In the previous post of our twelve-part blog series on the Top 10 Technology Trends for advisors and their partners, we discussed how those advisory firms who embrace the workflow trend and systematize their business will create more business value than firms that fail to do so. The sixth trend we will discuss in this post is cloud-based computing.
The ‘cloud’ is another name for remote servers operated by a third party. In the cloud, digital storage space and computing power becomes virtually unlimited because you’re reliant neither upon the physical space where you can house servers nor upon your budget for purchasing and maintaining computer hardware. In the cloud, you’re instead renting server space and, with high-speed wireless Internet access, anything stored in the cloud can be accessed just about anywhere, at any time.
The greatest trend and perhaps the greatest cost savings for advisors related to the cloud is that software no longer needs to reside on the user’s servers or computers. The software program itself actually resides in and is accessible from a cloud-based server. cloud-based software means that firms don’t have to purchase and maintain their own often high-priced server rooms for storage, nor do they have to maintain multiple software licenses. Software can be purchased on a per-user license, and in effect, only one version of the software needs to be maintained on the cloud as all users will access the same core program. The benefit of this is that new software versions, software bug fixes, etc., are done at the cloud level, so firms no longer have to worry about maintaining and updating software at the individual computer level.
The cloud computing trend also brings an entirely new level of security, back-up and compliance issues. As you look to take advantage of cloud computing, make sure that you speak with others in the financial services industry and educate yourself on best practices related to security and compliance. By working with the right cloud-based firm, your security can actually improve as again, compliance and security can be managed at the cloud level. But not every cloud computing firm that promises high security can deliver, so make sure you check with your custodian and other advisors on who they might recommend.
The biggest benefit of cloud-based computing is it enables advisors to focus their energies on running their businesses and providing advice to their clients versus worrying about a server crashing or a hard drive failing. The best analogy is the power grid. Years ago, businesses had their own generators to create power and someone at the company was responsible for ensuring that there was enough power to keep the lights on. Over time, public utilities became more reliable, businesses plugged into the power grid, and for companies, worries about power disappeared.
Today, while large businesses may still own their own generators—mostly as a part of a backup plan—99.9% of companies rely on utilities for power. We predict that advisors and financial institutions will increasingly outsource the maintenance and support of hardware and software to the cloud. There are still some issues—including security and disaster recovery—that make outsourcing to the cloud unfeasible for certain applications and businesses, yet we see a day when the majority of those will disappear as well.
The bottom line: the more firms can outsource hosting and software maintenance to the cloud, the more time the executives at those firms will have to focus on the core business of advising clients and serving advisors.
View all the articles in this series at the Top Tech Trends home page.