Sibos Topic 3: The benefits of Cloud Computing

By Nicole Miskelly | 19 September 2014

Last week bobsguide provided insights into big data, a key topic up for discussion at Sibos this year. With the global conference quickly approaching, this week bobsguide discusses Cloud Computing and its impact on businesses within the financial sector. Despite some negative attitudes towards cloud when it was first introduced, attitudes have softened over the past few years and many industry experts believe that cloud is the key driver for innovation in companies. No longer is cloud just an option for start-ups such as Instagram, Pinterest, Spotify and Shazam but now larger corporations such as Samsung and even governments are using cloud technology to innovate and better serve their customers.

How has Cloud Computing changed the way companies do business?

Many companies believe that cloud has changed the way they do business. According to Jane Tweddle, Industry Principal, Financial Services, SAP, cloud allows businesses to react more quickly to changing requirements and enables them to take advantage of business opportunities. “Cloud has transformed the way that organisations do business, allowing them to react to changing requirements at a far quicker pace and take advantage of new business opportunities in a way that would otherwise be difficult.”

Cloud technology benefits large companies when it comes to cost and scalability but according to Tweddle it can also provide SME’s with low cost solutions through better functionality and flexible subscription fees. “Cloud can provide SME’s with the benefits of enterprise solutions at a manageable cost. They can access broader, deeper functionality via controllable and flexible subscription fees, and also benefit from not having the cost of installing and running the infrastructure needed to power these systems.  This means they can run their business better and gain access to far more functionality.”

Benefits of Cloud Computing

Financial service executives are under extreme pressure to meet shareholder demands, improve customer relationships to reduce flagging customer loyalty, monitor regulatory changes and requirements, and drive innovation to keep up with new entrants. Companies are looking for ways to minimise risk, reduce costs and streamline business operations. Cloud computing is known to offer all of the above and according to Mohammad Wasim, Director & Global Infrastructure Lead, Sapient Global Markets, aside from cost reduction, there are three important benefits that cloud offers; scalability, time to market and mobility.

Scalability: If well designed, cloud solutions enable firms to meet user demands and scale quickly, dynamic provisioning of computing resources, whether it is CPUs,  memory or IP addresses, will save business users and IT professionals from engineering the  systems for peak loads. To stay compliant with today’s regulations around risk management processes, financial services firms need multiple times the computing power for risk modelling than they did before the financial crisis of 2008-09.

And that’s why firms are looking at cloud-based grid solutions. Normally, to run these risk simulations and calculate analytics indicators, computing power is heavily required only at certain times of a day, leaving resources idle for the rest of the time. If shared computing resources could be made available to such processes based on when they are run and the data load, it could lead to instances of almost zero unutilized computing power. Firms can tackle the challenges of security and data privacy by creating a hybrid cloud where sensitive data can reside on a private cloud and computing power can be available on a public cloud. These private and public clouds can be combined in a virtual private network to create a single scalable hybrid cloud.

Time to Market: With cloud computing, time to market can be reduced from months to weeks or days, depending on the size of a firm. A self-service based on-demand and real-time monitored cloud helps by:

  • Eliminating procurement delays for computing hardware and software
  • Expediting computing power for when existing applications need to handle peak loads
  • Eliminating the upfront capital and time investment for procuring hardware for proof of concept work or rapid application development

Mobility: Many of today’s business users want to access risk and analytics reports, performance attribution metrics and trading summaries while they are on the move. They see the advantages of accessing their emails on their smart phones and tablets, anywhere and anytime. Likewise, they want similar interfaces for financial services-specific applications. And since a cloud enables users to access systems and infrastructure using a web browser or customized clients regardless of location and time, development of such interfaces has started taking shape. Some financial services players have ventured into this area by developing iPhone, Android and iPad interfaces for their account management applications, CRM tools and data research and reporting applications.

Wasim also believes that cloud can play a significant role in financial services. In the area of risk analytics calculation, he believes that applications that calculate analytics at the level of a single security, position or portfolio are perfect candidates for a grid-based cloud which service can easily scale up or scale down depending on the data load. Wasim also believes that cloud could provide benefits to trade matching and reconciliation. “During the trade matching process trade data gets taken from multiple brokers and counterparties and then reconciles it. This process is prone to high volumes during times of peak trading. The solution is to create a hybrid cloud where the reconciliation process can run on a public cloud for scalability and the data can reside on dedicated database servers in a private cloud.”

Cloud and DevOps  

Some industry experts believe that Cloud Computing helps to accelerate DevOps. According to Tweddle, many organisations enjoy having the ability to change their capacity to support heavy periods of development and testing, and cloud can accelerate the DevOps movement as it allows organisations access to larger capacity and a faster testing environment. “Cloud computing allows access to greater capacity when needed, and larger environments for performance and volume testing as required during a development lifecycle, therefore reducing overall timescales compared to installing or waiting for wider system resources.  Cloud solutions also provide for faster proof of concept and prototyping, allowing businesses to test technologies and new products in a much more agile way, and bring new solutions to market in a faster time.”

Is security the biggest risk?

Security is the biggest concern when it comes to cloud. Financial Institutions in particular are wary about adopting a cloud-based system because of the potential threat to their customer data. Tweddle believes that the security of these services and physical environments is now established and very mature because service providers have been providing hosted services for many years and the issue is actually people’s mindset around where data actually resides. Many organisations want to have their data in-house so show reluctance to placing it in the cloud. Regulators are also nervous around where the data sits geographically, and end-users may also have some concerns about where their personal data sits.  However, the technology to provide secure services is constantly evolving, and the Data Protection Act is supporting greater controls around the use of information by firms.

The future of cloud 

Many more organisations within the financial service sector are warming to idea of implementing a cloud- based system and some are moving to the cloud. Tweddle believes that although we are starting to see more transaction-based services in the cloud, it is going to be a slow adoption for more critical solutions within banking. “In the financial sector we are starting to see transaction-based services such as core banking and insurance being taken up via the cloud, as well as our ERP, HR and procurement solutions. However, the adoption of cloud for more mission-critical solutions remains slower, and this is something we expect to continue for a while."

By Nicole Miskelly, bobsguide Lead Journalist

Don’t miss the final Sibos Topic next week…

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