The promises of reducing costs, increasing scalability, being able to create future innovative digital offerings at a rapid pace, enabling better customer experiences across all channels, and keeping pace with ever-increasing customer demands are some of the major driving factors attracting an increasing number of financial services. businesses in digital transformation using the cloud and related technologies.
Over the past decade, many financial services companies have begun their journey of digital transformation and cloud adoption; however, the majority of them are still hesitant to abandon their on-premises infrastructure and embrace the cloud as their technology backbone, especially for mission-critical workloads. There are many industry-specific hurdles such as ever-changing regulatory compliance requirements, concerns over cybersecurity, data privacy, and many more that are proving to be major hurdles to the large-scale adoption of cloud technology. Various estimates and analyst reports indicate that less than 10% of critical workloads in the financial services industry have moved to the cloud. One cannot imagine widespread adoption of cloud technologies by the financial industry unless cloud service providers provide solutions to common financial industry needs.
The good news is that many leading public cloud providers such as IBM, Microsoft, AWS, Google and many other providers are trying to offer dedicated industrial cloud or cloud solutions for the financial industry with a dedicated set of industry-specific cloud capabilities, tools, and accelerators. , and a unified set of security and compliance controls designed specifically for and in collaboration with the financial industry to help banking and financial services companies unlock the power of the cloud.
At first glance, an industry-specific cloud for the financial sector seems like a step in the right direction; the question is whether this will be just a passing fad or if it holds promise in the future.
Key Factors Driving the Need for a Cloud for the Financial Services Industry
- Despite cloud adoption being at an all-time high, total cloud spending in 2020 was only 9.1% of global enterprise IT spending. While many have embraced the cloud, few financial institutions have been able to accelerate their cloud adoption in recent years. Simply “lifting and moving” applications to the cloud could result in suboptimal performance. Yet rewriting or optimizing them for the cloud would be time-consuming and expensive. Industrial clouds promise to accelerate and reduce risk in their cloud migrations.
- Highly complex and inflexible banking IT systems, making it difficult and costly to adopt cloud technologies. To solve these challenges, they need a new modular and interoperable architecture with intelligent operating environments that integrates risk management, security and compliance at its core.
- In many cases, the industry cloud is built through collaborative efforts through the sharing of best practices and thought leadership provided by vertically specialized functional and implementation teams, a global leader in consulting services in regulatory compliance of financial services (e.g. Promontory Financial Group), many ISVs and SaaS companies. .
- Industrial clouds will allow traditionally separate purchased solutions to be combined into a pre-integrated and composable solution. This will make it easier to manage the procurement, implementation and onboarding processes.
What is the main benefit of having a dedicated cloud for the financial services industry?
- An industrial cloud will provide a seamless public cloud ecosystem comprised of technology partners, industry service providers (ISVs), software vendors, fintech and technology assurance companies that will help financial institutions balance their need for Transform and modernize legacy systems with the right balance of pre-integrated and highly configurable controls for cybersecurity, regulatory and resiliency requirements.
- To provide new solutions and services to their customers, financial institutions can collaborate with the industry cloud ecosystem, collaborations will allow them to generate new revenue streams, innovate and introduce new products faster pace, increase business agility and adopt new business models.
How is the cloud market evolving in the financial sector?
Given the opportunity offered by industrial clouds, it is no surprise that all major public cloud solution providers such as IBM, Microsoft, Amazon, Snowflakes and many more offer a wide range of cloud solutions. specific to the financial sector. While some offerings dedicate the cloud to the financial services industry, many offer solutions for certain areas of the financial industry via the cloud.
IBM and Microsoft both have long vertical market experience and large vertical market customer bases are able to leverage to build and support financial services industry clouds. IBM is working with two leading financial services institutions to create an industrial cloud offering and offers an IBM financial cloud offering. Microsoft is offering an industrial cloud focused on financial services starting November 1, 2021. Amazon recently launched FinSpace, a data analytics service for the financial industry, and data warehousing giant Snowflake announced its first cloud industry-specific data collection, also targeting the financial services sector.
What will be the biggest barriers to industry adoption of the cloud?
- Today, an industrial cloud for financial services is still in its infancy and essentially addresses the needs of specific domains or capabilities for financial institutions. It will take time before it becomes a one-stop solution for all financial institution capacity demands. In the future, the industrial cloud is expected to evolve into a cloud solution ecosystem comprised of multiple parties working in a highly shared model sharing common resources and processes and R&D that typically extends beyond the initial sharing of the infrastructure and technology that the cloud has traditionally brought. at the table, this will become a concern for many financial institutions.
- It is feared that industrial clouds will follow the same path as community clouds, where the underlying infrastructure will be shared and additional industry-specific features will be added, such as window dressing to provide enterprise-specific capability. industry, which can lead to frequent breaks in compatibility and scalability with the underlying cloud. platform from which it originated. This can expose financial institutions to the risk of a long-term unsupported copy of their preferred cloud.
Considering the great opportunity offered by industrial clouds, many cloud service providers would like to enter the fray and provide cloud solutions for the financial industry. Some offers look more like marketing strategies than real offers, at the same time, there are few promising cloud offers for the financial sector in the market that are created with leading financial institutions to create industrial clouds for the financial sector.
If you are a financial institution evaluating financial industry cloud, you should proceed with caution, comparing not only industry cloud offerings from different vendors, but also the financial industry cloud offering from each vendor you are considering. as well as comparing the offering to their general purpose cloud solutions offering. In many cases, there may not be much difference.
An industrial cloud tailored to the needs of the financial services industry is the way forward for financial services companies looking to survive and thrive in the future to stay ahead of the game.
What are your thoughts on industrial cloud for financial services ? I’d love to hear your thoughts in the comments!
If you would like to learn more about this topic, please consider the following additional resources
- The Gartner 2021 Hype Cycle for Emerging – Technologieshttps://www.gartner.com/en/newsroom/press-releases/2021-08-23-gartner-identifies-key-emerging-technologies-spurring-innovation-through-trust- growth-and-change
- IBM Cloud® for Financial Services – https://www.ibm.com/in-en/cloud/financial-services
- Microsoft Cloud for Financial Services – https://www.microsoft.com/en-us/industry/financial-services/microsoft-cloud-for-financial-services
- Amazon FinSpace – https://aws.amazon.com/finspace/
- Snowflake Financial Services Data Cloud – https://www.snowflake.com/snowflake-for-financial-services