Why Family Offices Are Going to the Cloud

Why Family Offices Are Going to the Cloud About Eze Castle Integration Eze Castle Integration is the leading provider of IT solutions and private cloud services to more than 650 alternative investment firms worldwide, including hedge funds, family office firms, private equity firms and other alternative investment funds. The company s products and services include Private Cloud Services, Technology Consulting, Outsourced IT Support, Project & Technology Management, Professional Services, Telecommunications, Business Continuity Planning and Disaster Recovery, Archiving, Storage, Colocation and Internet Service. Eze Castle Integration is headquartered in Boston and has offices in Chicago, Dallas, Hong Kong, London, Los Angeles, Minneapolis, New York, San Francisco, Singapore and Stamford. Visit us at www.eci.com.

TABLE OF CONTENTS It s More Than Managing Money.3 The Business Case for the Cloud: Why Family Offices are Making the Move.....3 All Clouds Are Not Created Equal.....5 Private Cloud: The Advantages......5 The Right Time: When Family Offices Are Making the Move....8 Conclusion 8 About Eze Castle Integration....9 2 2015 Eze Castle Integration

IT S MORE THAN MANAGING MONEY There s more competition in financial services than ever before. Family office firms of every size are competing to deliver broader ranges of increasingly exotic instruments, specialized funds, and highperformance investments that deliver competitive returns to clients whose demands and expectations continue to climb. But when it comes to performance and success in the family office world, there s more to evaluate than just the hard numbers. Returns alone aren t enough. Today, savvy firms know they need to deliver more. There s an increased focus on how operational risk is managed and how firms respond to greater demands for transparency. That means it s more important than ever for family offices to deploy and maintain robust, scalable, and secure technology infrastructures. According to a 2013 Family Office Exchange Benchmarking Study found that: Nearly half of firms (46%) were using cloud technology; Hurricane Sandy prompted many firms to evaluate or implement DR and BCP plans; 21% of family offices had dedicated IT staffs; and Firms typically spent about 5% of budgets on technology. These last two points align well with the shift we re seeing across the industry as family offices are now looking to invest more in technology and move to the cloud, where they can achieve cost-savings and avoid having to employ an IT staff to manage infrastructure on-site. Let s take a closer look at some of these inherent cloud benefits. THE BUSINESS CASE FOR THE CLOUD: WHY FAMILY OFFICES ARE MAKING THE MOVE Traditionally, investment management firms such as family office operations have allocated significant capital budgets to build out their own Communication (Comm.) Rooms, which can take months to provision and bring online. There are servers to buy and install, software to license and configure, and voice/networks to 3 2015 Eze Castle Integration

deploy. And these infrastructures also require firms to recruit and hire expensive IT talent to manage and operate something family offices often can t afford or don t want to allocate to. Increasingly, however, that model no longer makes good business sense for some firms. Today, cloud architectures are emerging as the dominant choice for computing infrastructures at family offices of all sizes. With cloud computing, firms procure from a third party a scalable supply of computing, storage, and networking resources on a near-immediate basis without the upfront capital investments, delays, staffing requirements, or maintenance headaches. They can provision new servers in a few hours, scale up to meet short-term needs, and scale down when needs dictate. Best of all, that infrastructure is managed and protected 24x7 by dedicated professionals who focus solely on operating these services on a firm s behalf. Not surprisingly, many firms including those with well-established in-house infrastructures are making the move to the cloud for a variety of compelling reasons: 1. Predictable and Favorable Economics Cloud computing eliminates upfront capital investments and frees the family office or wealth management firm to allocate its capital to other areas more directly relevant to the business mission. What s more, the conversion from capital expenditures to monthly operational costs creates greater predictability and smoother, linear cash flows. 2. Advanced Risk Management We can t be too careful these days with cyber-attacks and disaster incidents threatening to disrupt operations and leave firms vulnerable. With the cloud, firms can take advantage of inherent disaster recovery since infrastructure is housed off-site and advanced security features and controls that oftentimes firms cannot afford to implement and maintain on their own. Reputable cloud service providers can offer family offices layers of security and conduct thorough due diligence on the technology and software providers they leverage to ensure clients receive top-notch risk management capabilities. 3. World-Class Capabilities In the vast majority of cases, an outsourced cloud provider can deliver an infrastructure that is superior to what the individual firm could create and maintain on its own. By leveraging a cloud provider, family office firms can access institutional-grade IT on par with those used by much larger investment firms without having to undertake the responsibilities of management and maintenance. It s a win-win situation, allowing firms to focus on wealth management and leaving the technology upgrades, maintenance schedules and infrastructure support to the experts. 4 2015 Eze Castle Integration

ALL CLOUD ARE NOT CREATED EQUAL While many of these benefits apply to cloud platforms across the board, it s important to keep in mind that not all clouds are created equal, and firms have multiple options to consider. A public cloud, such as the likes of Amazon Web Services, Microsoft Azure or even Google, can offer firms an extremely low-cost solution. Public clouds are often ideal for testing and development environments, however are not generally suited for financial services firms who require more robust and secure technology. Resource pools are often shared on public clouds, and there are limited options for custom configurations and security protections. A private cloud provider, on the contrary, may specialize in offering IT services to the financial industry, giving firms enterprise-class features but with the added bonus of high-touch service and support that s tailored for that specific industry. Private cloud platforms can support custom applications, where often public clouds cannot. The third option is a hybrid solution, which combines the benefits of both the public and the private cloud. With a hybrid cloud, firms can leverage third-party providers in either a full or partial manner, increasing the flexibility of their computing if there are unexpected surges in workload, for example. PRIVATE CLOUD: THE ADVANTAGES Once you understand the options available to your firm on the cloud front, it s time to start realizing the true advantages. Let s talk specifically about the private cloud as its truly the best suited to meet the unique needs of financial services firms, including family offices. Many firms who manage their own IT leverage data center facilities to house their infrastructure if they don t want to build an on-site server room. Similarly, a private cloud services provider leverages space at data centers to store equipment, but those third-party providers often have access to additional benefits many firms can t normally take advantage of on their own. For example: A premier, enterprise-grade IT platform that comes at a fraction of the cost of an on-site IT environment; Layers of security, redundancy and data protection to mitigate risk and protect assets; The latest and greatest technology features and functionalities to keep firms current with emerging technology; and 5 2015 Eze Castle Integration

Professional management, monitoring and support so firms can focus on managing wealth and not on managing IT. The following sections will examine these advantages in closer detail. INFRASTRUCTURE For any firm leveraging a cloud platform, the first factor to think through and understand is the underlying infrastructure. This is the foundation on which your firm will operate on a daily basis, so it s important to understand what features are in place even if you aren t technology savvy. You should have an understanding of what technology vendors and platforms your cloud provider is using to lay that foundation everything from switches, firewalls and routers to what sits on the application level to the physical equipment located in the data center. If you can, we always encourage firms to take a tour of the provider s data center so you can see with your own eyes where your infrastructure lives and what measures and controls and in place to protect it. DATA SECURITY Cybersecurity breaches and attacks have been dominating headlines for years now and we ve seen businesses across healthcare, retail and financial services fall victim to incidents where either client information was hacked or in some cases, money was acquired. And while family offices might not seem like an obvious target for a hacker, there s really no telling who could become a cyber-victim in the future. And even if family offices don t need to comply with regulations such as those put forth by the SEC or other organizations, they do need to meet the demands and expectations of their clients. The high-net-worth individuals and families whose wealth you re managing expect a certain level of data security with regard to their assets. We recommend focusing on three aspects of cloud and data security: physical, virtual and policies/procedures. From a physical security perspective, if you re leveraging a cloud provider, you want to understand what security controls are in place at the data center where the infrastructure resides. First off, do you 6 2015 Eze Castle Integration

know where the data center is located? If you re using a public cloud, sometimes this information is not readily available. But it s critical to understand where your data physically resides. As far as the facility is concerned, does it have secured access doors and elevator banks? Is multi-factor authentication required to access locked cages and cabinets? Is there 24x7 monitoring and manned security? Security on the infrastructure or virtual level is equally as critical. Your cloud provider should be using N+1 configurations to ensure there are multiple layers in place to protect your data. And of course, continuous monitoring of the cloud as well as penetration testing is really becoming a must-have feature for all financial services firms with cyber threats becoming more prevalent. Of course, you also need to work with your cloud provider to ensure there are proper policies and procedures in place to back up all of these infrastructure controls. An Access Control Policy, for example, would indicate who at the firm can access certain data and sensitive information. You may not want to grant full access to every employee or certain high-level clients may only want top-level employees to access their accounts. You should also implement and have your service provider verify an incident response policy. In the event a security incident does occur, it s imperative to have an understanding of what steps to take to address and resolve the problem and get back to resuming normal operations as quickly as possible. DATA PROTECTION, DISASTER RECOVERY Protecting your clients assets goes beyond these security controls and policies. As we saw with the FOX family office study earlier, Hurricane Sandy was a situation that really prompted firms to implement and shore up disaster recovery systems and policies. Data protection, as a whole, is a necessity, frankly for any financial services firm. Let s start with backup and recovery. You should understand if your firm is required to archive or retain any communications with clients or other third parties. This could include email, instant messaging applications or even social media communications. Clients may have an expectation that you ll store certain communications about data for a certain period of time, so make sure you re clear on what s expected of your firm on this front. Then there s disaster recovery. With Hurricane Sandy, many businesses were caught off guard and didn t have procedures in place to fail over operations, and unfortunately many suffered damage to their infrastructures and lost data. Ensuring high availability of data with a secure DR system in place is critical. 7 2015 Eze Castle Integration

Furthermore, firms should work with their cloud providers to test DR periodically and ensure all applications and data will work seamlessly in the event of a disaster. THE RIGHT TIME: WHEN FAMILY OFFICES ARE MAKING THE MOVE Assuming family office firms are ready to take advantage of these cloud benefits, the next decision is when to make the move. Opportunities and timing will vary, but generally speaking, the following three scenarios represent ideal inflection points for moving to the cloud: 1. Office Relocations This is an ideal time to switch to the cloud. Many companies are understandably reluctant to take on the expense of moving a massive, expensive, and often outdated infrastructure to a new location particularly if the company expects to phase out certain portions or components in the following 24-36 months. In such cases, migrating to the cloud before relocating offices can be a smart move. 2. New Applications Larger firms with larger application portfolios often find that a transitional strategy is best. Abrupt migrations to the cloud can be disruptive. In those instances, financial firms find that new applications can start in the cloud no subsequent migration needed. And those deployments are faster. 3. Technology Refresh Similarly, many firms find that when the time comes to update infrastructure or upgrade applications, that inflection point represents an excellent opportunity to perform a cost-benefit analysis. In most cases, firms find that initiating a cloud migration for that particular component of the IT portfolio is the best choice. And since either choice introduces change, there s no added burden to making that transition. CONCLUSION For family offices of every size and stripe, the trend is clear: operations are headed to the cloud. With more scrutiny on the security and reliability of their infrastructures, firms realize that a world-class cloud infrastructure provides a rapid, low-risk, low-capital solution that enables them to focus on what matters most. With cloud computing, they manage investments, not data centers, enabling them to compete more effectively and improve operational and financial performance. For more information, visit www.eci.com. 8 2015 Eze Castle Integration

ABOUT EZE CASTLE INTEGRATION Eze Castle Integration is the leading provider of IT solutions and private cloud services to more than 650 alternative investment firms worldwide, including more than 100 firms with $1 billion or more in assets under management. We provide one global financial cloud platform that is complimented by exceptional service and operational excellence. Our Eze Private Cloud is built to deliver the high performance, applications and exceptional user experience demanded by the hedge fund and investment industry. Complete Managed IT Software as a Service Eze Managed Suite is a fully managed IT solution that provides flexibility and simplified IT operations. The hosted IT solution combines a robust, highly secure private infrastructure via the Eze Private Cloud with key business applications and professional IT management. Application Hosting Infrastructure as a Service Eze Managed Infrastructure provides clients easy access to an enterprise-grade private environment with the latest hardware and software without capital expenditures, expensive upgrades or ongoing maintenance and monitoring. It is ideal for hosting applications used by investment management firms worldwide. Disaster Recovery as a Service Eze Managed Data Availability delivers a full range of business resiliency services including Disaster Recovery, Online Backup and Message Archiving. Via the Eze Private Cloud, your critical data and applications will be available and protected 24x7x365. To learn more about Eze Castle Integration, contact us at 800-752-1382 or visit www.eci.com. 9 2015 Eze Castle Integration