Given how quickly many of their consumers have embraced the principles of enterprise-class cloud computing, making digital money transfers and forging strong relationships with retailers that keep their information encrypted in the cloud, it seems clear that banks would stand to gain many advantages as well. Several large banking institutions that have migrated operations to the cloud are seeing huge benefits, while others have been more hesitant in adopting the technology.
There are a few factors that can cause this reluctance. One, according to CloudPro contributor Jon Collins, is the fact that IaaS clouds are a necessity, and another is security. It's clear that banks need a private cloud system, which is inherently more secure than a public cloud and can offer maximum flexibility in its use. Financial organizations have a large amount of infrastructure and security layers that would need to be organized and kept protected during migration, which makes it clear that a tight connection with the cloud, as a business has in an IaaS cloud scenario, is a must. As with many large organizations tasked with updating on the fly and expected to keep pace with technological, industry and sociocultural developments, banks can end up with a bevy of legacy infrastructure than can be a huge hindrance to further development.
"One thing banks have been very good at traditionally is creating new IT systems," Collins wrote. "Back in the glory days, I remember being told, it was simply easier to build a new system than try to adapt an old one. While those days may now be over (at least for the time being), the result is a smorgasbord of systems, an unmeasured quantity of which are mission critical."
How enterprise clouds can be a bank's best investment
Eliminating legacy systems and making banks more agile will be critical to increasing business efficacy as their customer bases go global. According to Finextra, consumerization has made it imperative for banks to develop more customer-centric models. They can do this by using big data and analytics models, but the amount of data necessary doesn't really make the development and purchase of hardware to handle it all on premises a feasible option. Data center and business intelligence tools costs could quickly spiral out of control. As more organizations power their promotional efforts and customer relationship management with highly sophisticated data insights, banks' consumer interactions, like their IT, could fall behind the efforts of other industries. Enterprise IaaS clouds can help banks structure their big data and develop tools that enable real time, agile use.
The Economist recently highlighted several use cases in which companies were able to leverage cloud platforms for improvements in operations and overall profitability. Many of their efforts resulted from a desire to reduce IT spending. IT costs for banks are traditionally quite high – banks are projected to spend nearly $180 billion on IT costs this year. One Taiwanese lender was able to eliminate half of its IT costs by migrating to a private cloud, for example. Although the banking industry seems to be on the rise again, after many big banks posted large second quarter profits, scaling back IT and reducing operations costs can better ready banks for future economic downturns.