The Future is Past: Cloud Services Come of Age for Banks

For some, the future lies behind.

by Randy Davis, VP Sales and Marketing Operations

Banks and bankers are not, I suppose, usually perceived as harbingers of trends in technology, but kudos go to +Michael Harte, CIO at Commonwealth Bank of Australia, for getting it right back in 2010.

In our blog post at the time, Putting the Kibosh on Soaring Software and Maintenance Costs, we noted that Michael had recognized that select cloud vendors had solved his hardware/software problem, and that he didn't need to:

"We're saying that we will never buy another data center. We will never buy another rack or server or storage device or network device again. I will never let any organization that I work for get locked into proprietary hardware or software again. I'll never tell my teams in the business that it will be weeks to get them hardware provision. I'll never pay upfront for any infrastructure and certainly would never pay for any, or rent any, infrastructure that I would never use. I will never implement an internal solution for a common problem that I could procure on subscription across the Web (emphasis mine)."
                                                                                                  (Reported by Finextra.)

Now we read in an article by Bank Technology News titled, "Banks Are Finally Embracing Cloud Computing," that "banks are warming to cloud computing after nearly a decade of hesitation about trusting their data to outsiders." Michael Harte might say, "Welcome to the past, boys and girls."

However, the Institute of Financial Operations just published a report on "2013 Trends in Cloud-based and Mobile Technology in Financial Services," sponsored by eGistics (click the link and look under Media>Brochures). This study shows that many financial services companies still have a long way to go in recognizing the benefits of cloud-based services. Concerns about security, perhaps based on misinformation or misplaced fears, still prevent some FS organizations from embracing cloud solutions that have been carefully vetted by other banks and or bank servicing companies. This is an example of "The Emperor's Clothes" in reverse.

Rather than "seeing" what's not really there (higher security risks in proven cloud service providers), many banks may be ignoring what's really in plain sight (higher security capabilities provided by cloud providers consumed with protecting data).

Our view, of course, as a provider of "hosted" or "cloud-based" solutions to banks for almost 20 years, is that carefully vetted and chosen cloud-providers can (and do) deliver superior security and data management services. In our blog post, "Cloud Security Concerns Are Dead..." we argued that just as we have come to trust third-parties (banks) with our money, we will also come to trust third-parties (data banks) with our most sensitive data. It is the way of things.

So what should you do if you are hesitating to use cloud services? Here are some suggestions:

• Recognize that there are different kinds of cloud service providers. Understand the difference between general practitioners and specialists in handling financial services data
• Determine your requirements: Tier 4 data centers, certifications, experience with banking practices and operations, regulatory compliance, SLAs, scalability, etc.
• Visit the facilities and meet with the staff of prospective cloud service providers
• Talk to banks and FS companies that are using cloud services
• Don't focus just on high-profile cloud service providers. Consider that you may not want your cloud service provider to be "well known"

Post your comments about banks using cloud-services below.

The state of storage

By Mark Brousseau (markbrousseau@tawpi.org)

Randy Davis (rdavis@egisticsinc.com) of eGistics, Inc. (www.egisticsinc.com) finds several interesting trends in The 2010 State of Storage Report from Networking Computing.

1. The top planned storage project for 2010 is improved allocation
2. Forty-seven percent of respondents say insufficient storage resources for mission-critical applications is their No. 1 concern
3. Storage area network (SAN) vendors are responding to demands for lower-cost storage
4. Storage virtualization is growing
5. Thin provisioning is catching on
6. There is a significant increase in interest in cloud-based storage

How do these trends reflect your storage strategy?

A welcome cloud during the economic recovery

By Ed Pearce (epearce@egisticsinc.com)

In spite of hopeful signs that the economy is on the mend, the 2010 State of Storage report from Network Computing finds that the fallout from the recession has left IT execs without the resources necessary to store the rising volume of information required to support their business applications.

Nearly half (47 percent) of the respondents to the survey say they have insufficient storage resources for their mission-critical applications, while 30 percent say they have insufficient tools for storage management. Another 30 percent of respondents say they have insufficient storage resources for departmental/individual use. Nineteen percent say they lack staff for their storage requirements.

And -- regardless of economic "green shoots" -- the situation isn't likely to change any time soon: 34 percent of respondents say they have an insufficient storage budget to meet their business demands.

Against this backdrop, it's little wonder that survey respondents are showing increased interest in cloud storage services (34 percent in 2010 versus 19 percent in the 2009 State of Storage report).

With a hosted variable cost storage model, if your business struggles, and your volumes drop, your operations costs will be aligned with your usage, and you won’t pay for a “just-in-case” capital investment. The variable cost model also eliminates the need for capital investment (software licenses and hardware) or maintenance contracts; customers typically are charged a one-time load fee to archive documents. And when an array fills up, or a server must be replaced, it’s your service provider’s problem. Using a thin-client interface, there may not even be software to install, manage or maintain. In addition, variably priced storage solutions can facilitate more effective operations by providing scalability that would be very cost prohibitive in a traditional, licensed in-house system.

CBA Chief Information Officer Michael Harte spoke for many users when he recently told the Committee for Economic Development in Australia that, "I will never implement an internal solution for a common problem that I could procure on subscription across the Web."

With the economic recovery still gaining strength, the trend for 2010 will be the more efficient use of existing IT resources. That should make hosted solutions a welcome cloud during the turnaround.

Putting the kibosh on the soaring software maintenance and upgrade costs

By Randy Davis (rdavis@egisticsinc.com)

Finextra reports that in a recent speech to the Committee for Economic Development in Australia (CEDA), CBA Chief Information Officer Michael Harte lambasted legacy technology vendors for their slow embrace of cloud-based computing and their apparent preference for solutions that lock-in users to a "never-ending spiral" of costly maintenance and upgrades.

"We're saying that we will never buy another data center. We will never buy another rack or server or storage device or network device again," Harte said. "I will never let any organization that I work for get locked into proprietary hardware or software again. I'll never tell my teams in the business that it will be weeks to get them hardware provision. I'll never pay upfront for any infrastructure and certainly would never pay for any, or rent any, infrastructure that I would never use."

Harte concluded: "I will never implement an internal solution for a common problem that I could procure on subscription across the Web."

With increasing demand for cloud-based solutions, combined with a general reluctance to pay hefty upfront capital costs, Harte's comments would seem to reflect growing dissatisfaction with the traditional licensed software model -- and its “never-ending spiral” of ongoing expenses.

Are you as fed-up as Harte?