Infrastructure

03:46 PM
Promod Radhakrishnan, Oracle
Promod Radhakrishnan, Oracle
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A Strategic Approach For Cloud Enablement

Financial services organizations need to consider multiple factors before embarking on a cloud journey at the enterprise level.

As mentioned in my earlier article, much has been written about the confluence of social media, mobile, analytics and cloud driving the next round of innovation.

Promod Radhakrishnan, Oracle
Promod Radhakrishnan, Oracle

Among the big 4 trends, the most talked about is perhaps the move towards cloud models, be it from a consumer or institutional angle. From an institutional perspective, despite the fact that Software as a Service (SaaS), server virtualization and related concepts have been in existence for the past decade, the entire concept of leveraging cloud concepts as a strategic driver in the IT space has only gained steam in the past fewyears. However, large and small financial services institutions are better off adopting a strategic approach towards leveraging this concept as against a tactical opportunistic one.

If you look at the landscape today, there are scalable solutions available across the Infrastructure as a Service (IaaS), Platform as a Service (PaaS) and SaaS spectrum, both for hosted and on-premise options. On the application side, the 'SaaS or not' solution is perhaps an extension of the Build Vs Buy question. However, it is not just a linear extension of the problem statement with usage-driven pricing as an added factor. A low-risk option chosen by many institutions is to start off with leveraging the SaaS option for applications supporting non-core support services, or say, for commoditized transaction processing functions.

Banks Leading SaaS Charge

If you exclude pure play outsourced services from the equation, commercial and retail banks have moved farther in embracing the SaaS model for supporting core business functions, as compared to capital market shops. However, more recently, there has been an early uptick in leveraging this model even by capital markets organizations -- market data and trade surveillance solutions being prime examples.

However several factors mentioned above, apart from the key data security and data privacy issues, would prevent a mass uptick of this model in the near term, especially for supporting core functions that are either mission critical or are ones that provide sustainable competitive advantage. It is early yet to talk about the demise of on-premise software and in-house applications.

When we talk about IaaS and PaaS, the decision is not a simple one either. Though significant gains have been made by the likes of AWS (Amazon Web Services) in the public cloud domain, choosing a public cloud IaaS/PaaS option is still risky for most financial services shops. To start with, availability glitches have been widely reported and questions around data security remain open. Financial services shops are subject to strenuous data security clauses especially around Personally Identifiable Information (PII), and the 99.x% availability promise, even if taken at face value, is still not enough for supporting core business applications.

This leaves a private cloud option as the most preferred step to start with when embarking on the cloud IaaS/PaaS journey. Most mid-tier to large-tier shops already have some sort of virtualization in place as far as servers and storage goes -- hence the move to a private IaaS cloud environment, potentially including Db as a service too, is logical and relatively easy to decide on, even from an ROI perspective. Moving away from dedicated server instances for business applications and moving to a centralized IaaS cloud environment yields quick benefits in terms of hardware costs, license fees, and also alleviates overhead associated with provisioning and deployment. As long as there is not a big gap between the existing technology stack (DB, OS, middleware) for the application and the stack in the centralized cloud environment, minimal application-level changes are required, and hence effective ROI is usually quite high.

However, moving to a PaaS mode in a private cloud environment is a tougher decision to make. There is significant upfront R&D investment needed to decide on a suitable PaaS framework. Apart from elaborate application architecture and development guidelines, there is a need to take the right decisions regarding technology stack too, since there are multiple factors including license cost, developer support, scalability, reliability, synergy with respect to existing technology stack etc that are at play. Options range from end-to-end stacks to a pick-and-choose proprietary framework leveraging even open source components.

ROI and Open Source

A ROI-driven mindset is needed even at the framework definition stage to avoid pitfalls -- for example, a proprietary stack leveraging open source components might be cheaper to get up and running, but the costs involved in migrating applications will defeat an ROI-case if there is a significant difference between the current stack and the proposed cloud stack. And whichever way a PaaS framework is architected, there are significant upfront costs involved in migrating business applications to a private PaaS cloud environment.

So, unless there are direct synergies, arising from shared business services leveraging an SOA approach for example, an ROI case becomes difficult to make in most cases. To ensure proper ROI in this private cloud PaaS route, firms should use a top-down approach for analysis before deciding on the approach, defining the go-to framework and defining a migration path. This includes activities including definition of the business operating model, undertaking any process re-engineering as required, definition of common business services and adoption of a SOA mindset for IT architecture, undertaking an end-to-end application inventory and subsequently engaging in detailed application rationalization/consolidation activities.

All of this needs to be factored in to decision making before deciding to adopt the PaaS route in a private cloud environment. For all you know, you might be better off sticking to a landscape as-is or possibly the IaaS-only route if the economics don't work out right!

In a nutshell, organizations should look at the cloud journey with a strategic mindset. CIOs need to view it as an opportunity to redefine the technology landscape in the right direction, and craft a scalable IT architecture that would make IT more nimble and efficient in the long term. External experts would often help bring in the right perspective and neutral mindset required for such an exercise.

The views expressed in this article are my own, and do not necessarily reflect the views of Oracle.

About The Author: Promod Radhakrishnan is a Regional Sales Director for Consulting Services with Oracle's Financial Services Global Business Unit. As part of the sales leadership team for this specialized group focused on financial services clients, Promod manages and directs the development and implementation of go-to-market strategies and sales plans for banking and capital markets information technology solutions across multiple regions in the Americas. Prior to Oracle, Promod was with Cognizant's Banking & Financial Services Practice, leading sales and client relationship for a few strategic clients in South East US.

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