Is “Cloud Banking” set to explode ?

Posted on : 24-11-2011 | By : john.vincent | In : Cloud, Finance

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There are conflicting views on the maturity, positioning and suitability of cloud computing at an enterprise level. Couple that with an increasingly dynamic and evolving marketplace and it is easy to see why it is difficult for organisations to define a roadmap appropriate to their business. What isn’t in doubt is that cloud computing, in whichever form, is changing the landscape of business technology.

However, what is the situation within banking and financial services? I was recently at an event to discuss datacentre innovation with a number of infrastructure managers, architects and consultants in the financial industry. We discussed the fact that demand for IT services outstrips supply and the difficulties that causes internal technology organisations to deal with capacity planning, infrastructure utilisation and optimisation, space and energy requirements. For many, the option of simply building a new datacentre facility to deal with the ebbs and flows of demand is not an option.

We explored techniques and experiences around improving virtualisation and utilisation and also in terms of energy efficiency, with cap-ex and op-ex savings of between 25%-35%. Naturally the conversation moved on to how cloud computing may help in terms of moving power from internally hosted systems to a “best execution” venue.

What was clear was that the starting point for the majority of financial services infrastructure managers was fairly negative in terms of building the higher value cloud models i.e. above Infrastructure as a Service (IaaS) into their technology strategy. Some of the reasons tabled included, “We’re not there yet in terms of maturity”, “Why would we tie ourselves into an external provider?”, “Our data privacy requirements mean that cloud is out for now”, “The regulatory authorities just won’t let us” and so on.

These are, of course, all valid concerns. However, another comment that resonated with me was the anecdote of a business user who, for whatever reason, had decided to turn to Amazon web services for provision of compute power and then simply included it as a line item on their expenses submission.  Not good, but it demonstrates perfectly the tipping point we are at. The question is, how will infrastructure leaders within Financial Services react to a fast-moving market, some of which is driven by user perception and some by the ability to change a service provider?

It is a difficult conundrum. The impact of cloud on the organisation and culture is something we are exploring, but for now let’s look at a few of our predictions for the next two years and why we think that the adoption of cloud with banking and financial services will accelerate.

1) The security issue stops being a blocker:

A key area and one which we believe enterprise security teams will work closely with IT and business users to determine an approach. FS organisations have for years used external providers to manage applications and related data, including Software as a Service, and the same rigour should be applied to allow the appropriate application portfolios to run with external cloud providers (in addition to private).

2) Platform as a Service (PaaS) will see significant growth:

We will see more than just PaaS providers adding multiple distinct environments. In our conversations with technology service providers we believe that many ISV’s will transition their applications to PaaS to provide a more rich set of business services, particularly towards retail banking and corporate systems.

3) The commoditisation of Infrastructure as a Service gathers pace:

The technology discussion will move on from “How do we build and operate the infrastructure?” and start to consider what can be achieved with cloud at a business services level. Some FS technology organisations we speak to are already starting this debate, as the “nuts and bolts” of how to use IaaS are moving into a more commoditised space.

4) Private cloud will continue to expand and provide a “Spring Board” for externalisation:

Having dipped their toe, or perhaps watched others, banks will become more in tune with using private cloud for their IT environments. As budgets continue to be constrained and FS organisations tackle unused or underutilised environments, they will be forced to rethink their IT strategies and shift to adopting scalable cloud infrastructures. In turn, these infrastructures and applications will be considered for transfer to external providers.

5) “Captive” datacentre growth slows and shifts to cloud providers:

This takes us back to the opening discussion on datacentre efficiency. We believe that FS organisations who currently provision their IT environments within ever-expanding datacentres will shift to a “best execution” venue to take advantage of the scalability, on-demand and defined costs of cloud computing. Many companies have already transitioned large portions of their infrastructure to private clouds by introducing virtualised solutions. In parallel with this reduction in internal datacentre footprint, they will need to take advantage of the benefits and economies of scale of public clouds.

From CIO to CEO – Can clouds break glass ceilings?

Posted on : 24-11-2011 | By : richard.gale | In : Cloud

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As technology becomes even more entwined in the fabric of organisations, the opportunities for technology executives will increase. Will a CIO’s potential promotion to CEO be as commonplace as the CFO or COO in the next few years? Historically, with a few technology industry exceptions, it is rare for CIOs of organisations to become CEOs. CEOs either come from the profit-making, client side of the business or the financial area. CIOs are generally seen as managing a silo and being a cost centre rather than being a part of business growth.

How can cloud computing change this? Cloud infrastructure has been hyped to be the answer to almost every technology issue and we think it does have great potential. However, will it change the make-up of a CIO and go as far as to alter the way businesses view them enough to take the chair at the top table?

Well, we think that the IT department in a significant number of organisations will transform radically over the next few years. Let’s take universal banks as an example. Why would a global bank build and operate £200m datacentres? It is nothing to do with their core business and has significant financial, personnel and regulatory complexities. They only do it because they have to. They have vast processing requirements and need to support a huge level of increasing demand. Furthermore, new technologies are always breaking through so the equipment, skills and services constantly have to be upgraded and renewed.

Cloud or Utility computing fundamentally changes this model. If computing is seen as another resource to be switched on and off as required (with an associated usage based charging model) then the basic questions to be answered are:

–          What is the cost of supply compared with others?

–          How reliable, safe and secure is the supply?

–          How flexible and appropriate are the providers?

Obviously it is unlikely that all of the major banks’ IT operations would be placed in the cloud, but it will become the exceptions that are not in the cloud rather than the default.

The traditional IT department would then shrink down to very specific IT functions that were not suited to be run elsewhere. Obviously business-focused change and delivery teams will be the core functions and will keep on growing. Another focus of the ‘IT Department 2016’ will be on management of the demand and supply of technology with vendors. Infrastructure IT will become a relationship management and negotiation function requiring people to change their skillset radically or a different set of resources altogether. The emphasis will be on finding the most appropriate execution venue with external suppliers for an application rather than building the disk or server farm to house it.

So how will this impact the CIO and their future career direction?

–          The move to utility computing will enable CIOs to focus more or real business value and change.

–          CIOs will have to be even more business-orientated, managing external suppliers and their internal customers.

–          CIOs are less likely to be dismissed as ‘techies’ as they will no longer manage large technology-led departments & datacentres.

–          They will be more involved in the strategic future of organisations as the commodity aspects fall away

The modern CIO is already on this road and the future will further embed IT into the backbone of firms.

However, being an essential part of the fabric of an organisation is not enough in itself to get the leading role. Other aspects which are common to CEOs are needed such as the ability to have an external focus, international or overseas experience and proven business experience and qualifications. The business sector also matters – technology & manufacturing organisations currently have many more CIO to CEO promotions than financial services, for instance. But there can be little doubt that the impact of cloud could play a small but important part in ensuring that more CIOs become CEOs in the future.