Next year will see the Cloud Banking World Series take place in London, New York, Hong Kong and Dubai. Given its scale, one could be forgiven for thinking that the banking community worldwide has finally embraced cloud. But instead the series is billed as “the world’s first dedicated education journey”. Does the banking community still need an educational journey? Is anybody still actually asking the question “is the cloud safe”? Let’s start with asking the right questionIn a recent article busting the myth of cloud reluctance in this sector, Elliot Holley made the very valid observation that “A good starting point is to recognise that there is no single definition of cloud”. Instead as we all know cloud can be multiple things. The National Institute of Standards and Technology splits cloud up into private, public, community and hybrid. Obviously different cloud-based environments offer different levels of security. The highly skilled IT people that I speak to every week at our customer organisations know this, and they also know that a more appropriate question to ask is “which is the best cloud-based environment that can offer the required security for the task in hand?”With so many cloud models available, banks will choose which one best meets their needs on the risk/cost matrix. This is often defined by offsetting the level of risk that the individual financial services organisation wants to take against the amount of capex or opex they are prepared to spend. Public cloud services are cheaper but they use public internet to access public cloud services and store data in the public cloud cause data sovereignty issues and are seen as less safe. It is these services that have drawn the most scrutiny and led the world to conclude “banks can’t use cloud”. This is why banks are more likely to opt for private cloud services. It is a case of using the right tool for the job. Sunk costsCloud adoption in the banking community is difficult to quantify. What is clear, however, is that very few institutions have wholesale outsourced their application hosting to a cloud provider. And why would they? Many of the Tier one banks have more data centre space than the average cloud provider so it doesn’t make financial sense to suddenly divest oneself of decades of investment in order to pursue “cloud”. Instead the potential cost savings have to be offset against the investment required and the risk to customer facing services during transition. At some point maintenance and power costs will outweigh the risk and create a tipping point that makes the transition worthwhile.And finally there is the macro economic environment we all still find ourselves in. Banks are under enormous pressure to reduce costs and they need an agile, flexible infrastructure that will allow them to respond to the changing business requirements created by regulation and the global markets. This is driving adoption of cloud services, and it will continue to do so. Outsourcing models need to changeWhile the private cloud is often seen as a more viable solution, this is also often the more expensive option too. The need to cut costs without compromising client service is putting tremendous pressure on businesses, spurring changes in how outsourcing and business servicing are conducted. Once a contract for outsourcing to cloud-based services has been agreed, then details around who owns the data and who can access it should be clear. Before reaching this stage, however, exact data ownership is a worry, with financial firms potentially operating on standard cloudification terms or insisting on their own, more onerous non-standard terms for vendors to meet. The future is a hybrid and it’s flexibleIt should come as no surprise that the future is the adoption of a hybrid model, with applications being moved from one internal or external resource pool to another as demand and availability curves dictate. This will allow financial firms to protect their data in the way that suits their business best and resource to meet an unpredictable regulatory and economic future. It is perhaps time to stop asking “why don’t the banks use cloud” and instead turn the tables on the service provider community and demand the necessary technology and commercial innovation that will offer banking customers maximum flexibility and agility.
This agreement between AFR-IX and Colt will enable the multinational to strengthen its connections to the main European ...Continue Reading →