An Overview of Cloud Computing with special reference to financial sector

Presented by: Deepak Kumar Bora, Faculty Member (IT), ICFAI University Meghalaya, Shillong and Akinchan Buddhodev Sinha, Sr. Lecturer, ICFAI University Meghalaya, Shillong

Introduction
Any company or business organization always tries their best to reduce cost and maximize profit. Companies have redefined there basic culture of inside-out communication to outside-in communications, from traditional self-hosted IT to outsourced IT resources & operations (i.e. cloud computing). Cloud computing is an effective strategy in todays economic environment, to reduce the IT operations and management costs and free up critical resources and budget for discretionary innovative projects.

 On adopting cloud computing investment in IT changes from being a Capital Expenditure to Operating Expenditure, this leads to a lowering of the financial barrier for the initiation of a new project. Enterprises can become agile and harness the power of Information Technology to drive unprecedented customer value (i.e. outside-in communication).

What is Cloud Computing?

Cloud Computing is not new, the underlying concept of Cloud Computing dates back to the 1960s. Cloud Computing is the maturation and coming together of several prior computing concepts like Grid Computing, ASP, Server Hosting, Utility Computing and Virtualization. The five main principles that define cloud computing are as follows:
Pooled computing resources available to any subscribing users. Virtualized computing resources to maximize hardware utilization. Elastic scaling up or down according to need. Automated creation of new virtual machines or deletion of existing ones. Resource usage billed only as used.

Forms of services provided by cloud computing:

Software-as-a-service (SaaS). Platform-as-a-service (PaaS). Infrastructure-as-a-service (IaaS). Identity and Policy Management as a Service (IPMaaS). Network as a Service (NaaS).

Cloud Computing is:

(Engineering definition) An Internet-based technology through which information is stored in Virtual servers and provides services on virtual machines allocated on top of a large physical machine pool, which may spread over many locations around the globe. (Business definition) A method to address scalability and availability concerns for large scale applications without investing too much in procuring the necessary IT resources and infrastructure. (The big picture) Democratized distributed computing.

characteristics of Cloud computing

Multi-tenancy IT resources are shared between different users and customers. Rented service delivery model customers pay for the service instead of buying software licenses and hardware. On-demand usage/flexibility cloud services can be used almost instantly and can easily be scaled up and down as the application or the user demand. External data storage a customers data is usually stored externally at the location of the cloud computing vendor.

Classification of Clouds:
Public Cloud: Cloud Computing infrastructure is hosted at the vendors premises, and the customer has no visibility over its location. Private Cloud: Computing architecture is dedicated to the customer and is not shared with other organizations. They are expensive and are considered more secure than Public Clouds. Hybrid Cloud: Organizations host some critical, secure applications in private clouds. The not so critical applications are hosted in the public cloud. The combination is known as Hybrid Cloud. Community Cloud: The cloud infrastructure is shared between the organizations of the same community.

Relevance of Cloud Computing in Financial Sector

Large banks and financial institutions are sitting on pile of data that executives are eager to mine for business value. Many of them are opting for public cloud and private cloud technologies to free up this data from legacy IT systems, but the shift is challenging.
While some financial mammoths have opted for public cloud

services such as Amazon Web Services (AWS), thats most for simulations, experimentation and safe data. Regulatory and privacy concerns are attracting huge importance. The advent of private cloud technologies- software platforms that converts pools of computing resources into metered, self-service and flexible services are catching steam.

Magic of Cloud
Financial industry has been treading on a rough path post 2008 recession. It underwent a mammoth turmoil, and its on a restructuring phase. One of the foremost industries to embrace information technology is financial sector. In this regard, it is important to have a look at the recent innovation in this space. One of the most successful cloud service has been initiated by wall street for the FX market (Foreign Exchange), which is known as ESN (Electronic Settlement Network) volume growth for FX market continued unabated while financial markets were in doldrums over the credit crunch. The tier 2 and tier 3 banks have less margin in FX market because of the higher cost on per transaction.

The Grey Areas

Cloud computing which is touted as the way to deliver

software in the future, however the financial services sector, which incurs the highest expenditure on IT, is not so sure of its effectiveness.
Despite the fat promises its make regarding the improved way

of providing technology to business houses, cost reduction and that too without the need for the technology to be installed on a companys computers.

The Grey Areas

The research conducted by financial services think-tank, revealed that in the retail banking sector 37.9% of organizations said that they are not considering cloud computing. In the investment sector 24% are not considering it. None of the 230 organizations, forming part of the survey, said that their company had completed a cloud computing project. Despite the fact that finance firms were trying hard to bring south the IT costs during global economic crisis, acceptability for cloud computing was minimal.

The Grey Areas

Chris skinner, Chairman of the Financial Services Club, said

that the survey showed that there is absence of clarity about the definition of cloud computing. Another factor responsible for firms reluctance is that cloud computing is being driven by suppliers and not market demand.

Cloud computing-Indian scenario

The banking and financial services sector in India has clearly

distanced itself from cloud computing technology on the grounds that the concept may not deliver promised savings.
Large banks also fear that their confidential information could be vulnerable on another companys systems.
Out of 33 top banks and financial institutions that had

participated in a cloud computing event organized in the year 2010, not even a single bank or financial institution had embraced cloud computing in the true sense of the term.

The Silver Lining

The question that remains is how cloud services can be made compliant without missing out on their benefits especially for the firms in financial industry. Application of regulations. Data protection.

Due diligence and contractual protection.

Cautious approach.

Thanks