Reality & Head in the Clouds

Head in the Clouds

"Terry Dann looks at the opportunities in cloud computing for financial services businesses"

 

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Cloud computing: everyone’s talking about it – from Timothy Gartner, to The Economist, to the man-in-the-street (or my son at least). How many of us understand what it is though? Is it another over-hyped piece of packaging from the technology geeks or could it really be the silver bullet which will revolutionise IT departments?  Relatively few companies are truly using it, but it could have the potential to dramatically change the means and the cost of future IT services provision.

 

Cost saving versus delivery improvement

 

In my article for Motor Finance in January, I challenged CIOs to reduce their IT spend by 25 percent. I wonder how many have really taken that challenge on board – maintaining and even improving their service delivery and project completion while taking serious positive action on the bottom line?   Among the techniques I proposed to help achieve this goal were virtualisation and outsourcing – underlying elements of cloud computing.

 

Virtualisation delivers optimised use of data centre resources

 

For almost 10 years we have seen the growth of server virtualisation in our data centres.  Physical server boxes have been pooled and sub-defined into multiple ‘logical’ machines, enabling more cost-efficient use of capacity, reduced power usage, increased responsiveness and higher reliability.

 

We have seen similar advances in storage utilisation – storage abstraction has enabled disparate storage elements to be managed as a single environment and delivered dynamically on-demand, once again maximising the utilisation of available capacity and providing greater reliability.

 

Most enlightened IT organisations have been moving towards the increasing use of service-oriented architecture (SOA) in their application portfolios over the past few years.

 

SOA breaks applications into autonomous system services abstracted from one another.  Each service provides a self-contained function with a published interface conforming to web services architecture standards.

 

The services can be made available over the internet, either as unique elements, or built into complete application packages, software as a service. Employing application structures which can benefit from web services enables faster, simpler and cheaper application development

to be achieved.

 

Many companies from SMEs to large multinationals have made significant

investment in this area already  Next stop – cloud computing.  Cloud computing is the next logical step which combines the two concepts of data centre virtualisation and web-based application

services.

 

Next Step Cloud Computing

 

Cloud computing utilises the power of a broad base of multi-tenancy physical computing and software services resources to deliver capacity and applications on demand via the

internet. Not just ‘software as a service’ but also ‘platform as a service’ and ‘infrastructure

as a service’.

 

Ultimately, cloud computing could achieve the utopian vision of computing on demand, moving IT spend from capital expenditure to operating expenditure and commoditising the IT industry. This would be much to the chagrin of many of my CIO friends but it’s some way off yet.

 

Financial services afraid of the cloud

 

Reports on recent research by the Financial Services Club think tank indicate that of 230

financial firms surveyed, none has yet completed a cloud computing project. Within the retail banking sector almost 38 percent of organisations are not considering cloud computing

at all. This figure only improves to 24 percent in the investment banking sector.

 

Given the potential benefits, why are financial services companies so reluctant to give it

a try?  The answer is that they have real fears.

 

Embracing cloud computing means reviewing many of the cornerstones of financial services

computing – control of applications; regulatory concerns; security; and, critically, accountability.  Who is brave enough to mess with these in the current economic climate?

 

But we should be brave: All advances in technology present new capabilities which

can challenge many of our pre-existing operational norms.

 

An ‘internal cloud’ is a no-brainer

 

Financial institutions usually have large data centres with masses of computing power, much of it under-utilised. The internal cloud is a solution which could provide greater increases in data centre utilisation, uptime, dynamic adaptability and cost efficiency.

 

Under the internal cloud concept, all the company’s IT resources are managed as a conglomerate

whole, to deliver computing services on an ‘as and when required’ basis without

the control, security and regulatory concerns of an external solution. Also, the CIO and his team still remain fully accountable.This is a great place to start your journey to the clouds. 

 

The external Cloud is maturing fast

 

Virtualisation software providers such as VMware, Citrix and Microsoft are addressing the overall management and continuity issues with rapidly maturing solutions.

 

Cloud platform and application providers, such as Amazon, Rackspace, Salesforce,  Microsoft and Google are aware of the regulatory issues and, for instance, when required can guarantee the countries in which data

will reside.

 

The cloud is however unlikely to ever be suitable for all a company’s IT needs. Many key applications will remain bespoke and will run under the tight control of that company’s IT department for many years to come.

 

The most likely end state for larger companies is a connected enterprise cloud – a combination

of the internal cloud, the trusted, reliable, secure and accountable internal data centre, and the public cloud, composed of efficient, flexible and dynamic multi-tenant internet services.

 

Cloud opportunity too good to ignore

 

With the cost pressures and the public spotlight on all financial services businesses, we need our CIOs to be investigating every opportunity for efficiency.  The utopian promise of cloud computing is certainly over-hyped, but can we afford to ignore the opportunity and miss out on the prospect of some very real advantages, not only in cost but also in flexibility and agility for the future organisation?

 

Some 3.4 percent of retail banks in the Financial Services Club research reported they have started a cloud project and this rises to 4 percent of investment banks. 

 

You should join them. Pick an application area which is not business-critical or unique to your operation and dip your toe in the water – or your head in the clouds!

 

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