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Banking on the cloud

Banking on the cloud

Parag Arora, VP, Financial Services, Cisco India
Virtually every business sector today is betting big on cloud computing More so, given the benefits it promises and the way it changes how technology is delivered and consumed by the end user in an enterprise. Like most other sectors, banks and financial services companies too can benefit from the fact that cloud computing helps to create a more flexible, agile business model to meet the growing business needs in a dynamic and competitive landscape. Cloud computing can provide broad capabilities that banks need on a flexible basis to help them do much more than cut infrastructure costs.
Cloud computing helps banks to transform their business processes and enhance their ability to grow in new sectors or regions without the time and cost burdens involved with establishing a physical presence. It helps to create new markets and services to differentiate from competition and improve the ways customers' access and use the bank's products and services. Banks will have a much better ability to provide consistent service to customers across branches, geographies and also integrate a plethora of disjoint customer information and analytics.

Private cloud benefits
The private cloud is the first step towards cloud computing, and it is here that the most critical applications of the enterprise will be hosted for quite some time. The private cloud emerges stronger than the public cloud because it grants banks control over their IT while providing reduced complexity, increased flexibility, and all other benefits associated with cloud computing.
Private clouds have emerged as the hot favorite of the banking industry also because in a financial environment where applications are critical and governed by stringent user industry compliance, they can provide high security. They ensure that no data is lost or misplaced and also provide the flexibility of control in order to modify resource configuration according to demand. Since private clouds are deployed within an organization's firewall, the threat of security breaches is obviated. The company's IT infrastructure can be moved onto a single private network using a virtual private network (VPN) with ease and faster access.
Private clouds allow more systems to operate at high transaction volumes without loading the network or slowing the process, ensuring better customer experience. They promise cost savings and efficient services by having dedicated resources for each business unit in an enterprise. Since resources are rented instead of purchased, it helps convert CAPEX to OPEX, reducing the total cost of ownership. Private clouds come with the advantages of affordability and safety and enable a transition in banking. To guarantee long-term success, banks need to properly understand the technology and develop new applications that would benefit the customer.
When an organization changes its infrastructure to a cloud configuration, it should be done in real-time to curb the wastage of unused resources. Technologies such as Cisco's Unified Computing Systems (UCS) help to monitor the server, storage, memory and network capacity. They can calculate, with reasonably high levels of accuracy, which servers require more resources and automatically prioritize them. A well designed private cloud computing platform also costs less than a dedicated server on a per server basis.
Cloud based collaboration technologies can also provide a platform for application development, cost reduction and help banks to reach out to their customers more effectively. Beyond cost, they can create significant opportunities for banks to develop new business models that are customer-centric, thereby increasing growth and profitability.

Challenges to cloud
Although cloud computing is not a new concept for banks, this sector has been slow in adopting the technology. The key concerns are that such deployment models could lead to an environment sprawl and a lack of control in terms of change management. This can further lead to security risks, reliability issues and a lack of effective business continuity planning. A lack of core application solutions has delayed the process further. From the public cloud standpoint, the issues are around regulation, location, liability and recoverability in the cloud. These are some of the reasons that have slowed down the adoption and deployment of cloud computing and rather led most banks to start building mini 'private' infrastructure clouds.
To reduce this risk, the management of the infrastructure that underpins these computing environments needs to move away from complex IT provisioning requests to the presentation of a series of standardized services. Through the use of standardized processes and workflows, implementation risk is minimized, while established change management practices are supported. Reaching this state is the beginning of the journey to the cloud.
Concerns about the external cloud and rebuttals to them notwithstanding, banks have evolved technologies, which virtualize the IT infrastructure within an enterprise, to deliver IT as a service to internal users, calling it the 'internal' or 'private cloud.'

Future scenario
Private clouds have their place in enterprise IT, but they might not provide the cost benefits, economies of scale and ROI associated with public clouds. Customers looking to leverage the cloud for complex workloads which need high levels of security and compliance are moving towards the private cloud model. For certain workloads such as collaboration they look to leverage public clouds which provide them with an OPEX model.
Banks must consider looking at external clouds. Given their concerns around security and control, banks can follow an incremental approach, applying cloud computing to non-core operations first, with fewer applications and move more to the cloud as they see the benefits.
Finally, the banks need to know that this is all about 'business model transformation' and to achieve business agility for the next level of growth. The key is to ensure that each bank starts working on a cloud reference architecture, which will define its winning strategy.

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