Capital Markets Inflection Point: Preliminary Themes for 2014
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Capital Markets Inflection Point: Preliminary Themes for 2014

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Presentation by E. Paul Rowady, Jr., Senior Analyst, TABB Group

Presentation by E. Paul Rowady, Jr., Senior Analyst, TABB Group

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Capital Markets Inflection Point: Preliminary Themes for 2014 Presentation Transcript

  • 1. Capital Markets Inflection Point: Preliminary Themes for 2014 E. Paul Rowady, Jr. Senior Analyst TABB Group For additional information, please contact info@tabbgroup.com SAP FS Forum North America | New York | September 18, 2013
  • 2. Framework: Waterfall or Flywheel? Technology is both disrupting the ecosystem and reacting to changing conditions… Business Drivers Financial Market Impacts Technology Reaction / Disruption Source: TABB Group 2
  • 3. Primary Business Drivers: More regulation, more technology, more complexity, less clarity ahead Technical Innovation PostRegulatory Reform Competitive Capital Flows Economic Uncertainty / Risk Appetite Source: TABB Group 3
  • 4. Primary Business Drivers: More regulation, more technology, more complexity, less clarity ahead  Post-Regulatory Reform:   Economic Uncertainty / Risk Appetite:   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 crowdsourced data to crowd-funded investment, fewer intermediaries are need for the road ahead. Technical Innovation:  4 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:   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. 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.
  • 5. Why so painful?: Large players have bolted businesses together over years – now suffering from capability gaps, complexity costs  Sources of technical complexity that need to be solved:    5 Elastic Fragmentation: Cultural tolerance / policies allowing excess enduser 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
  • 6. Why so painful?: Large players have bolted businesses together over years – now suffering from capability gaps, complexity costs  Sources of technical complexity that need to be solved:    6 Elastic Fragmentation: Cultural tolerance / policies allowing excess enduser 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
  • 7. Capability gaps, complexity costs create impediments to enterprise analytics, improved overall transparency… Past In the post-GFC era, a partial picture of any counterparty – no matter how sacred – is unacceptable…. Present /Future Market and credit risk analytics absolutely must move to the enterprise level, followed quickly by update frequencies approaching real-time… 7 Source: TABB Group
  • 8. Need for comprehensive, enterprise-wide, pre-trade analytics puts pressure on data flows / data fluency…  Data used for post-trade risk analytics now needs to move into the front office   For enterprise data flows, solving siloed / cross-business challenges is critical   8 Pre-trade use cases also force push towards real-time Move towards real-time flows on horizontal basis a challenge here too Reference data challenges – for legal entity identification – forces move to standards Source: TABB Group
  • 9. Financial Market Impacts: The More From Less Era 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 sellside, 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.. SS Offerings Governance, Risk, Compliance (GRC) BS + SS Operational Intelligence / Operational Alpha Improved Data Analysis / Data Fluency Culture 9 Source: TABB Group Granular / Pay-per-use Pricing Models Shared vs. Owned Infrastructure Hi-Touch / Lo-Touch Balance
  • 10. Technology Disruptions and Reactions 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. Taming Bigger Data / Analytics High Performance Cloud / InMemory 10Source: TABB Group Standards / Interoperability Computational Destinations / Cost of Crunching Process (Re-) Engineering User Experience / Information Design
  • 11. Key Takeaways 11
  • 12. Speed begets speed, now power begets power: Calls for bigger workloads faster are getting louder… • 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… Evolution of Computational Engines 12 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 crosssection of the ecosystem – will eventually take over.
  • 13. Visual analytics will become critical to the process of risk discovery; a current blind spot… Presentation Layer Exploration Layer (Aggregate / Monitor) (Aggregate / Discover) Derived Data / Analytics Computational Engines (Measurement) Raw Data Plumbing 13Source: TABB Group
  • 14. Key Takeaways – The More for Less Era  Big data only getting bigger – but also more diverse    Shared infrastructure tackles cost reductions / shifting         14 Standards reduce costs, improve data fluency Increasing acceptance of cloud offerings for more workflows Leaders harvest more from existing data   Data standards, plumbing and storage key to everything else further up the stack In-Memory Revolution: Big memory meets big 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)
  • 15. Technology and Innovation  In-Memory Revolution:    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”   15 Solid state storage will take over more of the heavy lifting as computational loads become bigger and faster More data with a “hot temperature” “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)
  • 16. Capital Markets Inflection Point: Preliminary Themes for 2014 E. Paul Rowady, Jr. Senior Analyst TABB Group For additional information, please contact info@tabbgroup.com SAP FS Forum North America | New York | September 18, 2013