Building the right information technology platform is a major ingredient in the success of any bank. Jim Banks asked Mikael Munck, CIO of cutting-edge financial IT provider Saxo Bank, about what kind of data centre infrastructure will be needed to support banks in the future and what technological challenges lie ahead.
From trading technology to data centres, IT is fundamental to the operation of every financial institution, but some are so dependent on it that it raises questions over whether their main function is to be a bank or an IT provider. We spoke to one online bank, which is now moving into the area of physical branches, about the future importance of IT development and what is required of data centres to support tomorrow's banking technology.
"IT is vital to the bank," explains Mikael Munck, chief information officer at Saxo Bank. "We are different from most banks because we are an online bank and we have an unusual commitment to technology, even for companies in our business area.
"While we have always focused on online delivery, around 2006 we realised that it also helped to have a physical global footprint, and our real advantage today is the fact that we combine cutting-edge technology with human interaction through our 21 offices."
Headquartered in Copenhagen, Saxo Bank is an online trading and investment specialist with a global client base. It has three fully integrated trading platforms - the browser-based SaxoWebTrader, the downloadable SaxoTrader, and the smartphone and tablet-friendly SaxoMobileTrader. As well as being an online bank, it provides white-label trading solutions to over 100 other banks. Munck heads a team of over 700 people in the group's IT team.
"Are we a bank or an IT company? We are somewhere in between the two. IT is critical for us, even more so than for a traditional bank, as we run all our client flows via the internet. Our white-label solution is the most sophisticated one available to the retail trader and is a popular choice with banks that don't want to build their own in-house solution," he remarks.
Developing cutting-edge trading technology for itself and other banks that buy its solutions is vital to Saxo Bank. It strives to ensure that its trading solutions cover the widest range of instruments - forex, exchange traded funds (ETFs), stocks, futures and much more. It already covers over 160 forex crosses and 23,000 different instruments, and supports over 29 stock exchanges and 19 future exchanges around the world.
Underlying these trading solutions - and the bank's own online banking model - are Saxo Bank's cutting-edge data centres, and their ongoing development of the bank's fundamental business proposition.
Designing tomorrow's data centres
Currently, Saxo Bank has two data centres in outer Copenhagen, but both are being updated. One is moving to a modernised facility with more space and the other is being replaced by a brand new facility.
"Data centres are crucial to us. We must have the latest technology to support our business. It is a big investment, but every once in a while you need to make that kind of investment in any online business," says Munck. The renewal of its data centre infrastructure covers everything from the routers and servers to an upgrade of the networks that carry data. The aim is to ensure the right level of redundancy and move to a more advanced shared load environment.
Until now, Saxo Bank has used an active/active and active/passive model for different systems across its data centres. This is a network of independent processing nodes - each with a common replicated database - some of which are in active mode and some in passive.
This approach offers flexibility by balancing loads across all available processing capacity. Any transaction can be routed within the application network to any node, which can read or update any set of data in the database. At least two copies of the application database are running at any given time; they are constantly kept synchronised in the active/active part and can be reloaded in the active / passive part.
In contrast, the shared load model manages and optimises data flows across multiple servers to achieve high availability, lower response times and maximum throughput. "The shared load model is more demanding as it requires continuously running two environments fully up to par in order to run the business. We have to have two fully live environments, but the benefit is that we can switch instantly and automatically between them," says Munck.
The new model also provides a useful solution to the challenge of business continuity and disaster recovery. This is a deliberate choice by Saxo Bank, which has taken the opportunity to look at all aspects of security as it upgrades its data centres, in recognition of the dangers that could be posed to its business by data loss or hardware damage.
"The new data centre will have the highest level of physical security. Building a new data centre is also a good opportunity to look at fault tolerance on the lines into the data centres, including the back-up lines," says Munck.
Controlling cost and boosting performance
A key driver behind any data centre design project these days is the issue of energy consumption. Here, Saxo Bank has again taken the opportunity to use its data centre upgrade process to look at ways to become more energy-efficient. "The whole move from individual servers to virtualisation is a deliberate effort to reduce energy consumption," says Munck. "We are now up to around 40% virtualisation. One of the largest costs of a data centre is energy, so in the beauty contest between potential providers, that was an important factor."
In the future, energy-efficiency and cost control are likely to remain just as key, but for Munck there are other challenges ahead. "We have a role in developing Saxo Privatbank's IT, which means extending our services into more traditional IT support areas. Developing a branch network also means dealing with the issue of local data centres, which are not under my control, so my role is changing.
"But our global expansion and the development of Privatbank are less of a challenge than addressing the two key issues of latency in forex markets, to which all banks are exposed, and the growing amount of regulation in the industry," he says. "These things are a challenge for everyone, which is why, over the last few years, we have expanded our IT team from 170 people to over 700.
"That is the kind of volume needed to support the business in an environment where technology is so important."
