Is “Cloud Banking” set to explode ?


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.

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

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Comments (2)

[…] the landscape of business technology services (see our other newsletter articles this month around “Cloud Banking Set to Explode” and “From CIO to CEO – Can clouds break glass […]

These are all good points but there is one further one worth adding, TRUST. The whole banking market survives on trust and that means also security. Therefore for point 6 on your list I would add Trust. At the moment the banks do not Trust the cloud providers, and dont want to just share with anybody…so we can expect a catalyst in the market will be needed to create this trust, whether this is a large bank private cloud shared between multiple banks or a clearing house, exchange or similar providing the trusted service remains to be seen.

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