The cloud has become the primary mode of IT operation, either as a whole or in part, for diverse industries around the world. But that’s not the case for every type of business. There are some industries where the barrier to cloud entry is set a bit higher.
One case like this is the financial industry. Due to a number of industry-specific challenges, many financial companies remain cautious about approaching the cloud.
In this blog post we will take a look at some of the challenges that keep financial companies from going all-in in the cloud, and give some insight into how finance companies can develop the right cloud adoption strategy to make the cloud work for their industry.
What Makes the Cloud Challenging for Financial Companies?
Companies in the financial industry have typically built their IT infrastructure over generations of technology, acquisitions, and mergers. Regulations require that they store and secure their data in the geographical locations where the systems and services exist.
In many cases, these companies use disparate infrastructures that don’t interact, creating data silos that prevent achieving the insights across the enterprise that can drive competitive innovation.
Financial companies, therefore, are very much on-premises IT operations. While companies in other industries have gone fully into the cloud, established financial companies cannot realistically do that to the same degree.
But there’s “gold” in the data silos scattered across these enterprises. And there are two competitive threats applying pressure to adopt cloud tech to mine for that gold:
- Early adopters that have explored and are growing proficient with cloud tech.
- A new generation of small, agile challengers that provide a specific service to underserved markets and do it well.
PWC’s Financial Services 2020 and Beyond report states that established financial companies risk losing 25% of their business to agile startups. Also, the early adopters have already unified their data in the cloud and are now achieving the insights that allow them to become more competitive.
Financial companies that wait to embrace cloud tech risk getting left behind. IDC’s Driving Digital Transformation in Financial Services report labels early adopters as “thrivers” and those who have yet to adopt as “resistors.” It describes the world of cloud tech as rapidly changing, where thrivers embrace a process of continuous evaluation, plugging in new technologies and casting others aside as services evolve. It’s best to jump on this train as soon as possible.
If your company has been cautious about the approaching the cloud, this NetApp Cloud Migration Path for Financial Companies eBook will offer some important insights for you. It will help you assess cloud tech for financial companies so that you can create an adoption path that makes sense for your business model.
Cloud Adoption Frameworks for Financial Companies
Before you can plan how to make a cloud adoption work for your company, you must first assess your business model and choose the workloads that make sense to move into the cloud. The plan should clearly identify what to move first and how the end goal will look.
You can achieve this by working through the following categories.
Benefits Motivating Cloud Adoption
What do you want to accomplish with cloud tech? To answer this, it helps to look at what the leaders are doing. According to the PWC report, the main driver is to leverage data with AI/ML tools to accomplish these goals:
- Personalized offerings to match customers’ wants and needs. Financial companies must provide the web and mobile UX that users have become accustomed to from other industries.
- Improved services targeting primarily security and anti-fraud detection. Also, automating decisions for investing and underwriting frees skilled workers to contribute to risk management, product development and other expert advisory functions.
- Enhanced risk analysis by using AI to lower risks by monitoring increasing volumes of both structured data (databases) and unstructured data (social media, news). AI can assess risks in transactions, trading patterns, profitability, and more.
- Understand and target the most profitable customers by unifying data across the enterprise and using AI to derive segments that identify customers’ needs. Marketers can then use these segments to create user experiences with personalized choices.
The ML platform market continues to innovate with a wide variety of offerings to use for implementing these innovations.
Using Cloud Tech to Derive Value
How does cloud tech enable financial companies to derive these benefits? A Deloitte on Cloud Banking: Financial Services and Banking of the Future cites these trends:
- Data unification using on-premises systems is complicated. Moving data to the cloud lets you share data between business units, enabling you to solve customer problems more quickly.
- Connect data sets to use with analytics to achieve insights for faster decisions. This becomes possible with unification. Once the data is all in one place, you can use cloud tools to discover and build relationships between the datasets.
- Attract new talent by providing access to modern cloud tech. Once you’ve invested in a pool of cloud tech savvy talent, they will keep the innovation and knowledge base growing as cloud tech continues to evolve.
- Build resilient operations unaffected by outages and physical disruption by making use of the cloud vendor’s failover and load-balancing capabilities in the cloud.
- Ability to respond to market shifts by auto-scaling. One of the first big wins for the cloud was the ability to set metrics that trigger the cloud platform to scale up capacity to handle a bigger workload.
Cloud tech provides a scalable data laboratory with many tools. But financial organizations need to know that it’s safe. Let’s deal next with those concerns.
Addressing Cloud Governance and Performance Concerns
Financial companies have been slow to adopt new tech due to internal requirements and externally-imposed regulations. Cloud tech meets these needs and offers additional benefits.
- Data visibility and governance are mandatory requirements for financial companies. Regulators—now turning to technology to help solve their own problems—need access to financial institutions’ systems to verify that all is well. Cloud tech helps financial companies comply.
- Inconsistent data management can arise once legacy, silo-based systems start to move components to the cloud. The tools you choose must impose the same data standards across all datasets. This makes unification easier to achieve.
- Different products for different environments were also typical for legacy systems, and one of the major barriers to data unification on-premises. The cloud vendor provides a common platform for all its tools.
- Performance issues can happen at many points. In legacy systems, performance bottlenecks were typically addressed by making new infrastructure expenditures, which was reactive, and sometimes costly. Cloud tech comes with standard monitoring tools that cover service availability, latency, throughput, application performance and more. Performance optimization is necessary to ensure peak performance.
- Data security is hard enough on-premises. The threat possibilities increase when you add the Internet of Things (IoT), mobile devices and third-party tools. It’s natural to ask how secure your data is in the cloud. Cloud platforms help keep your data safe with built-in encryption and current firewall protections; however, financial companies need the highest levels of security and privacy, which may require solutions beyond those natively available from the cloud provider.
Cloud technology meets the concerns of financial companies with standardization and a service-level agreement to keep data safe. But financial companies have additional needs unique to the industry.
Addressing Security and Compliance Priorities
Financial data is among the most sensitive to manage. Financial companies must have solutions to secure the data and adhere to compliance regulations:
- Data security that includes backup, recovery, encryption and protection from external threats. Financial companies must have this on-prem and also in the cloud.
- Ransomware prevention is critical in the financial industry, as there are huge costs involved whether paying the ransom, violating compliance laws, or rebuilding systems from scratch if you’re locked out.
- Privacy of sensitive customer data is now a mandate for all businesses that handle customer financial data.
- Privacy of sensitive organizational data. A similar set of concerns exist for a financial company’s proprietary.
- Compliance with industry regulations such as PCI, Dodd-Frank, and GDPR bring with them their own record-keeping and enforcement requirements.
The cloud now offers numerous services that can help solve these problems. However, there are still many professionals in the financial industry who are reluctant to use these new services. This is because despite the standard functionality cloud-based services provide, they are usually very different from the existing on-prem services the financial companies have in use. That means replatforming or repurchasing to transition to these services can be complex. One advantage to being a resistor in this case is the ability to test these services with caution and adapt them to existing services. This way, when it is time to move to the cloud, the transition will be much easier.
Hybrid Cloud Architecture Goals
As mentioned in the introduction, established financial companies cannot fully move their data operations into the cloud. Most of your company’s operations will remain on-premises. Most likely, workloads such as analytics and artificial intelligence/machine learning (AI/ML) and those that require unified data will be prioritized for migration to the cloud, either temporarily or permanently, while the rest of the deployment remains on-premises. This is what is known as a “hybrid cloud architecture.”
According to the IDC study, the thrivers tend to do their most proprietary AI/ML processing in a private cloud that melds with the on-prem network, something like a VPN. Thrivers use the public cloud more sparingly, and employ Software as a Service (SaaS) to do the financial transactions there, since SaaS vendors already have security built in. This leads many of them to choose hybrid cloud adoption.
The benefit that comes with a hybrid private cloud implementation is data center experience that provides an end-to-end unified plane for the computation as well as the data. More specifically:
- Single combined compute plane and accompanying workload migration ability. This means the workloads happen in the tools and technologies provided by the cloud vendors, providing a comprehensive set of tools that work together.
- A single control plane and view of the environment. This means the tools provide a UX that lets you control the processing steps and environments acquired in the cloud, with full monitoring of performance and status.
- End-to-end control over the IT environment, including infrastructure, applications, and data. The hybrid private cloud connects all the pieces together so that the control plane manages the compute plane to carry out all the workloads.
The hybrid private cloud is the path to the cloud that’s most compatible with the requirements and constraints of a financial company. This is where a cloud data management offering can become extremely useful.
Key Areas of a Cloud Data Management Layer
A cloud data management product provides a layer of abstraction over the cloud platform(s) that you’ll use for the cloud implementation. Look for the following capabilities to start your path to cloud adoption:
- File consolidation means you can share on-prem files into the cloud and make them available via a global file cache for use in the cloud or in other on-prem locations.
- Data analytics with cloud bursting is how you will implement the workflow. First the data will get bursted into the cloud environment. Once there, analytics and AI can process it.
- Provides data protection by automatically backing up data stored in the cloud with protection against data loss, human errors, outages, cyber threats and natural disasters.
- Supports DevOps or the agile software development model, which rapidly brings services to the field. Your DevOps team uses a wide range of IT personnel (UX, UI, analytics, integration, big data, and AI/ML) who are trained to help accelerate the company’s software development and release cycle.
These are the major features to keep in mind as you evaluate vendor offerings. Next, let’s see how to move your workload into the cloud.
Cloud Volumes ONTAP for Finance Cloud Adoption
Cloud Volumes ONTAP provides the kind of hybrid capabilities and enterprise-grade data management that can make cloud adoption a viable IT deployment option for the financial industry. As a platform that runs on Google Cloud, AWS, and Azure, Cloud Volumes ONTAP enhances those services with hybrid and multicloud capabilities, high availability, multi-protocol file access, storage efficiencies, seamless data protection, safe cloud WORM storage, instant cloning, and more.
To find out more about how Cloud Volumes ONTAP can benefit your company make its way to the cloud, download our free eBook on Cloud Adoption in the Finance Industry here and read these financial company success stories with Cloud Volumes ONTAP.