It’s fair to say that banks and other financial institutions did not take to the cloud with quite the same enthusiasm as firms in other sectors. This is beginning to change for a variety of reasons, but the past preferences of finance sector firms will continue to guide to their present and future priorities.
The promise of cloud computing offers the access to a fast-evolving array of IT capabilities and services, typically providing scale, speed and power in the processing, storage and analysis of data on a cost-effective basis. But for the financial services sector, the combination of regulatory requirements and handling of data across multiple jurisdictions had, in the past, restricted the use of public cloud services. However, the cost efficiencies of locating or accessing certain compute capabilities via the cloud were too attractive to ignore, prompting the emergence of many “private clouds” across the finance sector. Not only did these private clouds ensure regulatory compliance and provide customer reassurance on data governance, they also played to a preference for proprietary solutions as part of the ongoing search for differentiation.
Changes in supply and demand
The past decade has seen a growing emphasis on handling customer-related data with due care and process in the financial markets. Notably, things have evolved significantly of late.
On the supply side, service providers’ security capabilities have been recognised as being on par with those of any bank, in terms of being robust, sophisticated and regulation-specific (by industry and geography). Also, the range of cloud services and capabilities has multiplied, as has the range and flexibility of service options.
On the demand side, regulatory curbs on leverage and capital have reined in banks’ appetite for relying on in-house IT resources. In parallel, banks have been reassessing their competitive strengths and value propositions to customers after the global financial crisis, partly due to stiffening competition from fast, nimble and innovative Fintech competitors. The outcome? A collaborative approach to delivering value core services – customer-centric, but less capital-intensive – using partnerships where necessary to provide scale, speed and reach.
Diversity in cloud usage
This does not mean of course that finance sector firms are ditching their existing capabilities and diving headfirst into the public cloud. According to recent research commissioned by Telstra, use of software-as-a-service (Saas), infrastructure-as-a-service (Iaas) and public cloud usage is expected to increase from 24.7% of workloads now to 36% in two years, while hosted and on-premises private cloud usage will fall from 32.2% to 23% over the same period.
Alongside data security and governance considerations, the ability to precisely match solution to need is critical. Our survey shows that currently 25% of multinational corporates are mainly using cloud resources for testing and development purposes, while 45% are using a mix of cloud resources and on-premises non-cloud servers for their production workloads.
Moreover, a desire to exert control through micro-segmentation is reflected in firms’ expectations of cloud, colocation and connectivity providers. In terms of selection criteria for colocation providers, our survey found 86% of respondents prioritised secure direct connection to third-party cloud services providers, while just under three-quarters (74%) cited the ability to access a variety of cloud services, e.g. IaaS, converged infrastructure, SaaS, and managed hosting.
While the survey canvassed opinion from various industries, discussions with our finance sector clients confirm they have the same plans and expectations as their global peers. Future success depends on cost-effective access to a diverse and evolving set of third-party capabilities, through the public cloud and / or colocated data centres, to collaborate with and support in-house resources in the continuous development of new value propositions. However, such external resources must be tapped within a framework that is transparent, secure, responsive and cost-effective.
For these reasons, Telstra is working to support the increasing demand for a hybrid IT and networking architecture by clients in the finance sector and beyond. The finance sector may be embracing collaboration, colocation and cloud in new ways for the efficient roll-out of new applications and services – but for the purposes of flexibility and control, they are unlikely to be drawn to a one-size-fits-all connectivity solution.
 Enterprise Hybrid IT: The Role of Colocation, Cloud and Connectivity – 451 Research (December 2016)