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Banking 3.0 : Organizational Drivers for Cloud Computing- Financial Institutions

To talk about the organizations that manage our money and assets, let us first classify them into the kind of work, they undertake. Then a careful study of the trends and a clear understanding of what cloud computing can offer, would provide us with the drivers for this sector to adopt cloud computing.

Bank services.jpgFor categorization, we can use a freshman's criteria of the nature of work. Hence we have

   ·         The banks

    o   Consumer Banks

    o   Govt Banks

    o  Industrial/Corporate/Specialized 


   ·         The Insurance Companies

   ·        The Non-Banking Financial corporations

trad dc.jpgIn terms of size and amount, IT services required at consumer banks can be the superset with the rest using similar or a part of that. Hence if we concentrate on consumer banks, we can easily breakdown the IT services required for a regular bank, as :   

The Evolution of Banking

Now, Banking 1.0 was all about brick and mortar branches, long queues, and generic services. Then with the advent of technology came Banking 2.0, an era of net and mobile banking, any time banking, customized and privilege services, and banks which took lead in technology, began to differentiate on these fronts. But then this technology soon became a commodity and the differentiation gone!  And while banking organizations were looking to pump in money to bring in more differentiation, came the recessionary times and IT dept had to cut budgets. With tightening Infrastructure budgets, came cloud computing and infrastructure as a Service concept. Almost every banking organization started taking note of this revolutionary innovation in IT infrastructure space, positively, albeit with some concerns and confusion. This novelty has all the writings to be called Banking 3.0.  Let's have a look why.

The concept of cloud computing already existed in banking services for some time now. ATM, net banking , CBS all work on concept of on-demand, variable pressure, real time-any time concept, though, technically the data center is traditional as ever. Hardly ever do we come across a non-functional ATM due to increased pressure. It is because the bank has over provisioned the servers for the ATMs with keeping the maximum load in consideration. Rightly so! After all, a 10 min failure of an ATM server in a prime location could be catastrophical for the banks brand and business.  

The Drivers

Economical: Now the above mentioned availability is though beneficial for the banks customers, it burns a deep hole on the IT dept pockets. And this is just one service. Add to it the net banking, Core banking at branches and the Infrastructure costs soar high. And that's not it.  There are internal customers of the bank, the employees who need continuous access to emails, payrolls, sales applications, budgeting applications, the branches handling the routine processes and the infrastructure budget just seems to be touching the sky.

So, this becomes the prime driver for the Banks to adopt a solution that helps them provision infrastructure linear to the current load on the applications, spend only on the infrastructure that the bank is using and be not hassled for any technology up gradation or maintenance. All this comes with moving the infrastructure to the cloud, physical server virtualization, and consulting partner cloud management.

Core Competency: Another important reason, which moving to cloud gives to banks, is the ability to concentrate efforts and resources on their core competency i.e. innovative banking. If banks enter into a strategic alliance with a Technology Consulting partner and leave the worries of all the infrastructure mess to them, they can do much more to delight their customers by innovating in the areas of mobile money, payment innovations and the likes. No need to mention the increase in dollar revenues this could bring and the leap they could take with respect to the competitors.

Legacy Applications Now, if we have a look at the technical aspect of moving to cloud, another compelling reason comes from the point of view of managing legacy applications. Most of the banks have risen through the ranks and have grown huge over a considerable period of time. Technology, business and market have changed drastically and so has been the heterogeneity of applications build as and when need was arisen. Now when we look back we find a whole gamut of applications developed on different platforms, different technologies and different architectures. Some of them are redundant too. For eg : For many banks there are three different and independent applications for branch banking, net banking and mobile/phone banking, accessing the same customer account. All of them have their own databases and even servers. Though it aint broke yet, but there is an immediate need to fix it, because this kind of redundancy increases the complexity and the pressure on the infrastructure. So while moving to cloud, these applications, technology and architecture could be homogenized in a gradual phase, using the virtualization layer, which will not only reduce the number of servers in the DC but even  the cloud management becomes easier and the banks can save a fraction of dollars currently being used up in the redundancy.

Staffing: Next, not so obvious but an indirectly important driver could be the Human resources that banks could save by moving over to the cloud. This is actually a shoot off from the core competency driver. A bank would need experts in marketing and finance but currently it also hires experts in technology and in numbers. If a bank decides to move its infrastructure to the cloud and rest its burden on a consulting partner, it can benefit in two ways. First, it can reduce the staff which was till now required for redundant work as mentioned in the above paragraph, and second the onus of hiring and paying the important resources for infra management would lay with the partner and bank can employ the same number of staff in its core finance and marketing dept. It can be argued well that this is possible without moving to the cloud and just outsourcing, but a partnership would rest the onus on the consulting partner, to provide the same, if not higher, quality resource which the bank used to employ and more importantly moving to cloud would reduce the number of resources required, simply outsourcing will, probably, not.

Passing the Buck: The last major reason, for banking IT infrastructure to move to cloud, is the benefit it provides to the IT service users. In the broadest of categorization, we have the services provided for external customers and the services provided for internal customers (employees). For internal services, moving to cloud could

·        Facilitate better emailing services, reduce the downtime of many routine applications, caused by excessive pressures.

·        Improve the response time as the server space would always be available because of limitless virtualization capacity

·        Reduce the time to market for any new application developed, as testing for any scale of implementation is possible without affecting the production environment

·        Would simplify the usage-expense sheet for all the business units, as all the business units will use the services on demand and will pay for only what they use , thereby also helping the management to find out efficiency of units in terms of services they use

For external users (business customers), moving to cloud could simply mean cheaper access to the banking services, as banks would look to pass on some dollars they save in managing the infrastructure. Also cloud may bring with it, some innovation in new services offered, though, this area still needs a lot of exploration.

Hence these drivers help make the clouds clear somewhat, over the banking and financial organizations decisions of moving their IT infrastructure into the cloud. The specific and technical details can be sorted out with the consulting partner they wish to engage, the important thing is to make that first bold step and say yes to cloud.

Continued from Here 


To follow:  Organizational Drivers for Retail, Manufacturing, Telecomm to adopt Cloud Computing and Infrastructure on Cloud



Will they be able to decommission legacy applications for a move into the cloud? Cloud Computing is still in its nascent stage and all type of risks have not been evaluated, I agree that moving or consolidating crm apps make sense, but what about the licensing of the existing applications? I'm sure that most Organizations prefer 5-10 years of binding contracts as it provides greater value in discounts.

Reetika Sharma
Salesforce Certified Administrator
An ex-infoscion


Thanks for reading. Yes there are risks and there are concerns, which I am planning to answer in a seperate entry. About decommissioning, I am not saying legacy apps can be given away overnight, but gradualy and virtulization has a solution for that also. And about contracts, then yes, i also talk about strategic partnerships rather than simple outsourcing.


Yes, I do feel that Virtualization can be a good solution for it to happen. Anyways, just off the record, I do not see any blog on Salesforce (SFDC) here. But, Infosys is setting good example to give this opportunity to its associates to voice their opinions on latest tech trends. I've not seen this happening in TCS, Wipro to say the least. Is there a way that I can contribute here, I didn't know that such a platform did exist till last year when I left Infosys. I'm SFDC certfied now and would like to contribute, not sure if you would be able to help here. Or else, if you are aware of any SFDC openings in Infosys, will you be able to forward my CV? Please let me know. My email id is (Emp id in Infosys was 89771).


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