The landscape for technological transformation is experiencing another major paradigm shift, and the “cloud” is the latest buzzword.
Put simply, cloud computing is computing done online. In the past, users would run applications from software downloaded on a physical computer or server in their building, whereas cloud computing allows them to access apps through the internet.
Many global customer-facing brands have successfully migrated their product range to the cloud in recent years. Noteworthy examples include Microsoft and Adobe, whose flagship cloud-based suites Office 365 and Creative Cloud have been widely successful.
There are several tangible business benefits to implementing cloud offerings, including flexibility, increased collaboration, and enhanced analytics. Despite this, uptake in the investment research space has been slow amongst its major players. CFOs of global investment banks who dominate the investment research space are generally wary of cloud migration because it demands a considerable shift away from traditional computing methods, roles and business processes, which can be time-consuming and expensive to execute.
In this piece, we consider the benefits of cloud-based research for investors and ask whether the future of investment research lays in the cloud.
The Potential Advantages of The Cloud for Investment Research
Increased Collaboration – When analysts can access, edit and share documents anytime, from anywhere, they’re able to do more together. Cloud-based workflow and file sharing help analysts share insight in real time and gives them full visibility of their collaborations.
Work From Anywhere – With cloud computing, if you’ve got an internet connection, you can be at work. And with most premium cloud services offering mobile apps, analysts are not restricted by which device they’ve got to hand.
Remote working allows analysts to access intelligence from the world’s premier analysts, academics, data scientists and strategists, regardless of where they live.
Streamlined Document Control – When a firm makes the move to cloud computing, all files are stored centrally. Greater visibility means improved collaboration, which ultimately means higher quality insight and a healthier bottom line.
Investment research providers that are still relying on the old way are missing opportunities for analysts to collaborate easily across different time zones and regions, making it harder to create groundbreaking research.
In a recently published report by EY, the global consultancy found that “CFOs who truly understand cloud technology, as well as the associated challenges and risks, are better placed to manage the impact of cloud computing on the finance function and potentially gain a competitive advantage over less informed competitors.”
The Cloud: The Most Viable Long-Term Strategy?
An important consideration for CFOs ought to be the viability of their product range over the long-term.
Cloud-based investment research platforms that provide valuable insight in real time will appeal to millennial buyers, the first true generation of “digital natives.” Born between 1980 and 2000, millennials are about to move into their prime spending years both personally and professionally. Millennials are one of the largest generations in history, even larger than the Baby Boomer generation in the United States.
In a recently published article, Goldman Sachs wrote that: “millennials are poised to reshape the economy; their unique experiences will change the ways we buy and sell, forcing companies to examine how they do business for decades to come.”
The considerable effect that millennials’ affinity for technology has had on the retail space has been well documented, but it is becoming apparent that it will reshape the B2B space as well.
In a report written by Think with Google, the company found that millennials are increasingly holding B2B businesses to the same standards as consumer brands. They expect B2B brands to offer a seamless user experience across all channels and this is influencing their purchasing decisions. This trend is backed up by the findings of the report, which found that when researching vendors, the first priority for millennials is the ease of doing business. The second priority is the vendor’s ease of access to relevant data and statistics.
Investment research providers that continue to use the outdated model of publishing and distributing investment insight as disparate PDFs via email are likely to struggle satisfying millennial buyers with growing purchasing power in the coming years. With product information and price comparisons available at their fingertips, millennials are turning to firms that offer maximum convenience and value, at the lowest cost.
The Global Impact of Research Unbundling
This trend is likely to be compounded by the growing number of countries that have decided to “unbundle” investment research. In Europe, the revised Markets in Financial Instruments Directive (MIFIDII), which is planned to take effect in January 2018 will require asset managers to separate research payments from execution costs. If the firm wishes for a client to pay for research, fund managers will be expected to report on the individual research providers paid from the account, the amount they receive over a given time period, and the services they provide.
With their purchasing decisions placed under greater scrutiny, asset managers will be incentivized to “shop” around for a better deal. The firms that are likely to reap the benefits of this new regulatory landscape are those who deliver meaningful investment insight in real time at an affordable rate.
Investment banks who continue to charge a premium for research to sustain bureaucratic operational processes and overstaffed research teams will need to rethink their existing processes to remain competitive.
