Every financial organization is today, in one way or another, involved in the cloud. Customer expectations and a staggering rise in the competition are driving adoption globally. But what is the state of the cloud in the financial space? João Marques Lima reports.
The financial sector and the cloud took their time to find each other, however, following the 2008 global crisis, the need to differentiate against competition changed the financial space as we had known until then.
Cloud and other technologies have become the key player in winning new customers, speeding up IT and time to market. However, the whole landscape has become a tough place to compete and only the fittest will survive.
“IT was used within a project [in a financial institution] as long as it could increase revenue and generated profit and a competitive advantage,” said Michael Winterson, MD at Equinix Services.
“Today, we see IT departments being pushed usually in the way of efficiency as well as towards the use of more nimble, agile providers and use OPEX solutions instead of CAPEX solutions.
“Those drivers are more around creating efficiency rather than creating new revenue streams. We will see these drivers push adoption.”
Conversations enter the second phase
With the use of IT technologies such as the cloud now seen as an important roadmap for efficiency and growth, the conversations in the industry have also slightly shifted from that security fear, according to John Abel, Head of Technology and Cloud for the UK, Ireland, and Israel at Oracle.
When the banks and other financial businesses considered the cloud, their main preoccupations sited around security – in line with every other sector -, data privacy, availability, compliance, and the fear of vendor lock-in.
Abel said: “Previously, customers would speak more about security because the barrier to adoption was security. However, in a recent podcast we did, the main focus was around scalability. It might be that security is still number one, but people are more comfortable with it.
“And what we generally see with technologies when you move from security being number one, to then scalability being number one, is that people have started to look into enterprise workloads.”
Speed of innovation
As conversations focus more on the scalability of services, businesses are starting to also realize the potential around innovation that the cloud can bring with it, and the speed at which that innovation can go from an idea to a functioning service.
This innovation is being shown by contemporary trends sweeping the industry such as fintech. And within fintech, the appearance of blockchain has shifted paradigms.
Abel said: “The speed of innovation is critical. What is happening now in capital markets, because a lot of the fintech and specifically around technology such as blockchains, a lot of the rules and latest regulations are requiring new steps of innovation.
“That means that fintech with a light agile style engagement can compete much more with established market leaders, meaning that if they do not formulate to be a bit more agile and a bit more like what customers expect now they are going to be challenged.”
Nevertheless, and although the conversation is now more focused on scalability and the speed of innovation, Abel highlighted that financial services are still in need of a cultural shift.
“The market is changing, because of the regulatory changes, because of certain conditions. The financial services need to go through that last part which is the cultural shift and the adoption of cloud will accelerate faster because I cannot see this transition to the cloud slowing down.
“The only way you stop being caught out is by innovating, by being in the cloud, and most customers in the financial services are really feeling that.”
The speed of innovation in the cloud is a major business asset, however, speed in the cloud age can only be achieved with an innovative approach to business and technology.
As innovation in the cloud takes between 60 to 90 days to happen, as opposed to months and years, the financial sector is now also adopting DevOps to keep up with change.
“The way you compete in this space is that you culturally change to what you are competing against,” Abel said.
“A lot of the industry is starting to adopt DevOps because DevOps is that continuous improvement. That one element of adopting DevOps is giving you that capability to have that continuous change, if you do not, other regions are just going to do it.”
Also on the colocation site, Winterson said DevOps is now a key discussion point and part of the thinking process, of not just Equinix but its financial customers as well.
“We are teaching clients today to think in a DevOps way. What we are preaching to them is not ‘here is a huge amount of data center contracts, here is a five-year contract’.
“We are saying: ‘if you extend your current infrastructure into one of our buildings at a nominal fee for a 12-month contract, we can directly connect you to the following cloud players, and we can connect you to the following service providers. In their turn, they can connect you to the following networks, and we can connect you to any number of these growing fintech companies who themselves are innovating so that you just subscribe to them’.
“By building an open and interconnected network policy and by building access to an agile cloud development platform, you are effectively subscribing to a DevOps mentality.
“Then all of a sudden you effectively made the first two or three actions towards transforming yourself and it is not that you, yourself, a large bank, are innovating at that pace; you are subscribing to service providers who are innovating at that pace, and that is the benefit of this new world.”
Even though being in the cloud is now perceived as something natural, many businesses will keep most of their jobs concerning their cloud environments behind doors.
Abel said: “Very few customers in financial services will publicly say what they are doing. They will put it under a bigger problem such as Digitisation, Customer Experience, or Customer Enhancement. The less talk about technology. The reason why? It is very competitive.
“If you have got a unique and niche angle, you find that you probably do not want to share it and that is what we generally found in the past. Once you are there and everybody is there and everybody starts publicly talking about it, they [the financial services sector] were there years ago, they were just not talking about it.”
Abel added that, in the end, the cloud does not allow businesses to regress, and the whole concept is about going forward, about new innovation.
“As financial services get more mature they are going to want new characteristics because of new regulatory requirements and scaling.
“The customer will treat their cloud experience just like their data center experience which is heterogeneous.
“The cloud is all about value, it has to be a service that is consumed for a value reason. “