Banking on Cloud

The Cloud though a recent buzz-word came into existence the day the common man woke up to the Internet and it has symbolized the Internet since. True to the symbol, the definition and image of the cloud has changed over time. The essence however, broadly speaking, remains the same i.e. to consume something that is beyond your firewall. The evolution of the Cloud The late 1900s saw the email get into the cloud, with Hotmail leading, and many others following. The acceptance amazed many, and every IT company wanted to get onto it. Over time, more and more applications were offered on the web. They christened this apps-ontaps, for want of a better word, and later SaaS (Software as a Service). Today we see a lot of apps right from SFA to ERP offered through SaaS. However, there were still apps that were typical to organizations and businesses that felt at ease behind their firewalls. Businesses which needed the entire application platforms tailored to their need. The industry obliged and offered PaaS (Platform as a Service), fully geared with application and development environment. Though the user did not get complete freedom to design the apps, (s)he did get pre-defined building blocks (like a Lego) to work with and create the apps. e.g. Force.com from Salesforce.com With software and platform in the cloud, Managed Services could not have been left far behind. It soon followed and today a number of services like security and anti-spam services are managed in the cloud. Benefits raining from the Cloud Though the major benefit delivered by the Cloud is economics, it is also worthwhile to understand some of the other key factors which are fueling Cloud adoption by the industry in general, and maybe even banking to be more specific. Quick Start Using the Cloud for applications and services organizations can do away with investments in infrastructure like servers and storage. Thus, the startup is not only quick but also economical. Added to this, applications are available anytime, anywhere. Leaner Operations Since there are no captive datacenters, the cost of running a datacenter is no longer a part of the operating budget. This is topped with the benefit of service availability agreements that guarantee service levels. Grows with business Cloud being much bigger than the organization, it is easy to scale applications and data according to business needs, shortening the lag between business and technology. Its also economical since server and storage optimization brings down the cost for the organization. Cloud and the Banking space Banking, by virtue that it deals with wealth, carries a baggage of unique features. It views every change through the glasses of concern for these features. Unlike most industries Cloud adoption by the banking industry has been marginal. Banks have however, willingly adopted Private Cloud services like the SWIFT network. Even in a Private Cloud like SWIFT there are concerns, being addressed at this very moment. This has not however, impacted the business per-se and banks continue to use the Cloud. Let us understand the Top-3 concerns and how Cloud addresses them.

1. Privacy of data: Banks have traditionally relied on keeping customer data private. The biggest threat that banks have felt the Cloud carries is the fact that it allows data access to competition as well. This could mean a likely access to information that would normally not be available to the competition, or for that matter other powers that could have access to the Cloud. In case of the Private Cloud of SWIFT this concern was initially raised, but soon the bankers rested considering the benefits. However, this was not for long, and post September 2001, when US Government got access to the SWIFT data, the bankers, especially in the EU were concerned. However, the solution came soon enough with SWIFT routing EU data through servers located within the EU. As you read this, the US Government is still working on an all-agreed formula for bulk data transfer of data to the USA. However, now it is more a political debate rather than a bankers concern. Proof of this is that countries like Hong Kong opted to use this Cloud for their domestic payment and securities messaging. 2. Security of data: This is yet another concern that is coupled with the earlier concern of privacy. While the earlier aspect is of unauthorized access of information by persons having authority within the Cloud, this one deals with unauthorized access of information by unauthorized persons, either by posing as an authorized person (using false identity) or forcing their way in through holes left open in the cloud network. Though both these threats exist even within their owned data centers, there is a perception of being in complete control of the situation. Over the recent past, banks have moved to outsourcing their data-center management to independent professional organizations, and it is just a matter of time before we will see such organizations proving their worth and catering to multiple banks, thus leading to small private clouds. 3. Application availability: Banks have been the earliest and fastest adopters of technology solutions and currently there are dozens of legacy applications in each bank. Finding equivalents of all these in the cloud overnight is not possible. This is a mere hurdle and not a show-stopper. Adoption would probably happen for the available applications to start with, and, as benefits are realized and application availability improves, adoption would be on the rise. However, it would not be out of place to state that such applications ideally be located in Private Clouds only. Summary While it may seem to many that the banking industry is resisting the change brought about by the Cloud, a closer look at the top-3 concerns shows that the resistance is not universal but classified. While resistance to the Public Cloud is complete, there are instances of increased acceptance of the Private Cloud. It seems to be just a matter of time, before technology will satisfactorily address all concerns and the industry will once again be the leader in embracing Cloud. Prakash Seernani is the Vice President & Practice Lead for the BFSI vertical at Omnitech InfoSolutions.

Banking takes to cloud

This is Part I of a two part article on Cloud Computing making inroads into the banking sector. We will never buy another data center. We will never buy another rack or server or storage device or network device again. I will never let any organization that I work for get locked into proprietary hardware or software again. Ill never tell my teams in the business that it will be weeks to get them hardware provision. Ill never pay up front for any infrastructure and certainly would never pay for any, or rent any, infrastructure that I would never use. - Michael Harte, CIO of Commonwealth Bank of Australia, in his speech to the Committee for Economic Development in Australia. Hartes comments encapsulate the two clearest benefits of cloud computing for banks: the ability to buy computing capacity, storage, network bandwidth, etc., on demand - paying only for whats used, rather than buying hardware or software up front and the speed and ease of provisioning and managing hardware and software when you tap into a true internal or external cloud. Cloud characteristics like zero up-front CAPEX, shared service delivery over the internet, agility, and a pay-for-use environment has got some large banks, proactively testing the technology. The banking industry has experienced unprecedented change in recent years. Regulatory pressures, narrowing margins, and fierce global competition require organizations to seek innovative strategies and solutions. To thrive in the new normal, banking institutions must focus on core business and cost containment without sacrificing the capability to adapt and respond as the market evolves. To meet the daunting demands for greater agility, efficiency, and managerial transparency, banks must align interdepartmental strategies and deliver solutions at a far greater pace than ever before. Banks, insurers, and other financial organizations have taken on myriad initiatives to refocus and realign their business models, leveraging a host of methods including Lean Six Sigma, performance analytics, and follow-the-sun operational models. Traditionally, the cost and time required for technology enablement has hindered the ability for IT to satisfy business needs. Clearly, new tools are needed. Enter cloud computing. The cloud offers a host of opportunities for banks to build a more flexible, nimble and customer-centric business model that can drive profitable growth. The Indian Banking CIO and the Cloud Indian banking CIOs are seeking ways and means of supporting banking operations through optimal IT investments. They are exploring some of the key imperatives that allow harnessing the power of cloud computing, be it virtualization, consolidation, etc. Since most large banks have already invested in captive datacenters the approach adopted is more towards private cloud implementations within these datacenters. Banking regulations are also undergoing rapid transformation and becoming more inclusive in nature. There is a huge potential for CIOs of Indian banks to adopt cloud computing technologies at the infrastructure layer. Changes in the banking landscape and regulatory requirements from RBI have driven banks today to implement a Core Banking Solution (CBS). Implementation of this solution would require an IT infrastructure aligned to the banks business growth plan and one that meets the bank's disaster recovery requirements. The Cloud can provide a

scalable, robust and a highly available IT infrastructure to support their growth and expansion plans at a fraction of a cost without the bank having to make huge capital investments. Banks expectations from Cloud solutions Dynamic and flexible technology model to fully align with the changing needs of the business enabling businesses to provision technology resources based on demand and usage at the right level and at the right time, rather than having to plan upfront for capacity. Highly optimized and virtualized Infrastructure enabling scale and cost Efficiency enabling businesses to leverage the right hardware components and manage computing needs as a function of real time usage, rather than design and run with maximum capacity, redundancy and resiliency upfront. Fully automated service provision, monitoring and management for achieving agility enabling service providers to focus on managing hardware, software, services as well as end usage outcome, rather than for businesses to set up extensive and expensive operations organizations. Shared Services delivered across trusted domains delivering security of data, transaction & operations enabling integrated treatment of security across all the operating platforms (self and partner) for all the services rendered to the end users. Internet or Intranet based access model using high capacity bandwidth and ubiquitous connectivity enabling businesses to deliver business applications to their customers and associates on multiple devices. Service based acquisition model providing functionally rich capabilities on demand enabling businesses and customers to seek, evaluate, integrate and consume services that are most appropriate to their context, rather than build for scenarios and variations upfront. Significantly low start up costs and rapidly expandable capabilities that shift Capital Expenses enabling organizations to focus on business outcomes rather than planning technology, capacity, service development and deployment; IT services investments moves significantly into Operational expenses domain. Rapid innovation in services, features and operating models leveraging the capabilities of service provider(s) as compared to the need for internal and isolated investments and enabling the full impact of Innovation to reach all consumers rapidly. Up in the Cloud By transitioning business and operations functions to the Cloud, banks can increase operational efficiency and decrease costs. Moreover, the reach and versatility of cloud-based servers can multiply the number of opportunities a bank has to introduce innovative products and services to the marketplace. The Cloud brings agility to banks Cloud computing enhances business agility where banks get the ability to react quickly to service requests not only from their internal IT staff but also to requests coming from external customers. Self-service and service automation that are attributes of cloud computing, reduce provisioning time and provide the right information in the right format at the right time. Cloud computing enables banks that develop applications internally to procure, configure a development environment in less time and with reduced operational requirements. Cloud-

based web hosting can help deliver marketing campaign websites faster. This will allow banks to dynamically iterate and refine messages based on market insights and trends. Further, the flexibility of cloud-based operating models lets banks experience shorter development cycles for new products. This supports a faster and more efficient response to the needs of banking customers. Since the cloud is available on-demand, less infrastructure investments are required, saving initial set-up time. The Cloud enables faster time-to-market and greater flexibility for new products and services to be launched. The bottom line is that cloud provides a lot of agility within a reasonable cost structure, which should in turn allow the organization to provide services to its business lines faster. The business can in turn create new products and services quickly and grow the top line. At the same time, the virtualization aspect of the cloud should drive costs down. - Alan Boehme, SVP, IT strategy and enterprise architecture, at ING Americas And opportunities beyond cost savings The Cloud brings cost efficiencies no doubt an attractive proposition, but there is more to Cloud Computing than just cost reduction. In our opinion there are four areas where Cloud can create significant opportunities for banks to design new business models that are more customer centric and nimble and help them grow more quickly and more profitably. Building a frictionless and flexible ecosystem Most compelling use case for cloud computing for banks likely will be in the way innovative services can be rolled out in a short span of time. The cloud gives banks an opportunity to break apart their own value chain - be it credit approval or back-office fulfillment. Ensuring greater customer centricity in a market where product differentiation is tough One of the challenges which banking industry is facing is that customer expectations and needs are more complex than ever. Banks need to provide a more engaging experience and deliver customer-centric services to retain old customers and attract new ones. In todays environment, firms need to rebuild trust through improved transparency and enhanced service levels to its customers. An analytics solution offered through the Cloud will help banks to deploy a shared business intelligence and analytics environment rapidly at optimal costs and will provide a single consistent view of the business enabling better decision-making. In addition, Cloud services will help banks to increase speed and responsiveness in test and development environments. This would enable shorter time-to-market and greater flexibility for new products and services. Speeding up time to market With cloud computing, time to market can be reduced from months to weeks and from weeks to days, depending on the size of deployment. A self-service based, on-demand and real-time monitored cloud helps by: Eliminating procurement delays for computing hardware and software Expediting computing power for when existing applications need to handle peak loads Eliminating the upfront capital and time investment for procuring hardware for proof of concept work or rapid application development and testing.

Provides high availability for banking applications Complexity, volume and size of operations have increased the need for high availability within the banking environment today. Customers expect banking operations to be available round the clock, 365 days in a year despite planned or unplanned outages. Cloud computing ensures high availability and centralized management across the banks numerous applications and heterogeneous platform technologies for branch applications, call centers, payments and trading operations, and other core banking system and reduce the risk of downtime. As a result, banks can derive significant business benefits like increasing competitive advantage and improved profitability. Enhanced customer experience Banks can more deeply engage consumers by providing cutting-edge offerings via the web and social media. Potential offerings include improved access accounts, analytics, solicitations, and other information vital to consumer and commercial customers. The Cloud provides an opportunity for banks to think outside the box and become more creative in servicing clients thereby improving client relations and increasing customer loyalty. Additionally, cloud-based business management applications deliver on the promise of creating one view of the client without the costly integration and upgrade challenges found with disparate business applications. Infrastructure Savings With the cloud-based virtualization of desktops, datacenters, and local networks, banks can create savings from the commodity portion of IT expenses, freeing up capital for businessfacing applications. The Clouds integrated, standardized platforms allow for greater scalability across organizations of every size. Gopan Joshi is the Product Manager for Cloud Computing Services at Netmagic Solutions Pvt. Ltd