February 2012: Is Hardware Sexy Again?

Let’s be clear here: That which qualifies as “sexy” is subjective, and therefore, relative. The white-coat-clad propeller-heads beavering away in Goldman Sachs’ IT department might, for example, find the latest high-performance chips and field-programmable gate arrays (FPGAs) particularly fetching. I, on the other hand, prefer Kylie Minogue’s Can’t Get You Out of My Head video. (Those familiar with the video will agree that it is amazing what can be achieved with two modest strips of double-sided tape, although when Richard Drew invented the stuff while working for 3M in the early 1970s, it’s unlikely that he had this particular application in mind.)

On a more serious note, it appears as though 2012 might well turn out to be the year that hardware makes its long-overdue return to the limelight. Hardware has always played an important, albeit unheralded, role in the financial services industry. But in recent years, firms have tended to place far greater emphasis on the software side of the business.

This is understandable: The development of electronic trading­—the natural consequence of the growth and maturation of the global financial services industry, precipitated by the establishment of new markets, financial products and execution methods—required firms of all shapes and sizes to roll out predominantly front-office applications in order to join the game. Now, order and execution management systems, trading algorithms, and performance-related software are old hat, and what firms are waking up to is the realization that their hardware, creaking under the massively increased demands from all areas of the business, is their single greatest limitation.

Here’s why: The by-product of the “electronification” of the markets is data … lots of it. So much so that particularly large data sets and voluminous feeds have, inevitably, earned their own moniker: Big Data. When it comes to data management, if a “store and ignore” strategy is employed, the challenge would be a cinch to address: Dump it all onto servers, ensure that it’s mirrored and backed up off-site, and repeat as and when necessary. But that approach simply won’t cut it as firms begin to view their data as a source of value rather than a liability, mining it in ever-shrinking timeframes for exposures and trends, while simultaneously keeping the industry’s regulators at bay. And it is in this business-specific, measurable context that their hardware becomes the enabler.

Now that’s sexy.

It appears as though 2012 might well turn out to be the year that hardware makes its long-overdue return to the limelight.