Banking in Cloud-First Strategy
“I don’t need a hard disk in my computer if I can get to the server faster… carrying around these non-connected computers is byzantine by comparison.” – Steve Jobs, late Co-founder and Chairman, Apple, Worldwide Developer Conference, 1997
Last year we talked about how banks should view cloud as an enabler for innovative technology implementation and not just see it as a commodity available for consumption. Recently, the mindset in the financial services industry has evolved and many progressive banks have started to build a coherent cloud strategy. According to IDG’s Enterprise Cloud Computing Survey, 2016, the typical IT department will have a portion of their apps and platforms (40%) residing in on premise systems by 2018.
While security concerns are still an area that need to be looked at closely – regulators are more open to relaxing some of the constraints around cloud deployments. Major cloud providers are also setting up data centers in different countries where regulations mandate that the data cannot reside in a space outside of its origin. Public cloud vendors like Amazon Web Services (AWS) and Microsoft Azure are becoming more compliance centric in order to cater to the requirements of the financial services industry, as a result of which, the push for banks to move to the public cloud has been strengthened – Microsoft has set up data centers in major Indian cities to tap into the financial services institutions that haven’t been able to use public cloud services on account of regulations around data sovereignty.
We recommend that banks should follow a three phase strategy for migrating to cloud in their transformation journey. The initial phase will be to test the waters and move non-critical environments, for example development and test environments, into the cloud. Banks can then implement hybrid cloud models to process peak loads with cloud-burst techniques, while continuing to process routine operations in-house. Progressive banks will leverage cloud techniques to optimize infrastructure investments and performance – for e.g DBS Bank recently announced that it will be running its cloud native applications on Pivotal Cloud Foundry. While not every legacy app might make it to the cloud, all new applications will be ‘cloud-first,’ which will mark the beginning of the third phase for cloud migration. New infrastructure and applications will be launched cloud first by design that is mandated by flexibility, scalability and ecosystem requirements. In case of existing applications, banks will have to re-design, and not just re-deploy these applications while adopting the cloud to provide a platform for innovation.
Whether banks like it or not, the new world with its open ecosystem will be banking on the cloud. The disruptive technologies that are the changing the face of business – big data blockchain, artificial intelligence (AI), IoT – will be powered by cloud computing. For example, Capital One Financial Corp. is using AWS to enable efficient development and deployment of the latest applications. Metro Bank has also recently moved its IT infrastructure to the cloud to keep up with the latest technologies and increase its business agility. With cloud as an enabler, banks are offering their APIs to the third-party developer ecosystem for creating innovative solutions for their clients. Cloud is no longer a second thought, but an essential strategy for banks to reinvent themselves as a truly modernized financial institution.