The disruptive route: heading further into the cloud

Date: April 24, 2012

The benefits on offer would have to be pretty substantial for any growing business to move away from a technology platform with an annual revenue stream of over £30 million. Either that or we’ve completely lost the plot.

However counter-intuitive it seems, our decision to take such a tremendous strategic step does have long and short term benefits for everyone and has not been taken lightly. It’s about providing clients with the advantages of a cloud based solution; reducing internal costs for the clients by getting rid of upgrades (you’ll always have the latest version), cutting down on consultancy fees (it’s so easy to use you won’t have to budget for professional services) and lower your spend – no need to rent all that server space next year.

There is method in the madness but our move to the cloud and to stop development on StatPro Seven has caused waves, so I and my fellow directors have taken the time to visit all 250 StatPro Seven clients to share our reasoning and give them the opportunity to voice their concerns.

Read: New Insights for Asset Managers: How Technology Can Drive the Most Effective Middle Offices

For the most part clients are concerned that the cloud is immature, unproven in the asset management sector and potentially insecure. StatPro is storming head first into the cloud far ahead of any of its peers rather than investing in the proven technology of StatPro Seven. Why?

Change is inevitable

Looking around at a recent RIA (Registered Investment Advisor) conference in Dallas, I counted over forty software companies offering various portfolio management solutions and other types of services for RIAs. Every single one of them was cloud based.

It’s entirely normal to continue to refine existing products but how many analytics providers are likely to build a totally new product from scratch today? How many of those are likely to use existing technology rather than cloud technology to build this new product?

The cloud has followed the opposite route of other technologies. Whereas before it was governments, the military or big business that created new technologies that eventually found their way to the consumer, the cloud has begun with the consumer, moved up to small businesses and is only now entering the world of government, big business and the military. Hence the RIAs, who represent the small business end of the asset management industry, are already keen adopters of the technology because it is more efficient and much better value.

Cloud is the future

We all use some form of cloud product at home, if not in the office, so the willing adoption of cloud-based products is actually much more prevalent than might be thought and a completely rational economic decision.

No matter how functional an existing product is, the fact that it needs to be installed specifically for each individual client makes it much harder and much more expensive to support, maintain and develop. StatPro has over 250 clients using StatPro Seven and although nearly 50% are hosted by us, practically every client has a degree of uniqueness to their installation. This means that we need to be able to respond to an ever increasing set of potentially unique problems. What is more, any upgrade is a major undertaking for any client.

Apart from the cost of buying consulting from StatPro there are also considerable internal costs for clients. This means that upgrades are only performed every two to three years and at great expense. With cloud computing there is only one version of software in one place, no matter how many clients we have. And, we perform upgrades every six weeks – the moment it is released all clients have use of the new functions. Thus our responsiveness to client and market demand can be far quicker by a factor of months or even years. Because clients don’t need to buy or manage their own IT, just use a browser, their money is spent more efficiently and flexibly. It is self evidently better and it’s why we’re moving our entire sales force to focus on StatPro Revolution (previously only 20% were focussed on the cloud).

Don’t believe the hype

You could argue that whilst the benefits of cloud computing are indeed tantalizing, security is a key concern and a very real threat.

Offering any guarantee is difficult if not impossible, but it’s worth noting that a recent report from the Computer Emergency Response Team (CERT) Coordination Center, which investigates fraud, found that 82 per cent of the financial services cases that it had handled since 2001 were the result of insider fraud, not an external breach. With cloud computing the data stays in one place and users are given access to it. What they do is monitored. When input data is sent to StatPro Revolution it is encrypted. Key data within StatPro Revolution is encrypted. As the system is centralized, monitoring occurs constantly so attacks can be seen and forestalled. Dispersed systems are much harder to defend and sending data via an email with a spreadsheet attached is an open invitation.

StatPro Revolution was designed from the ground up with security in mind rather than as an afterthought. Rather like a military compound is built for security whereas a house is not. Because it is centralised we can make it far more secure than multiple systems. We can mitigate the dangers of centralization by eliminating all single points of failure.

Forward thinking sustainability

Switching from StatPro Seven to StatPro Revolution is not yet possible, whilst StatPro Revolution is “forensically invaluable” (so says one customer) and simple to use, it doesn’t yet have the functionality to deal with many key performance tasks managed by financial analysts.

Think of StatPro Seven as a production system. It gathers in all the required transaction data and then the performance team process this data to ensure accuracy.

StatPro Revolution is part of a new product category. It really focuses on the sales side of the analytics. Once the performance team are happy they press a button and the system churns out reams of reports. Those reports get sent around internally and out to clients.

StatPro Revolution is effectively the replacement for the reports. It is a distribution system. When a fund manager receives a PDF report, if it is not over the period he wants, he has to ask the performance team to make him another report. This is extremely cumbersome and inflexible. If the fund manager had access to StatPro Revolution he would be able to look at his portfolio in any way he wanted without bothering the performance team.

StatPro is still supporting all versions of StatPro Seven, but this will eventually be upgraded to StatPro Revolution Plus (R+), our cloud-based solution. Clients will see the first module in early 2013. Not only will this replace the existing technology and provide the same functionality it will do so on a much bigger scale and much faster. Until then StatPro Seven and StatPro Revolution have been designed to work together to maximize the benefits of analysis for clients.

If we had just tried to improve the scale and speed of StatPro Seven we would only ever have achieved minimal improvements. However, with R+ we aim to get quantum improvements in speed. In terms of scale, there is no real limit to the potential capacity of R+ as the public cloud services are already monumental and are likely to quadruple in size over the next few years.

To completely replace the extensive functionality of StatPro Seven will take us until the end of 2014. At that point, clients will be able to migrate in their own time to the new services. Two or three years from now the debate on cloud services will have moved on from “whether to do it or not” to “who is best at it.” And we aim to be the best.

Promises, Promises

Why should any client be confident that StatPro will be able to deliver this wonderful sounding product by the end of 2014?

Almost all production and development delays experienced by software companies are down to the structural problems of providing installed software. StatPro Revolution Plus (R+) will be cloud based. Following on from StatPro Revolution’s planned development path, which exceeded our internal expectations for speed of development, StatPro’s ability to deliver StatPro Revolution Plus (R+) on time is a pretty safe bet.

StatPro Revolution already has over 80 paying clients in just over a year of being on sale. It is in part because we can feel confident of giving our clients what they want as quickly as possible with cloud computing that we are so enthusiastic about it.

If you would like to participate in one of our Focus Groups to provide input and feedback on our development plans, please get in touch

Looking for improvement in your middle office?


To learn more about 13f-2 watch our webinar replay Part 1: Unpacking the SEC's New Disclosure Rules for Shareholders
Join us for Part 2: Operationalizing the SEC's New Disclosure Rules, for Shareholders on December 12.