Précis - New research suggests that financial services firms are increasingly looking to cloud computing to meet their business strategies.
What? - A Fujitsu-commissioned survey of 50 CIOs from a range of financial services firms has shown that cloud computing is increasingly gaining traction and transforming the face of IT in the financial services industry.
So What? - In the space of just a few years, cloud computing has gone from a strange and unfamiliar technology to an innovative force which is changing the way consumers and businesses are using IT. The latest research commissioned by Fujitsu appears to show that CIOs in financial services firms are beginning to appreciate the positive implications of cloud computing on their business, and that we are likely to see a greater adoption of cloud technology amongst financial services firms in the coming months and years.
Fujitsu's research reveals that 60% of financial CIOs see cloud computing as a way to meet their business strategies whilst 64% see the cloud as an enabler for change inside their organisation. The core functions that appear to be top of the CIOs list for deployment of cloud-based solutions are mortgage processing, credit card processing, loan processing and retail banking functions.
Perhaps the highest profile adoption of cloud-based solutions by a financial services firm was the 2011 deal between Spanish bank BBVA and Google. Whilst this deal reportedly only concerned internal collaboration via Google applications such as email, calendar, docs and others, it sets a precedent whereby public cloud technology is demystified (should that be de"mist"ified?). We are not, however, convinced that this paves the way for full scale adoption of public cloud for applications processing customer data.
Companies are more likely in that scenario to look to the private cloud, as did Conifer Securities when it entered into a joint venture with InvestCloud which allowed the fund administrator to provide a cloud-based repository for its clients. At Eversheds, we have seen deals for FIs taking other services via a private cloud, from CRM to online derivatives swaps platforms.
The increased focus on cloud-based solutions is likely to be a consequence of the economic downturn, with financial services firms looking for cost efficiency by reducing capital investment in IT infrastructure and the resources required to administer that infrastructure. However, the Fujitsu research shows that 65% of financial CIOs do recognise that some investment will inevitably be needed in order to transition their IT department to meet changing business needs.
The adoption of cloud solutions will not be without its challenges. Firms will seek to avoid vendor lock-in and they will need to ensure their IT infrastructure allows flexibility to switch service providers in order to take advantage of competitive pricing. CIOs will also need to protect against service outages by spreading their business between multiple service providers. Security concerns regarding cloud computing have always been a major obstacle in the adoption of cloud solutions in the financial services sector. There has been much debate about the impact of the US Patriot Act on data security in the cloud. The Act allows the US authorities to requisition data from US companies even if that data is stored abroad or is in respect of non-US citizens or companies. In any event, CIOs should ensure tight security processes are in place to protect data stored in the cloud.
Financial services firms, like any other business, need to adapt and change to meet the new economic climate. Leveraging cloud computing is one way firms can deliver operational and cost efficiencies. The evidence appears to show that firms are conscious of the benefits of cloud technology and that adoption will increase in the near future. However, CIOs must be mindful of the challenges and pitfalls that cloud-based solutions can present.