Specialized Clouds Will Be A Tough Sell - InformationWeek

InformationWeek is part of the Informa Tech Division of Informa PLC

This site is operated by a business or businesses owned by Informa PLC and all copyright resides with them.Informa PLC's registered office is 5 Howick Place, London SW1P 1WG. Registered in England and Wales. Number 8860726.

Cloud // Software as a Service
02:35 PM
Connect Directly

Specialized Clouds Will Be A Tough Sell

NYSE's cloud service for Wall Street firms is seen by some as the start of on-demand computing tailored to the needs of different industries. But NYSE might be the exception.

Expanding The Market

NYSE hopes its new platform's pay-per-use approach will appeal to firms that don't trade enough to justify putting permanent servers in its data center, but still want low latency trading. "This opens up the addressable market," says Ken Barnes, senior VP of global platform services for NYSE Technologies, the business unit charged with marketing the exchange's technology services. "There is a wide array of parties that are willing to run a trading system on this type of infrastructure."

A colocated trader must be a member of the NYSE, and a seat costs about $1 million. Barnes believes some license holders will make their trading systems available and rent their identification number to customers, giving what may be a small trading desk a few minutes or hours of access to financial markets on a footing that's only slightly slower than high-performance trading shops. Multinational companies, for example, have a treasurer's office managing cash, short-term investments, currencies, and commodities that do trading that's often less time sensitive and not as frequent as that of Wall Street firms.

NYSE won't disclose what it will charge for its new on-demand services, only that the rates are higher than those of an infrastructure provider like Amazon, which charges 8.5 cents an hour for a Linux server. But the fees are much less than the price of admission to access the matching engine. "People who would normally say, 'I can't afford a colocation operation' can quickly set up a server in the OnDemand Compute Cloud," says Barnes.

The cloud infrastructure won't be quite as fast as dedicated servers. With colocation, the cables connecting each trader to the trading engines are the same length, to eliminate the possibility that one has even the slightest advantage over another. Likewise, NYSE cloud infrastructure will be equidistant. But using virtual machines on shared servers, while lowering costs, adds latency. NYSE will offer, for a higher price, the option of putting a trader on its own on-demand x86 servers, with no virtualization involved.

NYSE promises that its new services will be secure, employing VMware-based vShield security systems for the virtualization layer and a private network in lieu of the Internet. Beyond that, NYSE declines to go into detail on those technologies.

When NYSE announced its cloud June 1, it had only two small firms as beta customers, Millennium and Pico. It's possible other firms are testing the service under wraps; if so, NYSE didn't mention them.

However, NYSE doesn't need huge volume to support its offering. NYSE already had to build its data center to run its conventional exchange business, and it left a huge, unfinished section of the building for the growth of its colocation and other technology services. Anything its cloud services bring in "is gravy," not a required return on investment, Barnes says. He declines to set targets for that business, but NYSE Technologies has a goal of doubling overall revenue, to more than $1 billion in 2015.

So let's add up NYSE's advantages in this market, as a sort of checklist to see if other industries could have a similar player: It has a market opportunity that could let it expand its customer base, as well as provide services to existing customers. It's a highly regulated and security-conscious industry, and NYSE is broadly accepted as an honest broker among very competitive parties. It has data it can offer along with its technical services--data that would be difficult for customers to duplicate on their own. And, it could offer this without investing a lot of capital beyond what it needs to run an existing, profitable business.

You can come up with a few companies in a few industries that can match that mix of advantages, but not many. That's reason for skepticism when people start talking about a future filled with industry-focused clouds.

We welcome your comments on this topic on our social media channels, or [contact us directly] with questions about the site.
2 of 4
Comment  | 
Print  | 
More Insights
InformationWeek Is Getting an Upgrade!

Find out more about our plans to improve the look, functionality, and performance of the InformationWeek site in the coming months.

10 Things Your Artificial Intelligence Initiative Needs to Succeed
Lisa Morgan, Freelance Writer,  4/20/2021
Tech Spending Climbs as Digital Business Initiatives Grow
Jessica Davis, Senior Editor, Enterprise Apps,  4/22/2021
Optimizing the CIO and CFO Relationship
Mary E. Shacklett, Technology commentator and President of Transworld Data,  4/13/2021
White Papers
Register for InformationWeek Newsletters
Current Issue
Planning Your Digital Transformation Roadmap
Download this report to learn about the latest technologies and best practices or ensuring a successful transition from outdated business transformation tactics.
Flash Poll