Banking and Insurance: the obvious home for hybrid cloud
The banking and insurance industries are leading the way on hybrid cloud adoption. Rather than following a traditional approach of moving from private cloud to public in a strict sequence, the necessity for agility and cost saving means a hybrid approach is being embraced. The banking and insurance industries are often at the forefront of IT and in hybrid cloud adoption they once again promise to be pioneers.
By enabling each application to be developed, tested then deployed on the most appropriate private or public cloud environment (in terms of costs, capacity, security, regulations etc.) hybrid cloud infrastructures offer the flexible and responsive IT that the banks' and insurers' high-pressure businesses demand.
However, this promise of being able to take advantage of the best of both worlds has so far struggled to materialize because of the limitations - real or imagined - of public cloud offerings.
In recent months, hyperscalers (large-scale public cloud providers) have invested heavily to strengthen their B2B approaches. They create appropriate sales “Financial Services specific” entities, develop technical and advisory services, form partnerships (like Google Cloud with Atos) and deploy regional or even national data centers to address the key challenge of location of the data. Finally, their visibility and interpersonal skills give them valuable access to the highest levels of CxOs and company boards. And this offensive strategy seems to pay off since Gartner estimates that infrastructure services (IaaS) are expected to grow this year by more than 35%.
Costs and innovation: the advantages of the public cloud
By gaining credibility, public cloud can fully realize its strengths, starting with its economic interest. Since its launch, AWS for example has made 68 unilateral price cuts. The other great strength of hyperscalers is their unequaled ability to develop and continually offer new services. In April 2018, AWS had 1,430 in its catalog. The corollary of this profusion is that all the necessary ingredients for the most innovative applications are already available in the public cloud: Big Data, IoT, artificial intelligence, et cetera. In addition, the Software as a service (SaaS) offer continues to grow in wealth and maturity, including core banking.
Finally, the flexibility of public cloud makes it the ideal platform for launching new products, testing new ideas and providing digital factories with environments adapted to their agile and integrated modes of operation.
A favorable regulatory environment
In the banking and insurance sectors, these arguments are only worthwhile once regulatory barriers have been crossed. However, in this respect, things have recently changed very favorably for public cloud with the removal of a certain number of uncertainties.
In December 2017, the European Banking Authority (EBA) updated its outsourcing recommendations to include cloud services. The British Financial Conduct Authority (FCA) had already done the same in July 2016. And in the United States, the recent CLOUD (Clarifying Lawful Overseas Use of Data) Act finally specifies the conditions under which a US company must submit its data to the authorities.
"The GDPR is paradoxically an argument in favor of the public cloud because compliance is facilitated by the wealth of tools available."
Rightly or wrongly, security has long been the bane of the public cloud, especially in sensitive sectors like banking or insurance. This is why hyperscalers have invested heavily, to the point where today they are able to offer tools (encryption, regulatory reporting, audit, etc.) often more advanced than those that companies could develop internally. In addition, responsibilities are better defined and understood: the cloud operator takes care of the security of the cloud itself; the customer takes care of the security in the cloud.
Organizations leading by example
To all these favorable factors, we must add the ripple effect of FinTechs and some large groups such as Société Générale or Axa, who willingly communicate on their assertive strategy in the public cloud. The now widespread adoption of SaaS solutions for everyday tools (Microsoft, Salesforce, ServiceNow, etc.) opens the door to the cloudification of more specific business applications. As for the neo-banks, which are born and deploy almost exclusively in the public cloud, they constitute – by their results and their agility – many convincing references.
Now that it has the maturity needed to meet the stringent requirements of the Financial Services sector, public cloud is all set to become the key pillar of hybrid cloud models and digital transformation over the coming years.
In my next article, I will focus on the key technical and organizational challenges to overcome when deploying Hybrid Cloud solutions.