Financial services learn to embrace cloud
Cloud computing represents the largest disruption in enterprise computing since the advent of the Internet. The main argument in favor of entering the cloud, which is the flexibility it affords with regard to both resources and costs, is increasingly hard to resist. However, new elements such as security and agility are rapidly becoming the dominant factors, and they help address many of the challenges that the financial sector faces today.
Security and regulation: from obstacles to benefits
Initially, there was some uneasiness in the financial services industry about fully embracing the cloud's benefits. Reluctance persisted over security issues, regulatory compliance, concerns of lost control, or simply a lack of trust in cloud providers.
Over time, however, financial institutions realized that cloud providers have more resources, knowledge and experience to build and operate cutting-edge security technologies than the vast majority of commercial or governmental organizations in any sector.
When it comes to security, telco providers have an additional advantage, because connectivity is so essential to the cloud. They can provide secure, SLA-backed private data lines door to door, from customer to cloud. Other cloud providers largely depend on the public Internet, which by design offers no guarantees in terms of speed and security.
The change in thinking and an increased need to exchange data and applications with third parties led to a range of cloud-based solutions being demanded by the financial industry. They created a “neutral zone” in the cloud for interactions with clients or suppliers. Examples include file sharing with marketing agency suppliers and running client software like online banking applications in the form of SaaS.
Cloud computing also helps financial institutions to comply with the regulations pertaining to data processing and storage. Large cloud providers own the tools and follow the processes demanded by the strict relevant ISO certifications or applicable regulations such as the GDPR. They can help financial institutions classify and label their data, and secure it at every layer, from the physical to the applicational. The cloud also enables processes that are not supported by common on-premises solutions: Contrary to traditional backup tapes, for example, the cloud backup supports selective data deletion as required by the GDPR.
Traditional services on cost-effective infrastructure
Even traditional IT services such as ERP software, messaging and document management must be built on an infrastructure that is cost-effective and flexible. The cloud’s flexibility and pay-as-you-go model are ideal for acquiring the instant scalability demanded by market forces or internal transformations. A virtual server in the public cloud is a fully-featured replacement for a conventional, physical corporate server designed to run enterprise applications. Public clouds utilize computer virtualization technologies, so these applications can’t really tell the difference when they are run in the cloud.
Most applications used in the financial segment are multitier, with structurally separate presentation, application and data management functions. Each layer may be more or less suited for migration to the cloud. For reasons linked to performance and licensing, it is likely to be more appropriate to stick to on-premises hardware to house heavy-duty databases, for instance, while presentation and application servers are ideal candidates for the cloud’s flexibility. This situation calls for a hybrid setup, which is perfectly covered by cloud providers who also offer colocation services.
To stay profitable, or even just relevant, companies and organizations must overhaul their current IT services and introduce new ones. Nowadays, it is necessary for any traditional brick-and-mortar financial institution to create online and mobile applications that can provide services anywhere and on any device in a secure manner.
With agility becoming the dominant motivating factor for adopting a cloud-based model, the true value of the cloud lies in its ability to let companies react to changes promptly by instantly scaling existing IT services and quickly provisioning new ones.
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