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Wednesday, February 13, 2008

Thoughts on the Bitter Pill

Posted by Louis Lovas

In reading a recent CEP blog, a Bitter Pill To Swallow by Tim Bass and Opher's commentary it reminded me of a few thoughts I've had recently on the role of CEP in the modern trading platform for Capital Markets.

First, let me say that I believe Apama takes a much larger view and includes much more in the CEP stack than many other vendors. Naturally, we’ve turned this into a competitive advantage. This larger perspective encompasses many aspects beyond the core CEP engine. That includes dashboards, connectivity adapters, development and deployment tooling, vertical-focused application starter kits and of course language. That said, I still believe the CEP industry is still quite nascent and only loosely defined. However I think it is gaining clarity – from both an industry view and customer/prospect expectations. What’s the role of CEP in financial services and where does it fit in total software stack of fully deployed trading platforms? A few recent experiences have drawn me to the conclusion that CEP technology is just one of many elements in that infrastructure.

  • AITE Report on High Performance Infrastructure

The AITE report is a review of the infrastructure components that make up a trading platform, this included various sorts of connectivity (market data, order management, messaging), distributed cache and CEP. The report did not articulate the actual trading applications (i.e. strategies) themselves; those are unique to any one customer. The point being, those trading apps are viewed as independent and not defined as part of the trading infrastructure (a rather obvious point frankly). The technology used for strategy implementation is left as “an exercise for the user”.  My interpretation of this… CEP is part of the infrastructure and not necessarily the application. Without question, I clearly understand that the division between infrastructure and application can be quite gray, and with CEP lacking an absolute definition it's not all that surprising. Within Apama we are driven towards providing a total platform for our customers. As such, we undertake the task of providing both the infrastructure and a framework for applications. This framework takes the form of ready-to-use functions, components and starter kits or accelerators as we call them. Ideally, customers only need to inject their own IP. Our platform lends itself it that end – a one-stop-shop if you will. Our future plans are focused on this breadth in the platform because that's the sort of demand we face. While I don't think this necessarily broadens the definition of CEP, it simply means CEP as a technology cannot exist in a vacuum. It needs the standard complement of tooling both within itself and for outside integration to the IT-centric world at large. This is the stuff one comes to expect as maturity overtakes hype.

  • Standardization on EP benchmarking

There have been a few initiatives to define vendor-neutral benchmarks for CEP. Additionally, a few vendors have published benchmark studies, BEA in particular. Efforts to define independent benchmarks will inevitably do more that just define test cases for CEP, they will also shape the definition of what CEP is and does. I would expect any effort to benchmark CEP engines will be somewhat narrowly focused to just the core capability of doing something to or with streaming data. Many of the elements that make CEP truly commercially viable, from tools for development and visualization to deployment, runtime management and high availability will not be part of the equation. Practically speaking it stands to reason this is the case. It's impossible to create a neutral benchmark for these things. However, it would be ideal for benchmarks to include real-world usage. Some finance examples would be a Pricing engine, Index Arbitrage, Spread trading, Crossing and VWAP trading. I would expect not all CEP products to be fit-for-purpose to meet the needs of these examples. Furthermore, I'm not convinced one could say these were all CEP use cases either.

  • Discussions with prospects

Over the course of the past year I've met with numerous clients. There are a couple of observations I've made with respect to the growing understanding of CEP technology. First I've noticed an increasing number of them use the phrase "researching CEP platforms" in conversation on their next-generation trading platform. While this might appear innocuous, it represents a shift in thinking. CEP is gaining wider awareness and its general applicability to trading. It was not so long ago that the term CEP was not mentioned either by us or the client – it had no apparent meaning to the opportunity at hand. However, times are changing and CEP awareness is growing, unfortunately this does not necessarily mean there is complete clarity on its definition. This lack of definition, I believe has caused (future) adopters of CEP to look at the various vendors' products through different lenses. For example if a particular CEP product is not fit-for-purpose for implementing a Pricing Engine that does not necessarily mean it cannot provide a component of a Pricing Engine, with the remainder (or a significant portion) being implemented in more a traditional manner. In a competitive bid environment, I am convinced clients draw the line-in-the-sand at a different place for different vendors based on their fit-for-purpose. Unfortunately, this causes CEP products to be judged on unequal footing.

Another validation that shows CEP is gaining awareness but still immature is a recent report from the Forrester group on CEP Adoption. To paraphrase, CEP adoption is being driven by and used within the business side of organizations sans IT. Business tends to be on the bleeding edge of technology simply because they're looking for any nugget that can give them a competitive edge. IT on the other hand, has to face the challenging realities of daily care and feeding of software. Their priorities are in stability and manageability - attributes of mature technologies.

As the CEP hype curve starts to level off, it will follow the same path as all other hyped technology to eventual commoditization. Its usage will coalesce around a few paradigms and an industry definition will start to solidify. The items I mention above indicate that this is happening already.


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