As any industry trend plows through the landscape, you can frequently spot key events where the discussion quickly evolves from one phase to the next.
I believe such an event happened today. The New York Stock Exchange (NYSE) announced their new
Capital Markets Community Platform -- essentially, a cloud service for financial traders.
Yes, EMC and VMware were prominently mentioned in the announcement. That shouldn't be a surprise to anyone.
More interesting is that it adds additional (and highly visible) evidence that external cloud services will compete on being better - and not necessarily just cheaper - than in-house alternatives.
With this announcement, I believe the general perception of external cloud services is changing -- fast.
It's All About Perception -- Isn't It?
I think it's safe to say that there's been a collective distrust of external cloud services in people's minds up to now. Regardless of the facts, external cloud services are often seen as perhaps less reliable, less secure or less responsive than internal IT approaches.
Now we have a uber-premium cloud service -- aimed at some of the most demanding IT users on the planet -- that turns that around: the service will compete by being more reliable, more secure and more responsive to customer needs than trying to do it internally.
In this case, cloud isn't really about cheaper IT, it's about better IT.
Consider The End User
Imagine you're a hedge fund, or a high-volume brokerage firm, or some other serious player in the global financial markets. Essentially, you've got the the prototypical "information business" -- information in, decisions out. Needless to say, with lots of money at stake.
It's obvious you depend on instantaneous, high-quality information to power your business and get whatever edge you can in the marketplace. And to deliver all that information capability, you need killer infrastructure to support it.
Prior to this announcement, there weren't many external services targeted specifically at your requirements for infrastructure and platform. Now there is. So you've got some new variables to factor into your computations. How do you figure it?
When you look at your competition, you realize that IT investment falls into two categories: investing in things that everyone else is doing, and investing in things that only you are doing.
The first category is a clear candidate for an external service provider -- why invest in re-inventing the wheel? And any money you save by doing so can immediately be re-invested in the second category: differentiation.
More to the point: if using a community platform like NYSE's confers some competitive advantage on it users, well -- you've got to have it as well.
Broader Impacts Will Result
There's no reason to assume that this phenomenon will restrict itself to the cloistered community of uber-competitive global financial traders. Think, for a moment, of other highly competitive industries where most of the players are basically doing the same thing.
Energy exploration and transmission. Genomics. Retail. Insurance. Automobile manufacturing. Telecommunications. Airlines. And more.
In each industry, it's not hard to make a case that their should be one or more "cloud service providers" that offer the same shared IT capabilities that all the industry players need. Not because it's just cheaper, but because it's better than you can do yourself.
In turn, you'll get the option to focus your IT spending on what makes you different, rather than simply re-implementing what makes you and your competitors essentially the same.
Over time, there's a compelling case that much of this differentiation will come from competing through big data analytics: knowing more about what's happening than the other guy. That's the case for the global financial trading community; it's also quickly becoming the case for other industries as well.
Competing Through Analytics
Something else to bear in mind: the global financial trading crowd is perhaps the most compelling example of an industry that has been completely transformed (and not always for the better) by data scientists and advanced analytics.
I don't recommend many books, but one recent compelling read has been "The Quants" by Scott Patterson. Yes, it's an entertaining story with interesting characters, but the real insights come when you appreciate what can when an entire industry acquires the same advanced weaponry.
If you've read the book, ask yourself: how would this story materially differ if we were talking about some other highly competitive industry? I think versions of this story will play out over and over again --- across industry after industry -- going forward.
Do You Trust Your Cloud Provider? Do You Have An Option?
At the end of the day, the act of moving critical workloads to an external service provider is essentially about trust: will it work out OK? And, more importantly, will you be there when things go wrong?
Certainly, industry-focused cloud offerings like NYSE's go a long way to bridging that trust gap perception. NYSE knows what these people need, and can certainly deliver it. And, speaking for EMC and VMware, a big "thank you" to the NYSE-T team for the trust they've placed in us. We'll work hard to continue to earn it.
But, in some cases, there'll be a different dynamic, especially in highly competitive industries. You'll be essentially forced to trust an external service provider -- simply because all your competitors are already doing so.
Interesting times indeed.