We’re at a fascinating moment in the financial services sector’s adoption of cloud technology. Industry reports highlight the unequal pace of change between early adopters and those who are slower to investigate the cloud route – often due to a perceived lack of data security and control. In this post, Niall Twomey, CTO at Fenergo explores the trends and key drivers for adopting a cloud-based infrastructure in financial services.
A recent report from Aite Industry Analysts estimates that the majority of global tier-one firms have less than 10% of their total technology stack hosted in a public cloud environment. At the same time, we’re seeing some major banks report huge success with their cloud programs. Take Bank of America’s Cloud Project, for example, which has been running since 2013. The bank estimates it has saved $2.1 billion in infrastructure costs.
So, for financial institutions (FIs) that have a clear objective for migrating to the cloud and a strategy to achieve it, there are demonstrable business benefits.
There are three key trends and drivers behind the use of cloud technology in today’s financial institutions:
1. Cost Management, Predictability, Transparency
A key trend we’re seeing is the desire to stop investing in bricks and mortar data centres, which is making the move to cloud inevitable.
One of the problems with bricks and mortar data centres is that they require a continual investment top-up, and the required never-ending search for qualified resources, so removing this is a key requirement for banks.
Organizations want predictability and transparency over what they spend and understand that they are moving into an opex model, but they still want to understand what the fixed and variable costs they can expect to pay on a monthly basis, Sweeney adds.
One of our clients, a CTO at a tier-one global bank, explains this better when he says: “The transparency that the cloud offers around costs – getting that nailed down and understood and clear with folks that are responsible for finance and finance forecasting is an important piece.”
2. Data Security
Data Security Banks and financial firms, in general, need to be assured that, in the cloud, both the institutions’ and its customers’ data is well protected. One of the main challenges financial institutions face is actually moving data to the public cloud.
Security teams and regulators have strict requirements that need to be met, such as data location and encryption. These need to be understood and addressed upfront, rather than waiting for the project to be implemented. Any delays in addressing these or deferring them can result in significant project delays which financial institutions want to avoid.
Some organizations use hybrid environments with data being retained in their existing data centres as the first step, because this can often be perceived as a lower risk starting point. This can be the first phase of a multi-phase project.
3. Cloud-first Technology
In general, Fenergo is starting to see more financial institutions adopt a cloud-first strategy. It is very encouraging to see the executive buy-in, and that they are recognizing the superior benefits that Cloud can bring. The ultimate end goal by most institutions is to move fully into the cloud for certain projects but this can be seen as a stepped approach, with the hybrid step being the first step in getting there.
The key is to start small and scale up with your cloud projects.
If you would like to learn more about how you could realise the benefits of cloud, please get in touch.