Flexible options for cloud computing migration
When it comes to cloud adoption by financial institutions, it’s no secret that the transition to the cloud has come at a slower rate for financial services than for other industries thanks to rigorous data security policies and stringent regulatory requirements. However, pressures to renew banking’s existing technology and applications because of shrinking margins and the emergence of nimble (and less regulated) non-traditional players have caused a tipping point and more financial institutions now feel incentivized to move to the cloud.
The benefits of cloud computing include new levels of agility, the ability to expand customer access points faster and, of course, the attractive promise of lower Information Technology (IT) costs. In fact, by 2016, poor return on equity will drive more than 60% of banks worldwide to process the majority of their transactions in the cloud, according to Gartner.
As with any new endeavor that poses a perceived risk, fear can inhibit progress. But in the case of financial services, the cloud presents a valuable opportunity to level the playing field and even build a competitive advantage in a sector barraged by an influx of financial technology companies (Fintechs) saddled with fewer regulatory, market, and organizational constraints. The cloud combines the promise of tangible business value with innovations that improve security and facilitate compliance with complex regulatory requirements.
Flexibility the Key
When it comes to cloud, there is no “one size fits all” approach and organizations are looking for services that fit their needs. Cloud computing by nature makes it easier for IT departments and business leaders to deploy applications faster and use the best approach for their business. It eliminates the need for hardware, operating systems and storage found in on-premise IT environments. Flexibility and adaptability are critical.
Some banks, due to the sensitive nature of their data and regulations, have started their journey with private cloud or managed cloud services. These approaches give organizations greater control over the management and security of the infrastructure components of their IT environments, while supporting the need for faster innovation and extremely high availability and performance.
Public clouds, where applications are hosted in the provider’s data center and then available on subscription to the bank, offer a different experience for growth. For example, some institutions are using enterprise resource planning applications delivered through the cloud to improve their back office human resources management. Others are looking at public cloud offerings such as lending and leasing or revenue management and billing in the cloud, enabling them to quickly turn on a loan origination and billing application and scale it as needed.
For other banks, the most attractive offering for many of their infrastructure and application requirements is a hybrid approach, leveraging a combination of on-premises, private cloud, and public cloud platforms. The key to successful hybrid environments is interoperability of information across these various platforms and delivery models.
Firms that begin to embrace the cloud now will be better positioned for business agility as they can leverage a wider range of services, faster than those who remain with their existing systems. While many banks are still in the early stages of considering and charting their move to the cloud, significant innovations such as highly secure core banking systems available on managed cloud services, and cloud-based lending and leasing applications in the auto loan industry or revenue management systems hosted in the cloud, are being introduced to address and ease legacy security, compliance and migration challenges.