While use of cloud computing continues to grow at a healthy pace, determining exactly what "the cloud" is remains a topic of discussion. The U.S. National Institute of Standards and Technology (NIST) provides a useful definition: "Cloud computing is a model for enabling convenient, on-demand network access to a shared pool of configurable computing resources (e.g., networks, servers, storage, applications and services) that can be rapidly provisioned and released with minimal management effort or service provider interaction."
Financial services firms are capturing the benefits of cloud computing, from improving customer relationship management and virtualizing desktops, to exploring new infrastructure-as-a-service (IaaS) models. However, significant security concerns continue to deter many firms from putting their data and core processes in the cloud, leaving huge untapped potential for further adoption.
While such reticence is understandable with any emerging technology, the potential benefits of the various forms of cloud computing are too great to ignore. Companies that adopt a comprehensive, multiyear cloud strategy can leverage the cloud to improve performance, competitiveness and customer care, while keeping data well protected.
Many firms are strategically beginning to integrate cloud projects into their IT strategies and architecture. Some are using cloud exclusively for non-core activities; others are venturing into the realm of computation-intensive core activities. One large investment management firm has developed a cloud computing proof of concept for CPU-intensive back-testing of the company's proprietary investment trading signals while maintaining strong data security by leveraging encryption and data-masking techniques. The approach enables the firm to avoid the costs of dedicated infrastructure by leveraging the cloud's ability to provide burstable CPU capacity.
Cloud computing appears to be on track for robust growth in the next several years. According to Gartner, worldwide cloud services revenue is forecast to reach $68.3 billion in 2010 and $148.8 billion in 2014. Companies in virtually every corner of financial services are testing the waters of cloud computing, including banks, brokerages, wealth management firms and insurers. The cloud also is attracting growing interest among service providers, including Nasdaq's recent Data on Demand offering.
Harnessing the Cloud
Many of the early cloud implementations are software-as-a-service deployments. SaaS's roots date back to the application-service-provider (ASP) model that emerged in the late 1990s; other cloud computing models -- platform as a service (PaaS) and IaaS -- are more recent developments. Thus, it is not surprising that the relatively more mature SaaS technology would be the initial step into cloud computing for many companies. But there are recent examples of financial services firms deploying all three types of service models:
SaaS in the Banking Industry. The broad use of Salesforce CRM -- Salesforce.com's customer relationship management offering -- by financial services companies provides evidence of the strong SaaS uptake in the industry. Prestitempo, an Italy-based personal lending division of Deutsche Bank Group, chose Salesforce CRM to support management of a dramatically expanded client base, creation of customized client solutions and better leveraging of promotional campaigns. The lending unit can extract comprehensive client information from the cloud service quickly to create tailored solutions. Information and activities managed in Salesforce CRM can be shared to create a common knowledgebase for each client. And commercial managers from various Deutsche Bank subsidiaries now have real-time access to accurate results from each promotional campaign.
IaaS in the Insurance Industry. Tokyo-based Taiyo Life Insurance wanted to reduce the burden of updating 1,500 administration-focused PCs while increasing security. The company implemented IBM's Smart Business Desktop to create a "desktop cloud" that virtualizes its client environment on servers. The desktop cloud environment provides automatic updates to all related client environments when an application adds a new function, eliminating the need for update releases and a separate configuration process on each PC. This form of IaaS is also referred to as desktop as a service (DaaS), virtual desktop infrastructure (VDI) or, in earlier deployments, server-based computing (SBC). Security is increased because data is now managed over secure data center servers and is not stored on the client side.
PaaS for Online Banking. North Carolina-based First Citizens Bank wanted to overcome the problem of having to interrupt the activities of its online banking customers, even during overnight hours, to deploy new applications. Using the IBM WebSphere Virtual Enterprise solution in a private cloud model, the bank, which has more than $21 billion in assets, now can deploy new versions of applications without affecting customers. In addition, it has been able to eliminate up to six hours of scheduled downtime per month and remove 20 percent of its application server capacity from the data center floor.
Rising to the Cloud and Beyond
The use of cloud computing is increasing among financial services companies despite continuing concerns about security and privacy. Financial services firms can gain confidence and knowledge to support their cloud computing initiatives from the experiences of companies that already have taken the plunge. Most of these efforts provide useful insights to help companies take one of the critical steps in any cloud computing initiative: setting a clear strategy and road map with achievable, meaningful goals.
As part of this process, firms should develop a high-level "cloud adoption vision," as well as a short-term business case for cloud computing anchored to the long-term vision. Align your strategy with your organization's business objectives and risk management framework. Establish a governance process and standards that address security requirements, support consistent and logical cloud adoption, and prevent the proliferation of random, uncoordinated initiatives around the enterprise. And recruit people who understand cloud services and can lead strategy development, vendor selection and ongoing management. Considering these factors and approaching the cloud thoughtfully will make for a smoother, more successful ascent. n
For more on how financial services firms are approaching the cloud, visit www.capco.com/ capco-institute/research-thoughts/feeling-more-secure-about-cloud-computing.
About the Authors: John Gubala, Partner, Technology Group, CapcoAs a partner in Capco's technology group, Gubala focuses on IT strategy and large program management. With more than 20 years of technology consulting experience, Gubala has extended knowledge of IT optimization, business and IT alignment, IT organization design, and IT cost takeout.Milo B. Sprague, Director of Technology, Silicon Valley BankSprague has 23 years of IT consulting and executive management experience, including 16 years with Morgan Stanley. Most recently, Sprague's focus has included the design, build, global operations and strategic optimization of complex Internet infrastructure, managed services and data center environments.