Financial Services and the Great Cloud Conundrum
I read an interesting article recently that outlined the way in which cloud adoption has changed the business landscape, causing a seismic shift in how organisations operate. Depending on your source, UK cloud adoption rates are currently anywhere between 78% and 84%, and whilst cloud is no longer a new phenomenon, its importance to not only the CIO but also the full c-suite of decision makers such as CEOs, CMOs and CFOs, is paramount as they jostle to gain a competitive advantage over competitors.
It has been argued that cloud adoption heralds the largest disruption in enterprise computing since the advent of the PC, with many industries embracing cloud-based platforms to not only cut costs but also drive efficiency. Despite this, there has been a certain amount of trepidation from the financial services sector to make the transition and fully embrace cloud and its many advantages.
At the mere utterance of the word ‘cloud’ we used to hear a plethora of reasons why financial services organisations could not make the leap. There were concerns over regulatory compliance as well as the complexity of functional replacement, security and control. And, in an era where financial institutions are more highly regulated than ever before, one could forgive these organisations for a tentative approach to change – especially when it came to new technologies that cloud put compliance at risk. To further validate this hesitance, financial services firms are reportedly hit with security incidents 300 percent more frequently than other industries.
However, over the past year, the UK financial services sector has taken a more confident and proactive approach to cloud computing. In mid-2016, following the publishing of the Financial Conduct Authority’s (FCA) final guidance for UK regulated firms outsourcing to the cloud, it was made clear that there is no fundamental reason why financial services firms cannot use public cloud services, so long as they comply with the FCA’s rules. This statement and the guidance provided will certainly be welcomed by those UK financial institutions that have been hesitant to embrace cloud due to the lack of regulatory certainty over its use. This also serves as good news for the cloud sector too, providing a boost in the uptake of cloud services in the sector. Certainly, there are many examples of financial services firms using cloud while remaining in compliance with FCA regulations.
Regulatory compliance and managing cyber risk do not need to be the enemy of innovation. In fact, taking a risk-avoidant approach to experimenting with new business models, technologies or user experiences will be a fast path to obscurity in today’s business landscape, where innovation and competition can come from anywhere. Banks, hedge funds, asset managers, insurance firms and other players in the financial services ecosystem should seek out technologies that meet compliance and security needs but also enable agility and flexibility.
Here are three quick benefits that cloud can provide for the financial services sector:
- Enhanced Security – Contrary to popular belief, businesses who take advantage of cloud computing may actually enjoy stronger security than those who try to go it alone or rely on their on-premise security technologies. The cloud is certainly more secure than many legacy platforms, so if financial organisations choose the right cloud service provider, they can actually experience a higher level of security than they would via legacy solutions.
- Reduced Infrastructure – As your financial services firm grows, so does its information technology hardware and software needs. By migrating to the cloud, your company can reduce the amount of infrastructure stored onsite, share liability with qualified technology partners, eliminate much of the hassle associated with procuring hardware and software, and reduce costs in the process by moving IT CAPEX to OPEX. There is no longer a need to purchase multiple servers and supporting equipment, store it on-site and pay for the space and utilities to support the operation of that infrastructure.
- Increased Business Agility - Cloud computing brings with it a number of benefits related to agility. First and foremost, cloud computing is all about scalability and flexibility on demand and financial services firms benefit from being able to roll out new applications very quickly or use the cloud for dev/test to drive innovation. Additionally, cloud computing is built with mobile productivity in mind. Employees need no longer be tethered to their desks. Applications and information can be accessed from virtually any device with Internet connectivity, allowing your staff the access needed to be effective, without being tied to the office.
By embracing cloud computing services, companies in the financial sector are able to add vast efficiency to their operations. As long as the risks can be managed, and with the right cloud service provider they can, there are many benefits. Cloud services – ranging from Production to Dev/Test to Disaster Recovery and backup - can help financial firms reduce setup and operating costs related to installing new IT infrastructure and negate the need to invest in more data centre space by making the necessary infrastructure resources available on demand. Perhaps most importantly for such a regulated industry, cloud services can help financial services firms gain IT innovation while protecting them against cyber-attacks, ransomware as well as maintaining compliance.
If your financial services firm has been hesitant about a migration to cloud computing, it may be time to reconsider. Enjoy stronger security, lower your maintenance costs and unleash the productivity potential of employees by migrating to the cloud.
Authored by Monica Brink, Director of Marketing, iland.