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Banks - Don't Let Your Concerns Cloud Your Cloud Vision!

 - Anjani Kumar

Today, most banks endeavor to leverage IT for delivering bespoke, anytime, anywhere services and products underpinned by real-time analytical insights. Unsurprisingly then, at an average ~15% of total costs, banks' IT spending is the highest among all industries.

Understandably, banks are looking for impactful ways to bring down this cost.  Cloud Computing is a superlative means to achieve this goal, and can play a key role in helping banks transform their operating models. The Cloud enables secure deployment options, effective collaboration, new customer experiences, and shorter time-to-market for new launches. Cost savings and flexibility (through minimal capital investment and a pay-per-use billing model), enhanced business agility and continuity (through robust upkeep of the Cloud environment), and Green IT (by reducing both carbon footprint and energy consumption) are just some of the benefits of Cloud Computing.

It is estimated that by 2020, around 40% of the information in the digital universe will be Cloud-enabled. Further, research estimates that in about 18 months, more than 60% of banks worldwide will process high volumes of transactions over the Cloud.

Following are some of the functions that proactive banks have successfully migrated to the Cloud:

Mortgage/Lending Origination: Private / Community Cloud-based integrated collaboration lending platform -enabling customers to apply for loans and complete processes electronically

• Enhancement of customer relationships through consistent cross-channel experience
• Channel management (kiosk, ATM, online, mobile, call center) and content management using Private Cloud

Payments: Modernization and standardization of transaction processing

Micro Banking: Micro banking business execution

Analytics: Customer data integration across banking platforms for providing near real-time insights

Desktop Management: Centralized management of employees' desktops for greater remote management flexibility

•Access to bank's systems for branch employees via a secure Cloud
•Enablement of all customer engagement dimensions

Enhanced Business Services: Enablement of third-party services to extend banking ecosystem

New Service R&D: Research and development of new services


In spite of Cloud Computing's huge potential, many banks, beset with the following concerns are reluctant to leverage it:

Security: This remains a key concern. Many banks believe that the security and confidentiality of personal and commercial data is at risk in the Cloud.
Regulatory requirements: Many countries require banks to maintain their financial and customer data within the national boundaries.  Consequently, banks are concerned about the exact location of their data in the Cloud.

Operating control dilution and higher risk: Banks are concerned about an increase in operational risk, and its potential adverse impact on business and reputation should services over the Cloud be hampered.

Uncertainty over long term cost impact: Banks are concerned that a major strategic decision, such as switching to a Cloud-based model, is not easily reversed. They are also concerned about a potential lock-in with the Cloud service provider and unsure of how to bring the services back in-house later, if needed.  They are concerned of the huge cost and risk implications if IT systems need to be brought back in-house at a later point in time. They are also not certain of the long term cost implications of moving to the Cloud.

Concern over Cloud service providers: Banks are worried about a relative lack of standards for integrating Cloud service providers' services with their own servicing needs. They are also concerned that the solutions of many Cloud providers (across functional, operational, technical and commercial models) lack maturity. Many Cloud service providers lack proven credentials and a successful track record. Banks are also concerned that if the Cloud service provider suffers a major outage; it can have huge adverse implication for banks. Not even big Cloud service providers like Amazon Web Services have been totally immune to major outages.

That being said, success stories of banks' migration to the Cloud abound. Here are just two examples. Bankinter, the 6th largest bank in Spain, has crashed the time taken for credit risk simulation from 23 hours to just 20 minutes using the Amazon Cloud.  Commonwealth Bank of Australia cut its costs by half by moving its storage to the Cloud, and also achieved huge cost savings in app development and testing.
So what should banks, unsure of how to go about Cloud migration do, to reap immense business benefits? My next blog will provide actionable recommendations. Stay tuned...

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