Whenever we hear laments about banking’s supposedly slow embrace of the cloud, we beg to differ. While a recent poll found that 52% of banks avoid cloud entirely, largely because of security concerns, you can also say that 48% of banks do make use of cloud computing. That consists of 22% who utilize the cloud “a lot” – because of the lower cost and greater flexibility – and 26% who use it “a little,” only for non-mission-critical apps such as risk modeling. Of course, these numbers may be understated; thousands of community banks and credit unions are running their core banking platform and/or ancillary services on SaaS platforms today.
Moreover, if you review the cloud journey of many other key sectors – retail, energy, transportation, government, healthcare – you find similar caution. Healthcare, for example, is cautious because of patient privacy concerns, energy because of geopolitical and terrorism worries and government for a host of concerns, including reengineering costs. In fact, as far back as 2011, a survey compared 16 global industries on the average number of cloud applications per-company and found financial services came in second only to computing/electronics/telecom!
So, no, banks may not be the full-speed-ahead earliest adopters, but neither are they behind the curve. By and large, they appear to be “just right” adopters of cloud computing. As of this writing, many of the largest banks as well as savvy regional banks are piloting substantial workloads on private clouds to see how much speed they can gain and expense they can save. While these workloads may still be a small percentage of the banks’ computing, they set the stage for massive and confident cloud conversions in the coming months.
Clouds Not Equal
There’s another reason to be comfortable about banking’s cloud adoption: workloads differ and all clouds are not equal. Public clouds work well for lower risk workloads, while more highly regulated workloads can be placed in private or community clouds. In addition, a hybrid cloud approach distributes workloads across multiple cloud and non-cloud tiers to get the best of multiple worlds. If a major marketing campaign for online banking produces heavy consumer traffic on a bank’s website, it can shift computing resources away from other non-peaking applications to online applications. Overnight, when transactional traffic subsides, those resources can be shifted to data analytics, account reconciliation and other traditional batch processes.
For banks to continue making a smooth and profitable transition to this transformative technology, they will want to keep in mind at least seven important considerations:
Security. That hardly needs mentioning because it is first and foremost in any discussion of transition to cloud – especially public cloud. High profile breaches have made all banks super-sensitive to protecting their data and transactions. One of the most effective measures to proactively prevent breaches is to completely cloak your infrastructure and make its activity invisible to unauthorized users inside and outside the organization.
Culture. Transformational technology always entails cultural change, or else it fails. Being a cloud-savvy bank entails new skills, new roles and leaders who understand those skills and roles. You don’t want your strategy to leave your people behind.
Savings. A well-executed cloud strategy can result in phenomenal savings, as much as 50% on private cloud and even more on public cloud. The shift from CAPEX to OPEX is also advantageous. But savings will always take a back seat to security and speed.
Speed. It’s hard to overstate the growing importance of being able to respond quickly to changing business needs. When new business opportunities arise, your competitive edge could be measured in weeks; a rapid time-to-solution enabled by cloud will keep you ahead of the pack.
Planning Variables. Sometimes banks invest a great deal of time and effort into choosing the technology and platform they wish to run, and not enough time on other variables that need to be considered just as carefully: your cloud management processes; financial policies and models, physical and virtual architecture design, security, IT service management and support services.
Incrementalism. With most transformational technologies, the temptation is to study too long and act too late. Cloud facilitates a better way. It allows banks to test and learn by shifting newer workloads to cloud, learn from the experience, adjust and then expand. This is how many banks ultimately gain the confidence of business heads and boards of directors for their cloud strategies.
Interoperability. For your cloud strategies to deliver on the flexibility you expect, different cloud operators and apps on different clouds need to communicate seamlessly. The more complexity and variety in your cloud configuration, the greater your interoperability challenge, so a careful and well-tested build-out of your multi-cloud environment is essential.
By keeping these factors front and center, banks can continue their just-right journey to a broader, inevitable and more profitable embrace of cloud’s advantages.
Mr. Olson is vice president, Global Financial Services, Mr. Lacey is vice president, Infrastructure & Cloud Solutions and Ms. Almad is senior marketing manager, Cloud Solutions and Hybrid Enterprise Strategy, for Blue Bell, Penn.-based Unisys. They can be reached at [email protected], [email protected] and [email protected] respectively.
While financial services firms may lag other industries in AI deployment, they are better than average at data collection and verification. In this report, learn how the industry has potential to lead by further investing in AI infrastructure and computing...
Persistent inflation and higher interest rates will challenge banks’ ability to meet capital needs and cash flow. That means treasury departments need digital solutions that are timely, capture data from across the institution and anticipate changing economic trends.