October 31, 2013

Challenge: Most firms are active in their own private clouds, but a few banks are starting to move to the public cloud. To do that, banks need to make sure data is safe and secure before making the jump.

Why It's Important: The cloud has been embraced. Almost every firm is in some stage of deployment, or at least considering the cloud. Before they make the jump, financial service firms are wrapped up in one very important debate: private cloud or public? In the end, the answer comes down to security, the biggest barrier to cloud adoption, and private cloud has won (for now).

Security concerns are declining as the top inhibitor of cloud adoption with 46% citing it in 2013, as opposed to 55% in 2012." -- GigaOM Research

But is this sensible? Probably not. From a service, transparency and speed perspective, the case for private cloud may be strong for a particular business, but in the area of security, firms are starting to have a hard time justifying claims that private cloud is more secure than a public cloud. Yes, breaches are possible, and more people are trying to hack into the public cloud, but there will be more defense and robustness from providers like Amazon and Microsoft than from private players. But try telling that to any financial services CISO right now.

From the perspective of public cloud providers, top-of-the-line security is beyond important for their reputation. With such a large number of institutions relying on their services, damage to their credibility could bring the entire brand to its knees as clients switch to competitors. Still, financial firms need to convince themselves, and ultimately regulators, that public cloud is just as safe, or even safer, than their own systems.

Where The Industry Is Now: Arun Karur, head of global commodities practice at Sapient Global Markets, says a barrier to public cloud adoption is that corporate culture and policy often dictate that financial data be kept secure in a proprietary environment. He says firms are simply "uncomfortable with the idea of sending data outside the enterprise" and that "there is no business pressure to reverse that decision."

[For learn more about all of the topics that will shape the business technology landscape next year, download the November Digital Issue: Capital Markets Industry Outlook 2014.]

Focus In 2014: Private cloud projects are on the rise, but recent projections by Gartner analyst Thomas Bittman have suggested that hybrid solutions, a mix of public and private cloud operations, are also picking up. Furthermore, 50% of enterprises will be engaged in a hybrid cloud system by 2017. It's argued this is going to be the most appealing to the industry because firms can dictate what's most appropriate from a data point of view.

The hybrid model is potentially the first push toward public cloud acceptance. According to Louis Lovas, director of solutions at OneMarketData, security is going to factor into the decision as they start moving to hybrid models, but they're going to test it out with an asset that isn't that critical. In time, firms will use a broader range of applications on the public platform.

Technology Providers: Popular public cloud providers include Amazon Web Services, Google Compute Engine and Microsoft Azure. VMware, Rackspace OpenStack, Verizon Terremark and Oracle Cloud also top the list. Both Nasdaq OMX's FinQloud and NYSE Technologies' Capital Markets Community Platform are billed as industry-specific cloud options that offer services tailored for financial firms.

Price Tag: In the end, it will be cost pressures that bring financial institutions around to the idea of adopting public cloud for more sensitive assets. With technology budgets still under pressure, firms will have no choice but to take public cloud options seriously and find ways to address security challenges. Many public cloud options drastically reduce the cost of owning and operating technology for larger enterprises.

ABOUT THE AUTHOR
Before joining UBM Becca served as Editor-In-Chief at Kapitall Wire, the sister site to an online brokerage firm that combines the challenges of the stock market with the thrill of ...