Is cloud computing ready for the financial industry? All signs point to yes.
According to research from Gartner, by 2016 poor return on equity will drive more than 60 percent of banks worldwide to process the majority of their transactions in the cloud. Ovum also comments that capital markets will accelerate their adoption of cloud services this year – on both the buy and sell sides – due to improvements in cloud security and the wider variety of applications available.
Financial services organizations handle trillions of transactions each year, and need to manage them efficiently and cost-effectively. They also must protect sensitive information about individuals, companies and other parties. Safeguarding that information is a critical component in building trust with customers. So while cloud adoption is happening, progress is slower here than in other industries.
What’s moving forward quickly, however, is the outsourcing of services such as email, intranet, enterprise resource planning (ERP), and website and microsite hosting. These are well-established in the cloud overall, so the comfort level is higher.
Meanwhile, IT leaders at financial services companies are determining the next set of jobs they can move to the cloud. These include:
- Batch processing of large quantities of data (for example, consumer transactions within retail banks or processing claims for insurers)
- Test and development environments to better meet ongoing needs for flexibility, scalability and ability to turn cloud services on and off quickly
- Big data analytics to leverage the scalability of hosting providers to manage terabytes of data easily
- Mission-critical applications that rely on the robust security of enterprise cloud solutions, high availability and backup options
- Disaster recovery planning to ensure that services continue to operate in the event of an earthquake, civil unrest or other unexpected calamity. Some financial services providers may also face regulatory requirements for disaster recovery. For example, in the United States, the SEC has indicated that a disaster recovery plan is a required fiduciary responsibility.
Much of what gets migrated to the cloud – and what cloud model is embraced – depends on the requirements of the particular business type within the financial services sector. A commercial bank, for example, might be more likely to use the public cloud – for commoditized, non-proprietary content such as website hosting – than a broker who must protect sensitive data.
In the end, as their trust in the cloud grows, financial services companies are becoming increasingly likely to use a hybrid approach to their cloud strategy, hosting less-sensitive applications in the public cloud and others in a private cloud environment.