The market is awash with cloud and managed hosting service providers, from industry heavyweights like Amazon AWS and Rackspace to smaller, highly reputable vendors such as Digital Edge. And it’s growing rapidly. According to Future Market Insights, the global hosting infrastructure market is expected to reach $11 billion this year, an increase of $8 billion since 2018.
The broad range of providers and the array of services offered is good news for family offices and asset management firms whose unique needs don’t often work with a one-size-fits-all approach. Finding the right solution can improve efficiency, lower costs, reduce risk and enable your firm to compete more effectively. But with so many providers and the various deployment options, where do you begin?
Understanding the Basics
Terminology can get confusing, so before delving into pros and cons or addressing specific needs, a few definitions are in order.
Dedicated hosting – As the name implies, dedicated hosting refers to servers and related hardware, storage, networking, etc. that are exclusively for use by your firm and not shared with anyone else. The servers may be housed on your premises or off-site in a data center. Regardless of where everything is located, you are responsible for set up, maintenance and day-to-day management of the IT and applications – the hosting provider only supplies power and cooling.
Managed hosting – In this arrangement, the IT systems (servers, storage, networking, etc.) are leased from a hosting provider, housed offsite, managed on your firm’s behalf and accessed through the internet. Like dedicated hosting, the servers are for use only by your firm. However, with managed hosting, servers, storage, networking hardware, system maintenance and technical support are provided through a contractual arrangement with the managed service provider.
Cloud computing – With cloud computing, resources, infrastructure and services are provided through a ‘virtual environment’ and accessed through the internet. Although public cloud is based on multi-tenancy, each customer has their own virtual server instance(s), which functions as a dedicated server but without the storage or processing constraints of dedicated or managed hosting. Private cloud also offers a virtual environment, but dedicated to a single customer. Hybrid cloud is a combination with applications housed in both the public and private cloud based on security, data restrictions and other factors.
Matching Services to Needs
Does your firm handle highly sensitive data? Do you rely on mission-critical applications for day-to-day processes? Does your IT department have the expertise and bandwidth to manage servers, infrastructure and software? These are some of the critical questions that will help determine which solutions are – or aren’t – a viable option.
Let’s take a closer look at four key considerations that will drive your technology decision: resources, cost, agility and security.
The availability and expertise of in-house resources is the most essential factor in determining whether dedicated or managed hosting is a better fit. For small firms with limited in-house IT resources, dedicated hosting is a nonstarter. Managed hosting, on the other hand, transfers the responsibility of ongoing operational support to the service provider, so it does not fall on your firm’s in-house staff.
For larger firms with full-service IT departments and technical support, dedicated hosting provides greater control over hardware and software.
Even if the IT resources are available to support dedicated hosting, it still may not be the best option. Dedicated hosting is expensive — it requires a large up-front capital expenditure for hardware in addition to the ongoing costs for maintenance of infrastructure, software, upgrades and support staff.
Managed hosting and cloud services don’t have the high ‘sunk costs’ of capital investment that are associated with dedicated hosting, but they do have other expenses such as hosting and maintenance fees charged by the service provider. However, these fees are typically based on a pay-as-you-go model so they allow for greater budget flexibility in aligning IT system needs to business growth.
Factor in Agility
Scalability is a significant concern for asset managers who have experienced good years and bad years and have needed to adapt quickly to respond to the gyrations of the market. Managed hosting provides some flexibility to scale up or scale down according to needs, but not to the same extent as the cloud, where a virtual environment offers rapid provisioning for unlimited agility.
The cloud ensures that as technology changes, there’s no risk of being saddled with a legacy environment since there is no infrastructure to maintain. This flexibility allows firms to compete more effectively and take advantage of disruptive technologies with up-to-date hardware and software.
Don’t Forget Security
While the public cloud offers potentially limitless scalability, the trade-off is that data is less secure than in a private cloud. Firewalls between customers may be breached and public clouds are often a target for hackers because of their size and the number of companies they serve.
Keeping mission-critical applications and sensitive data in the private cloud or a managed hosting environment provides more control since there are no shared servers.
In addition to security, using the public cloud puts additional responsibility on both your firm and the cloud provider to ensure compliance with GDPR and other jurisdictional regulations that impose strict requirements on managing data. Gartner recommends that firms consider using a hybrid approach “as a way to take advantage of public cloud while protecting sensitive data on private cloud or traditional infrastructure.”
A hosted solution can offer many benefits to businesses, including reduced IT costs, improved scalability, and increased flexibility.
Making the Leap - You Get What You Pay For
Once you assess in-house competencies, budget and goals to identify a hosting strategy, selecting a service provider is the next step. Not all hosting providers are created equal, so be sure to conduct due diligence and read the “fine print.” Consider certifications, response time, redundancy, back-up, security protocols and reputation of the vendor.
Whatever the size of your firm and whatever your needs, honing in on the right solution will improve efficiency, lower costs, reduce risk and enable you to compete more effectively.