A break in the cloud

But the asset management industry has been notoriously cautious when it comes to actually adopting the cloud as opposed to just thinking about it. This lack of trust in third party providers was historically due to concerns over data security, lack of control and business continuity risks. There were also worries about whether providers would be able to guarantee performance, scalability, and service with what was then an emerging technology.

However, attitudes are changing. Citisoft’s paper, Times of Change: A Look Back and a Look Ahead at the Biggest Trends in Asset Management Tech and Ops, said: “Barriers to cloud-based adoption are finally coming down. Software vendors and service providers are rapidly aligning themselves with premier cloud providers, offering benefits difficult to ignore: rapid deployment, standardization, scalability, data insulation in multi-tenant environments, information security certification, and lower total cost of ownership.”

The invisible links of APIs

One of the biggest selling points of the cloud is the ability to share information without requiring local software or cumbersome FTP processes. One such area of data sharing that is adding real value is through Application Programming Interfaces (APIs). These interfaces make it possible to programmatically extract data from systems and import it into others, whether they are cloud-based or not. These invisible links are an essential part of any cloud migration strategy as they allow you to connect systems and data and move away from legacy data silos.

A report by Deloitte, The future of investment management: Open application programming interfaces, states that the idea is to integrate third parties’ clouds into the asset manager’s solution via APIs. The idea is basically that the APIs allow various pieces of software (within the cloud) to communicate with each other, thus allowing data to move between the various counterparties in a timely and seamless fashion according to the rules placed around that movement.

“In the case of the investment management industry where market data is the lifeblood, getting accurate and timely market data in the requisite format continues to be a time consuming and evasive process. However, these businesses now have the option of linking their systems with external data feeds, which provide real-time, historical, and reference data without the need for complex in-house data management systems,” says the report.

Web APIs allow asset managers to programmatically move data between systems in an automated way. This means data generated in the cloud can be easily brought back into local downstream systems for further analysis, or reporting via data warehouses or data lakes. Having this ability is critical to avoid falling into the trap of replacing local silos of legacy systems and data with cloud-based versions with the same problem. Data portability is essential and open access is required to join systems up to a central data strategy. So not only do APIs have the innate ability to move data quickly, but they can also maintain a high level of security because of the rules and governance that can be programmatically written in around permissions. The idea is to enforce consistent security, compliance, and access control mechanisms and thus mitigate risk by ensuring that only the right data is exposed to the right users and applications.

However, data governance is key and making sure that the right application data is available  at the right time is no easy feat. If not done properly, there can be far-reaching consequences.

One step forwards, two step back

If APIs aren’t open then data cannot be shared, and it becomes much more difficult and time-consuming to get that data and use it in a normalized and automated way (think FTP downloads and manual file handling). Everything reverts to manual, and IT needs to find solutions to get that data, transfer it across, and implement time-consuming cross-checking processes.

The key is:

• The degree to which APIs are available
• The types of data extractions supported through Web API calls
• The framework of rules and governance that binds them
• Having a well defined data management framework.

Without this, data can end up in multiple places without automated or scalable ways of bringing it all together. As the industry begins to replace its legacy applications, it’s important to make sure that the new systems have the ability to talk to the old.

Care needs to be given to make sure that the right standards and governance around APIs and multiple cloud-based systems are implemented. Data standards around transaction data, reference data, and, more importantly, sensitive commercial data are all needed. Asset managers must also consider how to protect and authenticate their data as well as how best to manage relationships with third parties. Data sovereignty must also be well understood to know exactly where sensitive data is at all times. This can become complex with multiple cloud providers and software vendors using third party infrastructure platforms.

Ultimately, without the right tools the benefits of sharing via APIs are pretty much negated. Middle offices then need to revert back to the old days of separate systems and manual bolt-ons to try and make them talk to each other; something that is self-defeating and not all that practical in today’s cloud-based world.

Takeaways

• The barriers to cloud-based adoption are finally coming down.
• Web APIs are essential to connect cloud-based applications with other systems, including local data warehouses or reporting platforms.
• If APIs aren’t open then data cannot be shared; everything reverts to manual.
• The right data governance around APIs and multiple cloud-based systems is key.
• Without the right tools the benefits of sharing via APIs are pretty much negated.

Learn more about how IT can transform the middle office in our complimentary eGuide, What is the future of IT within asset management?

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