Are Remote-Data Centers on the Horizon?

Securities firms and exchanges are now evaluating whether they need to build data centers outside of the tri-state region to backup their existing sites.

In the event of another disaster, would financial-services firms be better prepared if they had a third, remote-data center that supplements their primary and backup sites? Securities firms focused on geographic diversity - making sure that their primary and backup-data centers were spread far enough apart - in the months following Sept. 11. But with the one-year anniversary of the World Trade Center attacks now in our rearview mirror, more and more Wall Street investment banks and brokerage houses are evaluating whether it would make sense to build and maintain a remote-data center outside of the New York/New Jersey/Connecticut region.

Kirk Killian, a senior vice president at Partners National Real Estate Group - a commercial real-estate broker that specializes in data-center procurement for financial-services clients - says that many firms are now seriously considering building data centers based "well outside of the tri-state area." Investment banks and brokerages are weighing this option, he says, in an effort to protect the critical information - such as trade records - they route to data centers on a daily basis. The goal, says Killian, is for firms to maintain the integrity of their data centers in the event of a disaster equal to, or greater than, Sept. 11. "When costs are a secondary issue and ultimate reliability is the goal, really the best strategy is to have two active-data centers in the same area, plus a third data center in a remote area ... . This is a great way to backup your data center, but also very expensive," he says.

Killian also cautions that, in addition to being costly, building a remote-data center poses some data-transfer challenges. Specifically, he says that it's very difficult to mirror data, in real time, between a primary-data center and a remote-data center located outside of the tri-state region, because of the distance that would separate those sites. "The challenge to successfully employing the remote-data center is that it precludes synchronous-data transfer, because of the distance (between it and the primary site), and therefore the remote-data center (would not be) an active, fully synchronized backup facility," Killian explains.

Nonetheless, he says firms that have already developed geographically diverse primary- and backup-data centers are now pondering adding remote sites to provide themselves with full coverage for worst-case disaster scenarios. "The fear is that you're going to have a really catastrophic event that could take out a significant portion of the tri-state area," says Killian.

While declining to specify Partners National Real Estate clients that are investigating the third-site scenario, Killian says that large firms with deep pockets - such as Morgan Stanley - are the most likely candidates to build remote-data centers.

Greg Ferris, Morgan's executive director of global business-continuity planning, says the firm already has "tertiary-data centers" in "several regions" across the globe. But Ferris declines to specify the locations of Morgan's remote-data centers in the United States.

Deutsche Bank, like Morgan, had to scramble to relocate thousands of employees following the WTC attacks. The firm met the needs of many of its displaced staff, including traders, by relocating them to a New Jersey-based backup facility it had built prior to Sept. 11. Roseann McSorley, director and head of the Americas BCP management program at Deutsche, says that the attacks forced the firm to think about worst-case scenarios.

In fact, she says that, post Sept. 11, the firm began planning for disasters "that are much more serious and much longer term." However, McSorley declines to say whether Deutsche has built a remote-data center to supplement its primary and backup sites.

New York-based exchanges, like investment banks and brokerages, have had to re-evaluate their data-center strategies in the wake of Sept. 11. The New York Board of Trade, which had its headquarters at 4 WTC destroyed by the attacks, had a backup-data center - as well as a redundant trading floor - housed in a Long Island City facility. But, since the NYBOT has had to use the Long Island City site as its primary headquarters since last September, the exchange also recently decided to lease space at 39 Broadway to backup its current headquarters. Moreover, after the exchange completes its expected move into the New York Mercantile Exchange's Manhattan facility early next year, the NYBOT plans to have parts of its data housed in three separate locations. "We wanted to triangulate our data, meaning have the primary-trading floor on NYMEX, the backup site in Long Island City and the new Data Center at 39 Broadway. This strategy ensures against any circumstance," says a NYBOT spokesman.

The International Securities exchange, a U.S.-equity options market based in downtown Manhattan, is now considering building a third site that would complement its headquarters and its Jersey City, N.J.-based backup facility. The Jersey City site currently mirrors all of the functions of the ISE's Manhattan facility, but the exchange is considering building a third office to ensure that it has all of its bases covered in the event of another disaster. Rather than have the third site serve as a backup facility to the Jersey City office, the ISE is considering one scenario in which it would evenly distribute each of its functions - including its data-center operation - across three locations.

Regardless of which strategy is employed, says a high-ranking executive at a regional stock exchange, Sept. 11 reinforced the notion that securities firms and exchanges must disaster-proof their data centers. "Disaster recovery is now more of a business problem ... because if you can't open, the truth is that your competitor will trade 99 percent of your products," the source says.