Banking on the Cloud: The Bank of England’s Migration to Public Cloud

For many observers, the Bank of England's decision to move to a public cloud platform might seem long overdue. But what are the challenges posed by the Bank's shift away from its legacy systems?

Cloud computing is one of the most transformative digital technologies across all industries. Cloud services benefit businesses in so many ways, from the flexibility to scale server environments against demand in real-time, to disaster recovery, automatic updates, reduced cost, increased collaboration, global access, and even improved data security. Numerous financial institutions around the world are already reaping the benefits of cloud infrastructure to fit their technology needs today and help them scale up or down in the future as economies evolve. According to research by the Culture of Innovation Index, 92 per cent of corporate banks are already utilising cloud or planning to make further investments in the technology in the next year.

The Bank of England is the latest financial institution to announce it has opened bidding for a cloud partner to support its migration to the cloud. Craig Tavares, Head of Cloud at Aptum, explains the significance of the Bank’s decision to Finance Monthly.

As the UK’s central bank seeks to move to a public cloud platform, IT decision makers are likely to encounter hurdles along the way. Figuring out the right partner will be half the battle for the Bank of England; it can be very difficult to identify and map out the broader migration and ongoing cloud infrastructure strategy.

The central bank’s cloud computing approach reflects an evolution in the way financial organisations are viewing data and the applications creating this data. The industry wide shift to viewing data as an infrastructural asset could have precipitated the Bank of England’s own move to the cloud. As such, the organisation should consider these four areas to determine their cloud strategy and partner — performance, security, scalability and resiliency.

Figuring out the right partner will be half the battle for the Bank of England.

Performance

Traditionally, financial institutions are known for their risk aversion and have been hesitant to undertake digital transformation due to their reliance on legacy systems. Fraedom recently found that 46 per cent of bankers see this challenge as the biggest barrier to the growth of commercial banks. But due to issues surrounding compliance, moving completely away from legacy systems isn’t always an option. This is no different for the Bank of England which is looking to move to a public cloud platform in order to enhance the overall performance of customer payment systems in the new digital age.

Legacy IT systems can prove to be a challenge for financial organisations looking to move applications to the cloud. Outdated processes often lead to system failures, leaving customers unable to access services, resulting in increased customer loss. However, with public cloud it is crucial to find the right combination of cloud services by defining the proper metrics for application performance and storage of critical data.

Legacy IT systems will need to co-exist with new or refactored cloud-based applications. Because of this, the bank will need to consider different strategies using hybrid cloud and multi-cloud architectures to align performance and cost. And when it comes to time-to-revenue or time-to-value the bank will be looking at traditional IT methodologies while leveraging cloud native approaches. The cloud native approach will lead to adopting DevOps as a new culture and Continuous Integration and Continuous Delivery or Deployment (CI/CD) as a process. These practices automate the processes between software development and operational teams which as a result will allow the bank to deliver new features to customers in a quicker, more efficient manner.

Depending on the hybrid IT architecture being used and whether the approach is traditional IT or cloud native, there will be different ways to ensure the best application and data lake or data warehouse performance. In order to do this, the bank will need to partner with a technology expert who will be able to offer guidance on the different levels of technology stacks required during the cloud migration.

Security

Central banks have traditionally kept close control of their IT systems and long expressed concern over the security of their customers’ information and financial transactions. As such, migrating to a public cloud platform and handing over to a cloud partner could heighten these worries. Global banks are expected to adhere to strict regulations to reduce the number of security issues within the financial sector and all new technology implementations must be compliant.

As complex regulatory requirements – such as the Markets in Financial Instruments Directive (MiFID) and Anti-Money Laundering rules (AML) – continue to cause a barrier to cloud adoption in the financial sector, the Bank of England should consider a partner that is able to adapt to high regulatory demands. As such, a three-way partnership should form between the Bank of England, cloud consultants and cloud service providers. This particularly applies if the UK central bank were to take on a multi-cloud approach – leveraging Amazon, Azure or both. This way, the three can be aligned and acknowledge the journey the bank has taken so far as well as the future of the financial organisation from a regulatory standpoint.

Adopting a partnership approach decreases the risk of security breaches which often cause client relationships to disintegrate.  In the past, security was treated like a vendor-customer relationship rather than an important partnership from day 1. Data is a major focal point in this discussion –   how the bank is protecting customer data or how they are managing financial data. Cooperation between partners ensures the configuration of every cloud service being used has the right security measures integrated into it from the start observing compliance requirements like GDRP, data sovereignty and data loss prevention.

Adopting a partnership approach decreases the risk of security breaches which often cause client relationships to disintegrate.

Scalability and Resiliency

With a growing abundance of data, The Bank of England will need a cloud platform that will allow them to scale up or down accordingly. Fuelling the growth of the bank’s data are its applications, which also need special scaling and resiliency considerations just like the data itself.

Keep in mind, cloud is not an all or nothing discussion. Not every application the Bank of England has needs to go to the hyperscale public cloud. For example, it may start with a progression to private cloud and then to a public cloud vendor agnostic framework based on the scaling and resiliency needs. The financial institution should understand which applications are best suited for the cloud at this time and which will be migrated at a future point. They should ensure that cloud is an enabler and not a detractor. It’s important to understand the cloud journey is an ever-changing process of evaluating business goals, operational efficiencies and adopting the right technologies to meet these outcomes at the right point in time based on ROI.

The UK central bank should consider moving to a container-based environment and cloud platform services (but as mentioned, in a hybrid cloud architecture), technologies that will enable an efficient process of building and releasing complex applications with the right scale in/out and uptime capabilities. The bank may incorporate Site Reliability Engineering (SRE). SRE is a discipline that leverages aspects of software engineering and applies them to infrastructure and operations challenges. The key goals of SRE are to create scalable and highly reliable software systems.

The Bank of England has come to recognise the significant impact cloud can have on the business and the benefits cloud technology will bring to their customers. Banks will become leaders in setting the bar for other organisations and industries when it comes to moving to the cloud. However, when it comes to choosing the right collaborator, The Bank of England should seek a cloud partner who is able to meet their business objectives, understands both traditional IT and cloud native approaches, along with hybrid multi-cloud and the data challenge which includes performance, security, scalability and resiliency.  Working with the right Managed Service Provider (MSP) partner can provide them with the necessary expertise and developing solutions that bridge the gap from where they are today, to where they want to go.

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