When it comes to helping clients, adviser Daniel Grossman of Acorn Financial LLC in Nashua, N.H., has his feet planted firmly on the ground.
When it comes to helping clients, adviser Daniel Grossman of Acorn Financial LLC in Nashua, N.H., has his feet planted firmly on the ground.
When it comes to computing, however, his head is moving into the clouds.
Mr. Grossman is an early user of cloud computing, or computing resources that are owned and operated by a third-party provider on a consolidated basis in data centers. Consumers of cloud computing services like Mr. Grossman buy computing capacity on demand and do not get involved with the technology or management of the servers.
As the cost of connectivity to servers declines and speed increases, the economic incentives to share hardware among many users are increasing and the drawbacks of not owning a solution or maintaining hardware in-house are declining. Those dynamics point to increasing popularity of cloud computing, and opportunities for advisers.
"I like cloud computing because it means I don't have to back up my data," Mr. Grossman said with a laugh.
Instead of doing backups manually, his firm uses online backup services from Mozy Inc. of American Fork, Utah, a subsidiary of EMC Corp. of Hopkinton, Mass. Mozy uses cloud computing to deliver the service.
"What I don't have to do in using their service is update the software or maintain the hardware," Mr. Grossman said of Mozy's service, which is largely automated and runs over the Internet at convenient times for the firm, such as late at night.
"Do we do regular backups of important information to DVD? Sure, but if we have a fire, flood or earthquake, it's Mozy we are going to rely on for our backup." Mr. Grossman uses Mozy because he wants his firm, which manages about $150 million in assets, to remain nimble and flexible in its use of technology.
"I don't want to invest in more resident applications if I can help it. My partner and I know that we both want to spend a lot of time away from the office," Mr. Grossman added, referring to the anytime/anywhere accessibility afforded by online applications supplied through cloud computing.
"The bottom line is that advisers will get better applications for a cheaper price," said Aaron Guidotti, chief executive of Big Brain Works LLC of West Chester, Pa., who last year launched Grendel, an online information management system for financial advisers.
"Broker-dealers will also want to take advantage of a cloud computing environment," he said. For instance, intensive operations like report generation and trading systems are a natural fit, Mr. Guidotti said.
"The increased processing power will also allow for more advanced modeling and analysis. B-Ds could even create their own cloud and offer the benefits to their advisers and clients," Mr. Guidotti said.
Because of its speed and economy, greater cloud computing use among advisers is inevitable, whether advisers choose cloud applications themselves or the applications are provided by an adviser's custodian or broker-dealer and are invisible to the user.
A report last month from analysts at Merrill Lynch & Co. Inc. of New York found that cloud applications cost from three to five times less than on-premises business software and are five to 10 times cheaper than personal productivity applications.
As one example, the Merrill analysts compared the costs associated with self-hosting a Microsoft Exchange-based e-mail system, from Redmond, Wash.-based Microsoft, with that of the business-grade version of Google e-mail, which is bundled in Google Apps from Google Inc. of Mountain View, Calif.
According to the report, the cost per employee for the Microsoft implementation can be as much as $5,440, versus as low as $50 per employee for the Google implementation.
"At a simple level, something like Google Apps with its online spreadsheet, document and presentation applications has already made it a lot easier to create and share information," said Alex Zaltsman, co-founder and partner of Mount Arlington, N.J.-based Exigent Technologies LLC, an information technology consulting firm that serves small to midsize companies in a wide range of industries.
Applications including e-mail hosting, archiving and customer relationship management from well-known companies are being delivered using the cloud model. Google Apps, for example, includes simple word processing, spreadsheets, calendar, collaboration and e-mail applications, all of which are hosted on Google's vast servers. A second example is the online customer relationship application Salesforce.com.
Over the past decade, changes in storage technology have given cloud computing new power. The new technologies have slashed the cost of running large computing tasks on a cloud infrastructure as compared with using traditional client-server networks.
One of these new technologies is the blade server, which consists of several densely packed server modules — each with its own central processing unit, memory and hard disk — that reside on a single chassis that provides the power. Because they are smaller and more energy efficient than the servers they replace, blade servers pack more computing punch.
Virtualization, in both its senses, also is fueling the cloud boom.
In its first meaning, virtualization permits software to manage numerous servers or storage devices, whether they are at one physical location or several, as if they were one device. It also describes how software now can partition a single server's memory into separate virtual machines, so that one computer can run different applications without one interfering with the other.
As a result of virtualization, servers running cloud applications can do more processing faster — which lowers costs and makes cloud computing more attractive. Popular applications, including Gmail and Salesforce, for example, are now hosted on low-cost blade servers that are virtualized.
COMPLIANCE
While cloud computing costs are attractive, advisers concerned about compliance may wonder how the remote nature of cloud storage jibes with an adviser's security and privacy obligations.
"Outsourcing of e-mail or other services by advisers is not a problem as long as you can capture it, surveil it and ensure that it is secure," said Richard D. Marshall, a partner in the investment management and securities litigation groups of Ropes & Gray LLP in New York, a global law firm. He is also a former Securities and Exchange Commission regional administrator overseeing enforcement matters.
Google clears these hurdles because it has separate archiving, e-discover and search services for its hosted products.
"Right now, the functionality of Google Apps is very limited compared to something like Microsoft Office," Mr. Zaltsman said. "However, it is possible to make web apps much more feature-rich. That all depends on [whether] companies like Google and Microsoft dedicate resources to make those web applications as good as locally installed applications."
E-mail Davis D. Janowski at djanowski@investmentnews.com.
