This presentation, including any supporting materials, is owned by Gartner, Inc. and/or its affiliates and is for the sole use of the intended Gartner audience or other authorized recipients. This presentation may contain information that is confidential, proprietary or otherwise legally protected, and it may not be further copied, distributed or publicly displayed without the express written permission of Gartner, Inc. or its affiliates.© 2011 Gartner, Inc. and/or its affiliates. All rights reserved.

Felix Enescufelix.enescu@gartner.com

Banking on the Cloud

Cloud Computing — FS CIOs Plan Rapid Shift Over the Next Five Years

When will your organization support: (a) >50% transactions on cloud infrastructure and (b) >50% transactions on SaaS applications?

v

Cloud infrastructure

SaaS

Source: Gartner Global Survey

8%

47%

26%

19%

9%

41%

27%22%

2010 2011-2015 2016-2020 Never

Cloud Infrastructure SaaS

All FS CIOs

Key Issues

1. What is the state of cloud computing for the BIS industry?

2. How can cloud computing enable long-term transformation?

3. What forms can cloud banking take?

Note: CC lets banks automate more processes and run them more cheaply than before — CB lets banks do things they could never do

before and that are unique to this industry.

FS CIOs Prioritize Cloud Computing

[Green = up on previous year; red is down]

Strategic TechnologiesRanking of Technologies CIOs Selected as One of Their

Top-Five Priorities in 2011  2011 2010 2009 2008 2007Cloud 1 2 - - -Virtualization 2 1 3 4 5Mobility 3 8 - - -IT management 4 9 6 6 8Business intelligence 5 4 1 1 2Service-oriented architecture (SOA) 6 7 4 3 3Enterprise applications  7 - - - -Infrastructure 8 10 7 7 4Networking, voice, and data communication 9 6 - 10 6Web 2.0/social media 10 5 - - -

Note: Data management and storage was ranked fifth or better over the last five years but didn't rank in 2011.

Source: Gartner CIO Survey

Demand Is High but Supply Is Immature

Strategy

Deployment

Risk

Road mapEngagement

Partners

Value-added services

0

20

40

20102013

0 = Embryonic30 = Developed

Major Vendor FS Cloud Maturity

Cloud Computing Technologies and Concepts Are Still Evolving

Technology Trigger

Peak ofInflated

ExpectationsTrough of

Disillusionment Slope of Enlightenment Plateau of Productivity

Time

Expectations

Years to mainstream adoption:Less than 2 years 2 to 5 years 5 to 10 years More than 10 years

Obsoletebefore plateau

As of September 2010

This chart is a composite, derived from Gartner published Hype Cycles. The particular combination and comparison of items made here has not been reviewed by Gartner.

Cloud Parallel ProcessingCloud Services Brokerage

Cloudbursting/OverdraftSaaS Delivery of Treasury and Trading Services

Cloud Management PlatformsCloud-Driven Business and IT Services

Virtual Private Cloud ComputingBrowser Client OS

Community Cloud

Cloud Application Development ToolsHybrid Cloud Computing

Cloud Testing Tools and ServiceCloud-Enabled BPM PlatformsCloud-Based Grid Computing

DBMS as a Cloud ServiceEnterprise Portals as a Service

Cloud APaaSCompute Infrastructure Services

Private Cloud ComputingCloud-Computing Security Concerns

Cloud Service IntegrationCloud Storage

ElasticityPlatform as a Service (PaaS)

Cloud ComputingCloud/Web Platforms

Public Cloud Computing/the Cloud"In the Cloud" Security Services

Real-Time Infrastructure

Dedicated Email Services

Enhanced Network DeliveryIT Infrastructure Utility

SaaS SaaS Sales Force AutomationVirtualization Cloud Advertising

Security as a ServiceGrid Computing Without Public Cloud Computers

Cloud Services for FS Risk and Compliance Management

Standard Hype Cycle adjusted for FS industry

Cloud Computing Heat Map for Investment Services

Area Application

"Cloud-Appropriate" Tests        

Maturity and Standz'n Indep'ce Scalability Ubiquity Risk

Overall App'ness Pub/Pvt/Hyb IaaS/SaaS Cost Advg Rev Advg

Front Office Core applications              Pvt S    Trade analytics and data management             H S    Pre- and at-trade processes

            H S    Sales and marketing, CRM, and analytics

            H S    Middle and Back Office

Risk management             Pvt S    Clearing and settlement             H IS    Post-trade processes (recons, exceptions, and corporate actions)

           H S

   Generic/Enterprise/Infrastructure

Data management/MIS/BI

            Pvt IS    Remote application components/integration

           H S

   Network, telco, VoIP, and connectivity

           Pub I    

Storage             H I    

CC appropriateness:Low

MediumHigh

For Illustration

Only!

Key Issues

1. What is the state of cloud computing for the BIS industry?

2. How can cloud computing enable long-term transformation?

3. What forms can cloud banking take?

Note: CC lets banks automate more processes and run them more cheaply than before — CB lets banks do things they could never do

before and that are unique to this industry.

How Cloud Computing Will Transform the Way We Do Business With Banks

By the end of 2015, consumers will initiate at least 10% of all banking interactions indirectly via cloud services-based

exchanges and portals.

Reasons why it might be lower• Regulatory problems (e.g., ban on

non-regulated services being offered via CC) and other inhibitors such as…

• …security, reliability, and privacy• …lack of industrywide standards• Dynamic pricing doesn't take off• Tech issues such as lack of

componentization• Lack of automation and power to run

auctions on industrial scale• Local restrictions such as Internet

bandwidth

Reasons why it might be higher• Consumers expect to be able to

negotiate prices, terms, and conditions

• Consumers expect to be able to configure product features

• Banks will need to reinvent and decompose products and services to meet customer needs

• Competition and disintermediation (e.g., by P2P lending) raise urgency and accelerate progress

• Next natural evolutionary step after price comparison sites for banking products and services

Cloud Computing Evolution to Follow Electricity Trajectory

From cottage industry, to

centralized industry, and now (a little) to

decentralized, feeding back into

smart grid.

(Banking is about

here)

NYSE + VMware + EMC announcement for CC platform

Trust within closed communityTo come: spot price vs. future price?

Developing the Banking Cloud

Transactional

Executional

Operational

Tactical

Strategic

Execute

Order Clear EvaluateDecision

Support Workflow/Life Cycle

Business Approach

Strategic Market Analysis

DemandPlanning

Matching

CRM

Analysis& Planning

Settle

LiquidityMgmt.

Activity Management

Custody &Payments

Allocation/Attribution

Compliance

ClientReporting

Pricing

OrderExecution

Reconciliation

CRMPortfolio Analysis

Counter-part

InteractionIOI

Risk Analysis –MRM/CRM/PTC

OperationalRisk

Accounting

ExecuteOrder Clear EvaluateDecision Support

Settle

Clou

d Co

mpu

ting

SaaS

Info/Integ. aaS

APaaS

IaaS

Clou

d Ba

nkin

g

Generic:ERP, HR,

payroll

FS Applications:CRM, compliance, etc.

Mission-Critical Apps(e.g., FX and trade pricing)

Compositions/Business Processes(e.g., reconciliations)

Acceleration via Cloud Service Brokerages* (CSBs)

Type 3 – Cloud Service ArbitrageSimilar to T2 (aggregation) but without fixed suppliers (e.g., use three credit scoring agencies but only take "best" score based on criteria)

CSB Exists to Provide Governance and Integration as a ServiceType 1 — Cloud Service IntermediationVAR for cloud services — adds value such as usage, pricing, billing, and payment

Type 2 – Cloud Service AggregationPackaged applications from multiple suppliers over cloud with all data and processes integrated Q: Will

regulators allow use of CSBs in BIS industry?

[* nothing to do with securities brokerages]

Key Issues

1. What is the state of cloud computing for the BIS industry?

2. How can cloud computing enable long-term transformation?

3. What forms can cloud banking take?

1. Compete2. Collaborate3. Consume4. Combine

Note: CC lets banks automate more processes and run them more cheaply than before — CB lets banks do things they could never do before and that are unique to this industry.

Consumer Negotiations via Cloud Banking (Reverse Auction)

Supplier 2(issuing)

Supplier 1 (branding)

Supplier 3(fraud)

Risk Pricing

Bank A Bank CBank B

Wants

PORTAL/INTERMEDIATOR

Offers

Selects

Delivers

No bid

Invalid combi.

Withdraw

RateFeeLimitColor

FeaturesTiming

E.g., configuration for cr. card

Consume/Compete

Shift of power!

Champion vs. ChallengerAlgorithmic Operations• People shift from executing processes and making

decisions…• …to designing and refining processes that automate

decisionsTwo pressures…1. Continually improving the champion2. Regularly challenging the champion model with

alternative models

Develop new algo

Test in parallel

Deploy best algo

Daily optimization

Compete

Core Applications:

SpecialtyLoans

PNCInsurance

Savings DDA

CreditCard

MortgageConsumer

Commercial

WealthMgmt.HELOC

Fixed TermLife andPensions Corporate

Banking

Today

LoanPayoff

Component

Component

Component

Component

Component

Component

ComponentComponent

InterestAccrual

Component

Open Development Platforms, Componentization, and a New Kind of CBS Vendor

Neg. Amort.

Lending

The End of Core Applications

Micro Lending

Lending Services

Wealth Mgmt.

Customer Services

Deposit Services

(>2015?)

"App Store"Extension of

component-based architecture

Collaborate

A "SETI" for Online BankingConsume

A two-tier service for online banking:A ready-made community……for analytics, big data, etc.

Or…

Multi-tenanted Core Banking SystemsCombine

Action Plan for CIOs and Sourcing ManagersMonday Morning

- Begin to catalog the different uses of SOA, ENS, BPNs, Hubs, and CC already in progress within your BIS firm.

- Identify conflicts and harmonies between the uses made of the above and your various outsourcing models.

Next 90 Days- Build an inventory of your existing IT service delivery paradigm and find

examples of existing models that map to CC. Use these as benchmarks from which to assess risk, build business cases, and develop vendor relationships.

- Determine where you can go beyond non-core, proof-of-concept deployments of CC and what style of CC is appropriate.

- Use the heat map to assess the accessibility, readiness, and adoptability of CC for your BIS firm.

Next 12 Months- Design the transformative services that can leverage CC to put your BIS firm

in the vanguard. Start the move to CB.

Related Gartner Research Using Industry Working Groups to Advance Cloud Adoption

in Financial ServicesPeter Redshaw, David Furlonger, Juergen Weiss (G00212992)

Major Vendors' Embryonic Clouds Will Frustrate Financial Services CIOsPeter Redshaw, David Furlonger, Juergen Weiss (G00210834)

Cloud Computing for Banking and Investment ServicesPeter Redshaw, David Furlonger (G00205296)

Three Types of Cloud Brokerages Will Enhance Cloud Services Daryl C. Plummer, L. Frank Kenney (G00164265)

Real-Time Bidding Heralds Growth in Cloud Advertising Andrew Frank (G00174910)

This presentation, including any supporting materials, is owned by Gartner, Inc. and/or its affiliates and is for the sole use of the intended Gartner audience or other authorized recipients. This presentation may contain information that is confidential, proprietary or otherwise legally protected, and it may not be further copied, distributed or publicly displayed without the express written permission of Gartner, Inc. or its affiliates.© 2011 Gartner, Inc. and/or its affiliates. All rights reserved.

Felix Enescufelix.enescu@gartner.com

Banking on the Cloud

This presentation, including any supporting materials, is owned by Gartner, Inc. and/or its affiliates and is for the sole use of the intended Gartner audience or other authorized recipients. This presentation may contain information that is confidential, proprietary or otherwise legally protected, and it may not be further copied, distributed or publicly displayed without the express written permission of Gartner, Inc. or its affiliates.© 2011 Gartner, Inc. and/or its affiliates. All rights reserved.

Felix Enescufelix.enescu@gartner.com

Banking on the Cloud