Are The Clouds Over Core Moving?
Are FSIs still slow and hesitant in looking for core banking solutions on the cloud?
Operational risk is a major issue that inhibits companies from moving to a cloud business model for core banking. It was once believed that FSIs would never move their core systems and applications to a public cloud infrastructure or purchase core services under a public cloud, software-as-a-service (SaaS) model. IT adoption is following a familiar pattern of embracing new technologies, leapfrogging developed economies, and their legacy systems.
Here are some success stories:
Microsoft and Temenos launched a cloud-based, pay-per-use core banking platform under a cloud-based delivery model and pricing approach that had 12 Mexican banks as their first customers. PNC bank is on its path of modernizing the legacy of its core banking systems. They want to rationalize and simplify their legacy core applications, reduce the time to market (TTM) innovative products and services vis-à-vis their peers, and prepare for hosted and cloud computing solutions.
It would be impossible for banking industry to adapt to cloud based solutions without some common standards. These standards will help integration of different services t from and to the cloud interoperable. The cloud solutions are going to throw open and allow multiple options. Then the big, enterprise wide solutions are slowly going to become a thing of the past. (When we say cloud here, we mean private, internally hosted cloud services and these are not public cloud offerings like those offered by Google, Amazon and Rackspace.)
The banking industry architecture network (BIAN) is not going to help banks to make or manage their private clouds or their SaaS applications. Yet, BIAN could be the best catalyst to help the entire banking industry gear up to become cloud-ready.
There are still many hurdles for financial services industry specific SaaS deployments and services. Issues such as privacy and safeguarding business secrets coupled with the larger problem of non-availability of specific appropriate financial services and some particular SaaS offerings are preventing banks from taking the cloud adoption route. BIAN has multiple a components to help them create a value in the SaaS space. BIAN's idea of cloud-enabling the banking industry will become a reality once these hurdles are removed.
In general while looking for cloud as a solution, Banks and financial institutions are placing transparency, robust auditing controls and better data encryption mechanisms on top of the list when it comes to expectations from their cloud service providers. When we try to understand why Banks are going to the cloud, flexible infrastructure capacity and reduced time for provisioning were listed as top objectives. Customer relationship management and application development are the top services being adopted by banks for moving to the cloud.
So, Clouds over core banking are clearing slowly and banks need to gear up and get ready.