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Reach for the clouds

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Reach for the cloudsCloud computing, the latest buzzword in technology circles, refers to the provisioning and usage of hardware and software over the Internet, using Web technologies. This simple business model allows enterprises to avail of a range of IT services, over the Internet, as and when required on a ‘pay-per-use’ basis, without ‘owning’ them.

Banks have accumulated a huge amount of data over the years and are heavily dependent

on both hardware and software. For instance, they require core banking, wealth management, e-banking and other software solutions to capture information, and hardware in the form of huge repositories, databases and servers etc. to store the same. Cloud computing offers these services so that banks can operate without investing in software development and hardware maintenance.

Cloud service models• Software as a Service (SaaS): Cloud service

providers have the business software installed at their location. Their clients can access it over a network and use it via a web browser. Related activities like software upgrades, data backup etc. can be handled at the provider’s location with the option of discontinuing the arrangement at the client’s behest. Examples: Enterprise Resource Planning and Human Resource Management

• Platform as a Service (PaaS): Service providers provide an environment to clients to develop, run, test, deploy and store their software. The platform could include an operating system and other software development

tools, an execution environment like a Virtual Machine (VM) to run and test their new or existing software, and web servers and databases enabling deployment and storage.

• Infrastructure as a Service (IaaS) or Hardware as a Service: Service providers extend hardware resources and support, i.e., physical equipment like storage devices, servers and networking components. They install, house, run and maintain the hardware so that clients can directly use it and thereby save on capital investments and maintenance costs. This model also enables demand- based usage.

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Cloud deployment models

Cloud implementation strategies for banks

• Public cloud: The service provider owns and maintains the infrastructure and charges the general public for these services. This is a scalable and cost effective model.

• Private cloud: The infrastructure is dedicated to a single client for private use. It may be delivered over an On-site Private Cloud – managed and implemented at the client’s premises or an Outsourced Private Cloud – outsourced to the service provider, who also maintains it. In this model, data is very secure.

• Community cloud: This is a cost-effective model wherein several companies with similar

• The “BIG” decision: Banks need to exercise caution before moving to the cloud model by first implementing it on a smaller scale. They should proceed with the cloud approach only if a thorough impact analysis yields positive results, else look for alternative models.

• Transition strategy: In order to ensure a smooth transition to the cloud, banks should chart out a transition strategy from both the technology and staffing perspective.

• Hiring the right people: Cloud computing being relatively new, there is a dearth of qualified personnel with implementation experience. Hiring competent professionals, who adopt appropriate strategies in tune with the bank’s requirements, will enable successful transition.

• Choosing the right cloud vendors: The right vendor recommends the models most suited to the bank’s needs and provides relevant

objectives and requirements come together to share cloud resources, maintained either by the companies themselves or the service provider.

Hybrid cloud: Here, the cloud infrastructure is a combination of two or more clouds (public, private or community), with each of them existing independently as separate entities, while collaborating to provide optimum services to the client. This combines the public cloud’s advantages of scalability and low cost with data security.

infrastructure. The bank should consider cost effectiveness, data security, and scalability while making a choice and monitor vendor activity to ensure accuracy in billing.

• Choosing the right cloud model: There are pros and cons to each model. The choice of the right model should be based on the bank’s requirements and have the right balance of economy, security, ease of implementation etc. Banks may adopt the private cloud model to start with and move on to hybrid clouds as they gain confidence.

• Migration planning: After zeroing in on the vendor and the cloud model, the next crucial step is to properly migrate the data from existing systems on to the cloud system. This is a very critical task as the slightest glitch can lead to exposure of sensitive client data and jeopardize the entire process.

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Benefits of cloud model

Risks of cloud model

Challenges implementing cloud model

• Cost saving: Banks save on costs of software and hardware installation and maintenance. Also, they can consume and pay for the services as and when needed, thereby minimizing the idle time for systems while providing greater mobility.

• Differentiation: In a highly competitive environment, a cloud model could serve as a differentiating feature and offer first movers significant advantage.

• Data exposure: Since all information resides in the clouds controlled by the vendor, customers might perceive cloud computing as risky or a breach of confidence.

• Data leakage: In cloud computing data is accessed over the Internet, and is therefore susceptible to hacking.

• Cloud outage: Total dependence on cloud computing can grind banking operations to a standstill in the face of technical problems.

• Network problems: Internet connectivity and speed form the backbone of this model and in turn have a significant impact on the bank’s performance.

• Replacing existing technology: Replacing existing infrastructure to accommodate the cloud model may not seem viable to banks in the short term.

• Only banking, nothing else: With the IT functions outsourced to cloud vendors, banks would be able to concentrate on their core business and not have to waste energies on extraneous IT-related activities, such as ramping up peak time server capacity.

• Go green: The decrease in hardware results in a smaller carbon footprint, contributing towards a greener environment.

• Vendor issues: With sensitive data being stored in vendor-operated clouds, close and constant vendor monitoring is imperative to ensure security and accuracy. Before forging relationships, banks must think about how they will safeguard and migrate data, in the event of the vendors closing down their business.

• Staff issues: Extensive training will help the staff adapt to this new technology with greater ease.

• Reliability issues: Cloud computing being at a nascent stage and plagued by security concerns, banks are still skeptical about investing in it. Trust and reliability are key factors in forming long-term partnerships.

Conclusion

Future of cloud computing in banks

The following are the key considerations in cloud implementation:

1. The decision to move to the cloud should be driven by business reasons only.

2. It should not be seen merely as a cost cutting technique but rather, as a technology of the future with huge long-term benefits.

Technology and innovation have always been the cornerstones of the banking industry. Computerization, core banking, online and branchless banking, ATMs, POS, and now mobile

3. Partners and cloud models should be chosen in alignment with the bank’s requirements to mitigate inherent risks in implementation and ensure a smooth transition.

banking, stand testimony to this. It is, therefore, a matter of time before cloud computing transforms the banking sector in a big way.

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Rajesh Kumar SahuSenior Associate Consultant, Infosys

Finacle from Infosys partners with banks to transform process, product and customer experience, arming them with ‘accelerated innovation’ that is key to building tomorrow’s bank.

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