Reflections on the Evolution of Cloud in Financial Services

  • August 02, 2019
  • Banking & Financial Services

My cloud journey began around 2006 when the term “cloud” was not part of the business lexicon and it still made me think of rain. As Technology Operations Manager of the Securities Sales & Trading business unit of a global investment bank, I was forced to ponder over how agile we were in responding to the needs of the business. The investments on infrastructure had reached levels where additional demands for storage and computing were leading to confrontations. On one hand, there was tremendous pressure from the business to be more responsive to their fast evolving needs, and on the other hand, there was intense scrutiny on cost. And, of course, I wasn’t the only one facing this conundrum. This was actually the scenario across the enterprise and hence an urgent need arose to build an agile infrastructure that could deliver computing and solutions to the business and create new software products and services for our customers.

To begin with, the enterprise adopted computing architecture that enabled us to run large-scale grid computing, which was put to use in the Derivatives Risk Technology. Also, in order to address the needs of a mobile and distributed global workforce that included large vendor ODCs at offshore centres serving a global clientele, the firm invested in virtual-desktop environment so that the workforce could access firm’s applications and services, wherever they were and whenever needed. PCs disappeared from people’s desks and the entire computer processing moved to data centres around the globe. Gradually, these concepts and principles were adopted into the core business processing and a uniform architecture for running an internal “private cloud” evolved. The technology teams could put up requests for infrastructure provisioning through a workflow system that made the whole process much more agile, efficient and transparent. Computing cycles were freed up taking advantage of computing resources across the globe. It took about 10 years to move most of the distributed workload to the private cloud.

The biggest value drivers of a private-cloud infrastructure were:

  • Risk Reduction - The uniform structure of the private-cloud infrastructure reduced complexity and we could respond to failures more quickly.
  • Improved Agility – Automated environment provisioning and management helped reduce launch or update an application from months to days and sometimes even minutes.
  • Improved User Experience – Development and Engineering teams could focus more on the Application Dev rather than underlying infrastructure and end users’ experience improved significantly as a result.

However, the transition to the new infrastructure platform and the new ways of working wasn’t a walk on the beach. The complex technology environment, with thousands of critical systems and bespoke applications almost all built in-house and carefully orchestrated to serve critical business functions, required meticulous planning, strong change management and reorganisation of the technology division. The entire application landscape was brought under the umbrella of an engineering led support organisation to drive the transformation and cloud adoption.

I know that many other enterprises had undertaken the same journey more or less around the same time and the process of change still continues. Now the focus has shifted towards public cloud adoption. When we talk about public cloud, one of the biggest challenges is determining how we could put private, sensitive and critical enterprise data and applications on servers and data centres owned and managed by a 3rd party. The journey from private to public cloud would also be an evolutionary process with an intermediate hybrid state.

The three key factors that always come up in my discussions with our Financial Services clients are -

Security: It is clearly at the top of the list of enablers for public cloud adoption for Financial Services firms since they are custodian of sensitive client information. A step-by-step approach of defining security architecture and classifying data for migration is essential.

Regulations: is another critical factor. Local and regional regulations around data access, storage and management must be carefully analysed and taken into account.

Systemic Risk: Since there are only a handful of dominant suppliers, large financial services firms are wary of systemic risks that are posed by the cloud infrastructure. As a result many firms are looking at multi-cloud environments.

Cloud is no longer an “emerging” technology and most Financial Services firms have a Cloud Journey roadmap as part of their transformation programs. With an underlying cloud infrastructure, firms can mine large volumes of enterprise data and can focus on building large scalable ways of managing business intelligence. The concepts of machine learning and deep learning requiring data to improve the predictive model accuracy can only be industrialised if enterprise data is made available.

The transition from bespoke infrastructure to cloud infrastructure would help reduce the frictional middle parts of the IT infrastructure and create a more seamless, end-to-end solution for end users. The future of Financial Services business depends largely on enabling a digital community. Every Business Technology leader understands the urgency of moving to a cloud based infrastructure. The debate and deliberations are no longer about whether to adopt cloud but it’s about how to undertake the journey and whether to use Private, Public or Hybrid Cloud. Lot of these initiatives will be multi-year journeys that no firm can shy away from.