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Wall Street Buying Fewer Servers, Or More?

The growth of high-performance computing (HPC) on Wall Street is accelerating hardware refresh cycles, an analyst reports.

Is Wall Street likely to buy fewer servers in coming months? Or more? The conventional wisdom holds that the huge losses at financial firms from subprime mortgages and the credit crunch will inevitably lead to cuts in IT budgets. An alternate view is suggested by new data from The Tabb Group, which reports that high-performance computing (HPC) is growing in importance on Wall Street.

Investment banks say HPC applications, which accounted for 19 percent of server use in 2006, now represent 63 percent of their servers. The trend is being driven by advanced trading strategies, which require massive computing power and low-latency connections.

Wall Street & Technology summarized the findings by Tabb Group partner Bob Iati, noting that 45 percent of sell-side investment banks are changing their server infrastructure to meet increased volume needs or to facilitate advanced trading.

As a result of all these trends, the firms are throwing out the old rule of thumb that says servers should be refreshed every three years -- they're replacing about two-thirds of their servers every two years. "Going forward, the anticipation is that this will decrease; by 2010 it could be down to an overall two-year refresh rate," Iati says.

The Tabb data was based on interviews with IT managers at 12 of Wall Street's largest financial firms.