The cost of complexity

Stephen Singh explains how utilizing emerging Enterprise IT Architectures can help to balance cost and complexity.

“Successful financial institutions have taken a step back to re-think their strategy”
-Stephen Singh

Today, the financial services industry runs on the global economy time clock. Stock markets, banking and investing are open for business 24/7/365. In order to remain relevant in this highly competitive and dynamic field, our individual businesses must follow this schedule. This can certainly yield great opportunities, but also substantial hurdles we must consider that weren't even an issue a decade ago.

The race to zero latency

Financial institutions are entering an unprecedented era of growth, where billions of messages per day are crossing the global markets and are critical to the core business.  The increased volume and timeliness of this traffic is being driven by incremental trading venues, automated electronic trading and an expanding list of equities, options and commodities being traded.

In addition to the challenges derived from exponential growth in bandwidth and message volume, competitive advantages for financial institutions engaged in trading environments are being measured by their ability to execute with the lowest possible latency. Single digit microsecond measurements for ultra low latency environments are the starting point for those capitalizing upon direct market access, outsourced ticker plants and collocation architectures.

To address these needs, financial service firms are taking an holistic approach towards cost and complexity by utilizing it as an inflection point to assess their Enterprise Architecture and surgically reduce latency, while systematically removing cost, complexity and overall risk to the business.

Cost, complexity and latency

The impact of cost and complexity on a financial institution can be seen purely by looking at the IT ratio between sustainment and innovation, which today is heavily weighted towards sustainment activities. When targeted innovation is efficiently applied, sustainment funds, allocated for supporting legacy environments, are reinvested in the business enabling new initiatives that can directly contribute to a company's bottom line.

Driven by the most recent global economic conditions, many corporations have adopted a different approach such as elongating the life cycle of their environments (sweating the assets). This approach utilized costly best practices from the past 10 years to address capacity and growth; but at the same time, the undesirable side effect resulted in increasing complexity by developing isolated pockets of technology to address special business requirements such as low latency communications.

To handle this exponential growth in message traffic and bandwidth, additional tiers of computing, networking and storage technologies are deployed in multi-slice architectures to handle capacity and availability requirements. This self-fulfilling prophecy leads to incremental technology deployments, unprecedented growth in operational costs to manage the new assets, all the while feeding the consumption of valuable resources (power, space, cooling requirements), and shortening the life span of data center facilities. Additionally, with these unprecedented growth rates, technology that was once a multi-year investment from a depreciation schedule now has been reduced to multiple quarters.

As is it pertains to the race to zero, low latency environments will eventually become commoditized, leading financial firms to find innovative means to stay ahead of the competition, such as service diversity, enhanced availability and data quality.

The continued use of outdated best practices, legacy technology and isolation techniques have created a generation of incremental cost and complexity that will need to be released from the IT system in the next few years. The impact will be felt as the stability of IT environments begin to buckle as they strain to handle business growth, emerging virtualization requirements and the need for incremental functionality that delivers competitive advantage to lines of business.

The Path to Success

Successful financial institutions have taken a step back to re-think their strategy and ensure it encompasses a multi-generational best practices roadmap supporting all five phases of an environment's life cycle (plan, build, run, secure, measure). 

The path to success in developing and operationalizing a strategy includes a stepped program that delivers a comprehensive IT architecture strategy that is aligned with business needs and growth for the next five to 10 years. The IT environmental frameworks should be templatized and repeatable across multiple environments whether they're deployed within your enterprise facility or not. Part of developing a repeatable process is being sure to capture architectural best practices that eliminate complexity, cost and latency through tier reduction.

Part of reducing the complexity is virtualizing services fabric, consolidating fabric to optimally utilize resources. The benefits of virtualization span compute, storage, network, security and services tiers. However in developing a plan for service optimization, it is essential to take into account the annual doubling of capacity requirements and build an environment which can grow as needed versus requiring forklift upgrades every two to three years.

The linchpin of this approach means taking back control of vendor management by expecting open solutions, which adhere to industry standards. Furthermore it means centralizing management to allow resources to be re-allocated and seamlessly activated to address your most challenging situations.

As part of business planning, expect to hear lines of business requiring near zero down time through the delivery of highly resilient and available services.  This includes the entire data environment, which will span dedicated, shared and cloud environments. Be prepared to reduce the time to revenue, by incorporating end to end virtualization as part of the framework to address rapid provisioning, shared resource allocation, service segmentation and meet emerging regulatory requirements.

Where needed, pay for performance, by designing an environment that provides a competitive advantage through the use of innovative technology that delivers unprecedented performance, ultra low latency and the highest level of resiliency. Expect your infrastructure footprint to only grow, but advocate for smart growth. IT executives will realize that their measurement of success in the future, won't be the size of their data centers, but by how many off premise services they're able to integrate into their Enterprise data center fabric. IT roadmaps will be annually refreshed with innovative offerings derived from external service providers: Cloud, SaaS, IaaS, PaaS, CoLocation, etc.

By rigorously assessing current Enterprise IT Architectures, organizations will become more adept at preparing for rapid growth, improved performance, simplified frameworks, new business requirements and balancing cost and complexity derived from the burden of operational sustainment. This in turn will allow IT organizations to strategically position themselves as industry leaders, with greater agility to better compete in the future.

Stephen Singh, Vice President of Segment Marketing at Juniper Networks, is responsible for developing the go-to-market strategy and initiatives for enterprise segments. Prior to Juniper, Stephen was vice president of Enterprise Architecture and Chief Architect for Fidelity Investments. His previous experience also includes senior management positions at CoSine Communications and SBC Communications.