Enough is never enough. At least not for Wall Street. That applies to almost any element of the business – profits, market share, customers – you name it. There is also an insatiable appetite for computational power and that’s where high-performance computing (HPC) comes in. Financial Insights’ parent company, IDC, uses the term high-performance computing to encompass the entire market for servers used by scientists, engineers, analysts and others to run computationally intensive modeling and simulation applications. Technical computers range from small servers costing less than $5,000 to large-capability machines valued at tens or hundreds of millions of dollars each. Wall Street IT licks its chops when it sees the chance to significantly increase complexity and reduce latency, and HPC is fertile ground for such innovation.
The Expanding Uses for High-Performance Computing
How will financial institutions capitalize on HPC capabilities? We can draw some conclusions by looking at what other industries have done. HPC is used in government, academia and for a growing variety of applications in business and industry. Established uses include advanced scientific and engineering research; aerospace and automotive design; oil/gas discovery and recovery; and weather forecasting and climate modeling. In each of these areas, new and/or higher-resolution applications continually boost the demand for computing power and storage.
Does this sound familiar?
Still, increased capability for its own sake is not compelling in business. There has to be a business case. The link between HPC and business competitiveness dates back at least to the 1970s, when the automotive industry began using supercomputers to shorten design cycles and improve vehicle safety. Now, automakers want more powerful supercomputers for high-resolution crash simulations that can model soft tissue damage and to design vehicles that can go 150,000 miles on average without repair. Computational ability is directly tied to safety and reliability, both major points of differentiation and competitive position.
Financial institutions are on a parallel track in three ways.
First, safety means compliance and risk mitigation. There is an inexorable trend towards tying in all manner of data to serve many masters, be they regulators, capital adequacy models or risk management. That’s a big appetite for computational power.
Second, reliability means maintaining the edge on profits. Some of the most brilliant quantitative talents on Wall Street have met the computational bottleneck with disgust. HPC opens up tremendous capability to model investment strategies. Equally anxious for a power boost are those focused on pricing optimization engines and efficient capital allocation.
Third, Wall Street’s HPC future is not in the back office. In financial services, new applications will emerge for HPC that will go beyond applications historically centered on the pricing of complex financial instruments or complex financial analytics. HPC will power growth.
The High-Performance Computing Market: Rapid Growth
The market for HPC servers or technical servers has grown faster than all other server markets over the last five years. By 2005, the HPC server market was the fastest-growing IT segment tracked by IDC – faster than the markets for flat-panel televisions or computer gaming – and it approached 20% of the overall server market in revenue. In 2006, sales of HPC servers crossed the $10 billion threshold and continued the double-digit yearly growth trend. IDC projects that the technical server market will exceed $14 billion in revenue by 2010.
Wall Street will be a major participant in this growth. With the globalization of markets, the exponential growth in investment and risk model complexity and the extension of data analysis to data sources in the darkest corners of the enterprise, increasing computational power is essential.
Bring on the juice.
Julio Gomez joined Financial Insights, an IDC company, in February 2007 as global head of research. Highly respected industry-wide as the founder and CEO of Gomez, Inc., a leader in Internet quality measurement services, he was formerly a trader and in institutional sales at HSBC, Security Pacific and Bank of Boston. Institutional Investor named him one of the “50 Most Influential People” in addition to Time Magazine, which named him one of the “50 Most Influential People Shaping Technology.”