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Level of Cloud Adoption

Broker-dealers are at various stages in their cloud computing journey. Firms identified their size, business focus, existing IT infrastructure, and firm culture as some of the factors that influence their path to implementing cloud computing. While it is difficult to generalize for the entire industry, the following broad categories related to cloud migration may be helpful to understand broker-dealers’ experiences:

  • Fully in the cloud: Firms that are fully in the cloud generally fit into two groupings. The first group included fintech start-ups that launched their businesses cloud natively (i.e., built their technology systems around a cloud environment from inception). Founding team members may include technology leaders with previous cloud experiences, either in the securities industry or elsewhere, and could architect an IT environment in the public cloud for launching their product. These firms note that having a cloud native approach may enable them to get their product to market and respond to market demands more quickly while minimizing the start-up costs associated with establishing a private data center. The second group included small firms that have been able to generally transfer workflows to the cloud by exclusively using off-the- shelf SaaS products or working with an IT service or cloud integrator to migrate their IT from an on-premise to a cloud-based one. Due to their small IT footprint, these firms may have fewer impediments to making a wholesale transition into the cloud.
  • Partially in the cloud: Firms that are partially in the cloud include firms with different business models and sizes. These firms have typically begun the process of migrating certain applications, business domains or other workflows into the public cloud but are taking an incremental approach to cloud migration. Larger firms generally have an articulated enterprise strategy for moving towards the public cloud and are in the early stages of scaling their cloud presence. This enterprise strategy typically entails migrating an increasing share of their work onto the cloud over time, often implemented at the business unit level, as well as beginning certain new businesses in the cloud. Large firms also noted early work in pursuing multi-cloud platforms as a way to separate workloads and diversify cloud vendors. They also noted the adoption of private cloud, often as an initial foray into the cloud environment. Aside from the larger firms, other firms were pursuing more targeted use cases without necessarily making a commitment to expand their footprint in the cloud.

    For the broader category of firms that have begun the process of migrating into the cloud, it was sometimes the case that the more mission-critical work were the first ones to migrate, which made the footprint in the public cloud appear more pronounced. For others, lower- risk workflows involving less sensitive data (e.g., public data or fund disclosures) were the first to go to the cloud. In addition, some firms took the approach of migrating client-facing aspects of their business early on to provide a better user experience. Generally, firms still ran legacy systems that needed to be accounted for when considering cloud migration, and the pace at which these legacy systems could be retired or the pace at which the data could be re-architected represented an important speed bump to the pace of moving to the cloud. The existence of legacy systems was one reason that developing a predominantly cloud environment for a firm might take a number of years.
  • Exploring or experimenting: Many firms are in the category of exploring or experimenting in the cloud. These firms are typically evaluating cloud options and experimenting with potential use cases through pilot programs.23  Some of these firms have defined an enterprise strategy for their cloud migration and were in the process of laying the groundwork for the migration (e.g., setting up polices and governance structures). For others, the approach is less overarching and more targeted. Some firms contemplated migrating much of their work to the cloud, though many firms in this stage of cloud migration cited a more cautious “wait-and-see” approach hoping to gain insight from their pilots and from others that are further along the cloud journey as the technology evolves. Many of these firms exploring cloud pilots typically elected to migrate lower-risk workloads. Some firms cited greater control or familiarity with existing systems and concerns over developing expertise or managing security in a new environment as reasons for proceeding more cautiously.
  • Principally on-prem: Some firms—typically small-to-medium in size—maintain mostly on-prem systems and are not actively contemplating a move to the cloud. These firms may have, at most, ventured into some SaaS solutions for non-core functions. For firms remaining in these legacy systems, the rationale for not pursuing the public cloud did not necessarily reflect a conservatism towards new technology. Rather, part of it was a lack of urgency since there was not at the current time a pain point or compelling driver to move to a different environment. These firms indicated that despite the surge in remote work and surge in trading activity experienced at the outset of the pandemic, they were able to adapt using their existing technology infrastructure despite initial adjustment challenges. These firms also did not see a strong economic justification for migrating to the cloud at the current time, especially if existing infrastructure had not been fully depreciated. Many of these firms, however, are still considering migrating to the cloud in the future, being fully aware of the potential benefits.