SAP FS Forum North America | New York | September 18, 2013 Capital Markets Inflection Point: Preliminary Themes for 2014 E. Paul Rowady, Jr. Senior Analyst TABB Group For additional information, please contact [email protected]
Nov 07, 2014
SAP FS Forum North America | New York | September 18, 2013
Capital Markets Inflection Point:
Preliminary Themes for 2014
E. Paul Rowady, Jr. Senior Analyst
TABB Group
For additional information, please contact [email protected]
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Framework: Waterfall or Flywheel?
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Business Drivers
Financial Market Impacts
Technology Reaction / Disruption
Technology is both disrupting the ecosystem and reacting to
changing conditions…
Source: TABB Group
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Primary Business Drivers: More regulation, more
technology, more complexity, less clarity ahead
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Competitive
Capital Flows
Technical
Innovation
Post-
Regulatory
Reform
Economic
Uncertainty /
Risk Appetite
Source: TABB Group
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Primary Business Drivers: More regulation, more
technology, more complexity, less clarity ahead
Post-Regulatory Reform:
With key pillars of Dodd-Frank in motion and other G20 cooperation following along, the
rule-writing phase of the post-GFC era is winding down and the implementation and
optimization phase is ramping up in force. The need for transparency, reporting and
analytics has yet to reach its crescendo.
Economic Uncertainty / Risk Appetite:
G7 coordinated central bank intervention exposes itself as a double-edged sword. Taper
or no taper? And, how quickly will interest rates change? Will retail investors move from
equities to bonds, or to the sidelines altogether? Many unprecedented questions on the
table to be answered in the coming year and beyond.
Competitive Capital Flows:
Capital becoming increasingly fluid, moving more easily from region to region, asset
class to asset class and strategy to strategy. Meanwhile, traditionally players are
becoming dis-intermediated with the advent of everything crowd-sourced. From crowd-
sourced data to crowd-funded investment, fewer intermediaries are need for the road
ahead.
Technical Innovation:
Social media and other data contribution / collection functionality serves as the
progenitor for the big data era. High performance (solid state) storage allows more data
to stay “hot” and available to respond to the growing demand for real-time analytics.
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Why so painful?: Large players have bolted businesses together
over years – now suffering from capability gaps, complexity costs
Source: TABB Group
Sources of technical complexity that need to be solved: Elastic Fragmentation: Cultural tolerance / policies allowing excess end-
user flexibility in solution choices
Legacy Fragmentation: Accumulation solutions tied to outdated
technology, old workflows / rules and former clients
Transactional Fragmentation: Accumulation of redundant solutions and
functionality as a result of mergers, acquisitions, etc.
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Sources of technical complexity that need to be solved: Elastic Fragmentation: Cultural tolerance / policies allowing excess end-
user flexibility in solution choices
Legacy Fragmentation: Accumulation solutions tied to outdated
technology, old workflows / rules and former clients
Transactional Fragmentation: Accumulation of redundant solutions and
functionality as a result of mergers, acquisitions, etc.
Source: TABB Group
Why so painful?: Large players have bolted businesses together
over years – now suffering from capability gaps, complexity costs
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Capability gaps, complexity costs create impediments to
enterprise analytics, improved overall transparency…
In the post-GFC era, a partial
picture of any counterparty –
no matter how sacred – is
unacceptable….
Market and credit risk analytics
absolutely must move to the
enterprise level, followed
quickly by update frequencies
approaching real-time…
Past
Present
/Future
Source: TABB Group
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Need for comprehensive, enterprise-wide, pre-trade analytics
puts pressure on data flows / data fluency…
Source: TABB Group
Data used for post-trade risk analytics now needs to move into the front
office Pre-trade use cases also force push towards real-time
For enterprise data flows, solving siloed / cross-business challenges is
critical Move towards real-time flows on horizontal basis a challenge here too
Reference data challenges – for legal entity identification – forces move to
standards
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Financial Market Impacts: The More From Less Era
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A complex market ecosystem is prone to new risks and challenges, as we have
seen in this post-GFC chapter. This leads to more rules, checks and balances,
which leads to more demands for data and analytics. Meanwhile, on the sell-
side, business is shrinking and market participants are struggling to right-size.
Future leaders will demonstrate a balance between human and technical
prowess. On the buyside, cross-asset and converting unstructured data getting
hotter..
Governance,
Risk,
Compliance
(GRC)
Improved
Data Analysis
/ Data Fluency
Culture
Operational
Intelligence /
Operational
Alpha
Shared vs.
Owned
Infrastructure
Granular /
Pay-per-use
Pricing
Models
Hi-Touch /
Lo-Touch
Balance BS + SS
SS Offerings
Source: TABB Group
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Technology Disruptions and Reactions
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The convergence of disruptive forces – from social media, big data deluge, and
high performance storage – will ultimately produce a level of analytics and
insight to map the collective intellect in real-time. Harnessing this intelligence
for economic gain will require unification of fragmented infrastructure, massive
process engineering, and highly creative user experience design. Only those
firms with the right innovative culture will be able to harness this power.
Standards /
Inter-
operability
Process (Re-)
Engineering
Computational
Destinations /
Cost of
Crunching
User
Experience /
Information
Design
High
Performance
Cloud / In-
Memory
Taming
Bigger Data /
Analytics
Source: TABB Group
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Key Takeaways
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Speed begets speed, now power begets power:
Calls for bigger workloads faster are getting louder…
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• More data leads to stronger engines, rinse/repeat (except a growing
portion of the engines are in the cloud)
• “Arms race” is between cloud providers (on the basis of
price/performance metrics), not necessarily individual firms…
Source: TABB Group
Even if HFT – and/or
demand for HFT solutions
and infrastructure - falls
off, a broader demand for
speed of bigger workloads
– by a broader cross-
section of the ecosystem –
will eventually take over.
Evolution of
Computational
Engines
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Plumbing
Raw Data
Derived Data / Analytics
Computational Engines (Measurement)
Presentation Layer (Aggregate / Monitor)
Exploration Layer (Aggregate / Discover)
Visual analytics will become critical to the process of
risk discovery; a current blind spot…
Source: TABB Group
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Key Takeaways – The More for Less Era
Big data only getting bigger – but also more diverse
Data standards, plumbing and storage key to everything else further up the
stack
In-Memory Revolution: Big memory meets big data
Shared infrastructure tackles cost reductions / shifting
Standards reduce costs, improve data fluency
Increasing acceptance of cloud offerings for more workflows
Leaders harvest more from existing data
Increase cycle time on existing datasets
Use existing data in new, more creative / complex ways
Capture, process new datasets
Use more – or ALL – of your data
Cloud + Co-lo: more computational power w/ proximity
Global markets on demand: accessing everything off of the same
(enterprise) backbone
More innovation around process engineering, managed services and user
experience (i.e. – information design)
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Technology and Innovation
In-Memory Revolution:
Solid state storage will take over more of the heavy lifting as
computational loads become bigger and faster
More data with a “hot temperature”
Managed Services: Moving the line btw Shared vs. Owned
The line between what is owned and what is shared needs to change in
order to right size cost structures with opportunity levels
Cloud offerings are a major part of this
Open source, standards, collaboration, consortiums, seamlessness,
interoperability, managed services are all part of the new paradigm
The New “Special Sauce”
“Human Latency” captures more mindshare
Process (re-)engineering, visualization and information design become
key value proposition (w/ new capabilities distributed to more roles along
workflows)
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SAP FS Forum North America | New York | September 18, 2013
Capital Markets Inflection Point:
Preliminary Themes for 2014
E. Paul Rowady, Jr. Senior Analyst
TABB Group
For additional information, please contact [email protected]