provide our data to as many clients as desire it via cloud distribution. We like the way Snowflake’s architecture is built, which separates the compute from the storage, which improves overall processing power.”
Breaking the mould
Historically, cloud providers have been focused on storage and computation, says Patel, but not on the specific data management workflows which are “critical and particular” to the financial services industry. “One of the biggest data management challenges facing the industry is the cost of accessing, onboarding and processing data,” he says.
Breakstone says the explosion of data has been overwhelming and both a “gift” and a “curse”. Users of S&P Global Marketplace are accessing data for the gift of answering questions, improving underwriting models, and making better investment decisions. The curse, however, is finding the right data in the midst of so much internal, external and alternative data.
“This is very challenging and costly” says Breakstone. “Our research found that data professionals can spend up to 60% of their time on preparation and evaluation of data, which is not necessarily the work they were hired to do.” Moreover, there are “more data scientist jobs than there are data scientists”, he says, which means cleaning and structuring data is not the best use of a precious resource.
Patel believes one of the drivers of cloud adoption in financial services has been a better understanding of security. “Security has always been a big concern for financial services firms, especially when IP, proprietary research and customer data are the lifeblood of the value that a buyside offers its clients. But now security is better understood, requirements are met, and that hurdle has significantly diminished.”
He also identifies an “economic tipping point”, whereby the move to cloud requires careful consideration, which often as an enterprise-wide play requires time and planning. “There is a fusion of the economic tipping point with the accelerating pace of demand coming from the business to onboard more data, new alternative and ESG [environmental, social and governance] datasets, for faster research, drive alpha generation, create competitive differentiation as well as provide solutions for the needs of new personas and approaches like data science and machine learning.”
Patel says buyside workflows are “ideally suited” to running in the cloud. Quant researchers, for example, can analyse large datasets and combine those with third party data to devise new strategies, rebalance and optimise multi-factor portfolios together with areas like risk management, back-testing and portfolio analytics – all in the cloud. “For all these reasons, we’ve seen buysides migrating wholesale to the cloud, and accelerating pace as more and more vendors make data and solutions accessible in the cloud.”
There were a number of key reasons investment management firms had been slow to adopt cloud computing, including complex legacy technology environments, concerns about outages and data breaches and loss of control as well as regulatory issues, according to Tara Winters, head of global managed services, capital markets at fintech company FIS. “However, the benefits of running in the cloud, including agility and lower infrastructure costs, are driving more firms to the cloud,” she adds.
The Covid-19 pandemic has accelerated this shift due to the number of employees working from home and the need for a stronger digital presence to support the growth in online financial services. The use of advanced technologies like big data, artificial intelligence, machine learning and the internet of things, requires the scale of the cloud to manage the significant data requirements, she adds.
Niall Twomey, CTO at client lifecycle management company Fenergo, agrees that the pandemic has accelerated the shift to cloud. “The pandemic has changed firms’ digitisation strategies,” he says. “CIOs who were aiming to digitise and adopt cloud technology in a 2025-2026 timeframe are looking to adopt the technology much sooner. The push also is more often coming from the business side, rather than technology. Business users realise they will be at a competitive disadvantage if they don’t adopt cloud technology.”
Firms like Snowflake that are cloud native, “born in the cloud” solutions bring innovative solutions that can be relatively easily leveraged by firms to quickly develop new products in their marketplace, says Mark Schlesinger, senior technical fellow at Broadridge Financial Solutions. “These types of solutions are easily accessible, quickly integrated, consumption based, and require no procurement cycles or long terms commitments.”
Tech teams can quickly innovate and iterate using solutions like Snowflake to ultimately determine the best “building blocks” for their new products, increasing the velocity of their innovation with little to no long-term financial risks or commitments. He adds that leveraging these third-party solutions allows firms to experiment and implement newer technologies such as blockchain.
FIS’ Winters says investment management firms will continue to expand their usage of the cloud to remain competitive, with cloud-first companies able to provide faster and more secure access to digital services.
She adds, “More firms will rely on AI and ML to help provide the right services for their clients and will rely on the cloud to support these technologies. The agility provided by cloud technology will also be a major factor in moving more investment managers into cloud computing as they look for ways to support clients through new products and services. The cost savings, operational resiliency and continued investment in security provided by the cloud are advantages over traditional data centres.”
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