Banks, especially the largest ones, never want to be left behind, and that includes getting invited to the party in the cloud.
Time is money, and no one knows this better than money center banks and investment banks, where lower latency can be worth millions of dollars in lost trading revenues, and time to market is crucial. For this reason, buy-side and sell-side firms as well as traditional banks have eagerly adopted cloud computing as part of their IT portfolios. It's not just the lowered costs that are drawing in the crowds, but benefits like standardized processes, improved customer service and a stronger sense of security and data privacy. However, the investment decisions do not stop there. Capital markets firms must also make a choice of public versus private cloud investments. These firms have focused largely on private cloud infrastructure, but the future is promising for greater hybrid and public cloud adoption.
Security and flexibility of data is a high priority for banks and Wall Street firms. They must keep a vigilant watch over private customer data, and the inability to control data could compromise the business that the data supports. The desire for that control has made private cloud solutions, or cloud solutions shared by private communities, the overwhelming choice for banks; they are comfortable with the control private cloud architectures offer in security, maintenance, standardization and agility. Private cloud deployments may not be as financially attractive, but they can be less disruptive and leverage existing security protocols.
Public cloud deployments may offer lower up-front costs, with quick and expansive scalability, but they have a significant downside in compliance, accountability, security and lock-in. Most firms are loath to move sensitive workloads and data into the cloud, so private clouds will dominate this sector for the next several years. Most firms see mission critical and customer sensitive data as the last piece to move into the public cloud — if it ever does.
We see a level of comfort with moving collaborative applications like email and messaging, Web applications and CRM into the public cloud while maintaining critical data like business intelligence/analytics and business processes in the watchful eye of the private cloud.
IDC survey findings have also shown that across all industries, roughly two-thirds of firms surveyed expect to be in production with private cloud deployment by 2013.
Has the security element handicapped banks from tapping into the strengths of the public cloud? To some extent yes, but this is where hybrid clouds are an attractive option. A hybrid cloud model helps financial institutions maintain their highly confidential workloads and data under tight supervision through private clouds, while enjoying the reduced capital expenditure, efficiencies of vast scale, and greater agility through nonsensitive software-as-a-service applications in the public cloud. Example: An institution might find it convenient to have client names and contact details in a secure public cloud but be unwilling to have sensitive data like account numbers, balances and transaction details exposed in the same cloud. In this way a hybrid model allows some fields to reside within an institution's purview and visible only to a few. Outside the firewall, only the nonsensitive fields are accessible, and even then, only to users with appropriate access controls.
Community or hybrid clouds combine the benefits of public with private environments. These types of clouds are shared by several organizations (multitenant) that have similar concerns in their specific sectors. Industry stalwarts such as Bloomberg and NYSE Euronext have stepped in to provide such hybrid clouds. It is worth noting that capital markets firms are more comfortable housing cloud services with an industry peer, someone they trust and have long-standing relationships with, as opposed to an Amazon or Google. The NYSE Capital Markets Community Platform has been developed to address the unique performance and security requirements of financial services firms. The platform offers a range of cloud-based services that let firms purchase computing power on demand. Services like this will expedite the creation and launch of new trading strategies and third-party services to the capital markets community through rapid provisioning of computing power and market data within a flexible, high-performance cloud framework.
Many firms have shown a willingness to use NYSE's collocation services, and the Capital Markets Community can be seen as a logical extension of that platform. Industry-specific community clouds will be a key for many industries worldwide.
Firms considering cloud computing must use a careful, strategically sound approach. One approach is to begin with moving noncritical platforms and data first, such as developer applications, email, change management systems and configuration management systems. Then slowly move on to those workloads that make the most sense to consolidate in the cloud. Avoid the herd mentality; evaluate your own internal capabilities, and be aware of what options are available and proven.
Compliance is another consideration in a cloud services strategy. Financial firms and other highly regulated entities require assurances about the integrity and confidentiality of their virtualized IT environments. Cloud services and infrastructure providers must offer automated compliance assessments against industry-accepted standards and specific regulations, as well as capabilities to remediate gaps and failures when an out-of-compliance event is detected.
The cloud will evolve, too. Vendors will need to consider a host of factors to maintain their existence. IDC Financial Insights foresees diversity in the portfolio of cloud offerings from vendors with customization as essential to success. We also expect changes in pricing, delivery and packaging.
Cloud offerings have forced firms to rethink their own IT investment strategies, which in turn has forced vendors to customize cloud platforms to control and mitigate risk in this sector. Banks need clouds as much as vendors need to adapt to new methods of IT procurement. It is a symbiotic relationship; it's just a matter of time till hybrid and private clouds become tools at all capital markets firms.
