Next Generation Data Centers in Financial Services

Driving Extreme Efficiency and Effective Cost Savings

Tony Bishop

• Verlag: Elsevier Science
• Jahr: 2009
• ISBN:
  9780080959368
• Thema: Business
• Thema: Business generale

Financial markets are witnessing an unprecedented explosion in the availability of data, and the firms that survive will be able to leverage this information to increase their profit and expand their opportunities in a global world. Financial firms have two options: to build their own data centers or to outsource them to hosting services such as Google and Amazon 'cloud' services. While outsourcing data centers is a trend for small firms, it is not applicable to bigger firms who want more control over their huge amounts of data. Large firms thus build their own data centers. In such an environment, the CIO's ability is crucial to lead an effective data strategy to capture, process and connect data to all the relevant lines of business. At the core of this strategy lies the data center – the repository of all information. In recognition of the importance of information, firms are rushing to invest in data centers, but they are finding that just throwing technology at the problem is not good enough. Despite the investments, data centers prove frustrating in terms of inefficiencies and rising costs, directly cutting into the profitability of lines of business that they serve. While there are books that discuss the mechanics, hardware and technicalities of data centers, no book has yet made the connection between enterprise strategy and data center investment, design and management.
This book is a solution driven book for management demonstrating how to leverage technology to manage the seemingly infinite amount of data available today. Each chapter offers cutting-edge management and technology solutions to effectively manage data through data centers.•Feature: Presents cutting-edge technology solutions not available in one place until now
•Benefit: Saves time going to numerous websites, calling vendors, going to conferences•Feature: Includes step-by-step instructions on how to implement a data center strategy based on the author's recent success with Wachovia's data center
•Benefit: Readers can follow these steps with confidence that they will work and not have to re-invent the wheel•Feature: Demonstrates how business and IT can be aligned in financial services
•Benefit: Demonstrating this alignment is crucial for any proposal for IT related resources today

Chapter 1. The accelerating demand for datacenters

It is not necessary to change; survival is not mandatory.

—Dr. W. Edwards Deming

Key Points

The demand for datacenter space continues to grow, but the business isn’t able to support that growth rate using traditional means.

Current legacy infrastructure environments pose a threat to growth and survival for financial services firms in the post-2008 mortgage crisis climate. The time is right to consider ways to deploy more efficient and flexible datacenters.

Today’s business climate places greater demand on IT organizations. They face a dual challenge of “keeping the lights on” while providing new services at unprecedented rates with reduced investment support from the business. At the same time, the very business model of IT is changing; how applications, content, information, and infrastructure are delivered. Organizations have come to rely on datacenter services for their external facing customer experience, corporate branding, and internal operational systems. Disruptions in this service can induce significant financial losses or even paralyze an organization completely.

One of the biggest barriers to business execution and innovation today is datacenter complexity. As a result, the major part of IT investment expenses (87 percent of the IT budget) ¹ is earmarked for keeping operations running and containing infrastructure sprawl.

¹Smith M, et al. IT Spending and Staffing Report, 2008. Gartner, Id#G00154809; February 20, 2008.

Approximately 83 percent of CEOs expect substantial change in the next three years, but only 39 percent did not feel their organizations were ready for that change. ² The enterprise’s inability to devote a majority of its time and investment dollars on innovating and differentiating business through IT results in missed expectations and disappointment within the business user community.

²Korsten P, et al. The Enterprise of the Future. IBM; 2008.

1.1. State of the Datacenter Today

During the last decade, organizations have become increasingly dependent on their datacenter environments, which effectively house the digital backbone of the organization. The pressure to technologically keep up with the competition has created a proliferation of datacenters full of massive amounts of technology resources. This pressure particularly affected the banking and financial services sectors.

The February 2008 Gartner IT Budget Survey showed that banking and financial services firms led the way in IT spending at about 7 percent of total revenue (12.6 percent of all operating expenses). ³ This growth was sustained by the highest operating margin of any other industry (about 35 percent). The result was technological innovations in delivering financial services that were generating tremendous returns. In the process, datacenters with thousands of servers and other resources proliferated.

³Smith M, et al. IT Spending and Staffing Report, 2008. Gartner, Id#G00154809; February 20, 2008.

Several factors have come together to create the perfect storm:

1. The economic downturn of 2008 and expected increase in regulatory requirements

2. The increasing rate of change to the business model and its implementation in the infrastructure

3. The growth of IT spending versus revenue generation

4. The diminishing returns of additional optimizations

5. The exponential growth of data

6. The overall lack of efficiency from existing datacenters.

All of these factors will cause a change of behavior of IT and datacenters utilization in financial services organizations.

The end result is that the business must take a very hard look at all of its IT expenditures. Careers will be made and broken in the process. There’s a general sense that IT is spending too much for too little. Controlling the rate of spending just to keep existing datacenters operational will be a challenge for some organizations. Altogether, the current trends in datacenter growth do not bode well for the future of IT and businesses.

1.1.1. Credit crisis and regulatory requirements

The credit crisis and the economic climate of 2008 have radically altered the banking and financial services landscape. ⁴ In short, the securitization of debt—the engine that has driven the financial industry for the past twenty years—is now out of favor. This, combined with the resulting government bailout, will impact financial institutions for years to come. Transactions and their related fees are depressed and entire business models in structured products no longer function. As a result, revenue is down significantly, and the banking industry will be preoccupied with reinventing its business model for the foreseeable future.

⁴Tabb L. Lehman, Merrill and Bear—Oh My. TABB Group; September 14, 2008.

IT budgets will be negatively affected by the poor performance of the organization. This comes at a time when funds will be needed to drive business innovation as the organization not only reinvents itself but meets the increased regulatory requirements the government will undoubtedly impose. IT will be challenged in meeting these two objectives, but it must be done if it is to survive. Reusing existing assets and repurposing those assets from defunct businesses will be critical to success (see Chapter 3).

1.1.2. Trends in real-time enterprise transformation

One recent trend in business is to become more reactive to real-time events. The traditional organization is slow to react to events as they take place and tends to sporadically adjust its activities. In contrast, the real-time enterprise works continuously to remove lag in response to events. By being more responsive, it’s possible to rapidly change direction and affect the outcome of events. The current datacenter model is poorly prepared to support a real-time enterprise. Changes in the environment often take weeks or months, which is much too long. The business may be aware of events as they occur, but without the proper support mechanisms in place, it is unable to respond appropriately. Then IT is seen as an impediment rather than a solution. As this trend grows, pressure will mount for IT to get out of the way or get on board (see Chapter 3).

1.1.3. IT spending versus revenue growth

Traditionally, when a datacenter reached capacity, IT made a business case for building a new facility. But with a modern datacenter costing hundreds of millions of dollars, preparing the facility for the first server is costly indeed. When the economy was humming along, the business was content to feed funds into IT to continue the growth of the datacenter. Now that the economy is on the rocks, the business will have difficulty investing funds into datacenters, never mind building entire new ones. If the organization is short on any capacity, it’s unlikely that IT will get any support for building yet another multimillion-dollar facility.

To avoid these challenges, IT must begin to track directly with business growth. Initiatives like utility computing have made headway, but they aren’t enough. The challenge is that while the business operates in terms of transactions, applications, and services, IT operates silos of resources like servers, network, and SAN. Being aligned will require IT to define its services as directly mapped with business activities (see Chapter 3).

1.1.4. Diminishing returns of further optimization

The last decade saw IT devote a lot of attention to optimizing the process of deploying resources into the datacenter and operating the applications running on them. This improvement process is at a point of diminishing returns that can no longer keep up with the accelerating business demand. IT groups are very thinly sliced in their capabilities such that in large organizations it takes the coordination of many disparate groups to effect a change. As the business continues pushing to increase the rate of change to be able to respond to business events, IT will need to figure out how to meet these goals. Provisioning servers and other resources is only a small part of the overall challenge of making rapid changes and increasing utilization. As will be discussed in depth in Chapter 4, virtualization is part of the solution, but it is not the solution in and of itself.

Technology alone can provide moments of competitive advantage, but they are not sustainable in isolation. The competition also has access to the latest technology and will catch up sooner or later (usually sooner). The creation of sustainable competitive advantages has long been promised by IT, though few organizations can actually claim they’ve accomplished this goal. The creation of tailored IT services in direct alignment with business operations can create the desired sustainable competitive advantage (see Chapter 3).

1.1.5. Exponential data growth

Markets are witnessing an unprecedented explosion in the availability of data, and firms are eager to leverage this information to increase their profits and expand their opportunities in a global world. Firms are capturing more data than ever before. Not only is the number of transactions increasing due to volatility, but the velocity of transactions is increasing as well. In some industries, such as capital markets, the volume of trades has increased by as much as 100 percent. In addition, there is increasing regulatory pressure from governments to store information for accounting and reporting purposes. With data also comes a new breed of experts who are helping firms crunch and mine this data to make analytical forecasts and use this information to enter new markets and float new products. These analytical tools and methods in turn create additional data to process and utilize.

The amount of data that firms must store today is unprecedented. Chris Anderson, author of The Long Tail, calls this the Petabyte⁵ Age (a petabyte is a unit of information or computer storage equal to one quadrillion bytes, or 1000 terabytes). In such an environment, the CIO needs the ability to lead an effective data strategy to capture, process, and connect data to all the relevant lines of business (see Chapter 4).

⁵Anderson C. The end of theory: the data deluge makes the scientific method obsolete. Wired Magazine. June 23, 2008.

1.1.6. Lack of efficiency

In order to keep up with demand, firms have been rushing to invest in datacenters, but they are finding that just throwing technology at the problem is not ...

Inhaltsverzeichnis

• Cover Image
• Table of Contents
• Copyright
• Series editors’ preface
• Preface
• About the author
• Book conventions
• Chapter 1. The accelerating demand for datacenters
• Chapter 2. Challenges in legacy architecture
• Chapter 3. Real Time Enterprise
• Chapter 4. Design from the top-down
• Chapter 5. Designing the foundation
• Chapter 6. Extreme optimizations and eco-efficiencies
• Chapter 7. Manage for scale and evolution
• Chapter 8. Key strategies and technologies
• Chapter 9. Measure for success
• Chapter 10. Industry extended applicability
• Appendix A:. Wachovia CIB case study
• Appendix B:. NGDC maturity model
• Index