Executive Summary
Today’s financial services transactions happen not between people, but between servers. Even still, a sophisticated server with dozens of cores and bytes of memory is virtually useless unless it has a network cable running out of the back. The phrase “going online” is as antiquated as the dial-up connection because the assumption is that if you are using a computer, you are networked to the world.

Networking technology, which encompasses switches, routers, cables and network cards, is playing a never-ending game of leapfrog with servers and software applications. Over the last two years we’ve seen networking jump to the front, with application developers fighting to keep up with the deluge of data that is coming from low-latency switches and fiber optics. For low-latency, high-speed traders, this is a good problem to have because speed equals profit.

Despite the additional complexity created by high bandwidth, low latency and global reach requirements, the data center-centric server-to-server approach has actually simplified the underlying network. Less equipment, fewer hops and robust management tools are allowing networks to flatten while they expand. Once programmed, servers and networks can run beautifully if people don’t get in the way.

This trend toward simplification has expanded to several areas of the infrastructure. Switches are handling much of the work that was once left to routers, and the SAN is quickly becoming an integrated part of the LAN. The lines between LAN and WAN are blurring, too, giving way to what TABB Group is calling the redefined Total Area Network. Specialists are certainly needed as each component and function of an infrastructure has its nuances, but those at the top of the game take a holistic view of the network and all that it connects.

The convergence of switches and routers does not mean that the death of the router is imminent. Many firms are still more concerned with scalability than they are with latency, but the efficiency that comes with flat, high-speed connectivity cannot be ignored. We will also see messaging move closer and closer to the hardware level. Some specialist providers have already taken this approach, integrating messaging middleware into a dedicated network appliance.

There’s some rough terrain on the road that leads us to these new low latency, high bandwidth and scalable solutions, but the resulting network paradigms will be much more straightforward than they are today. Using the Total Area Network approach, network equipment and protocols will be more standardized regardless of their function, and moving data between computers will be seamless despite physical location or the underlying data type. This pie-in-the-sky infrastructure is still being tested in labs (and its real-world implementation will be difficult due to existing legacy technology), but those who have the money and infrastructure will see serious efficiencies that will guarantee the ROI.

The TABB Group Vision Note Data Center Networking: Redefining the Total Area Network is based on conversations with trading firms, network equipment providers, telecommunications firms and high speed trading solution providers.  The study provides a detailed description of how financial services firms utilize cutting edge data center networking equipment and paradigms.  Discussions center on tradeoffs between low latency and high scalability, the move to 10GE and beyond as well as kernel bypass and other approaches to removing latency from the network stack.  The study also provides estimates for infrastructure spending by financial services firms.