Finance in the cloud – the shipping forecast
With a great many businesses now adopting a ‘cloud first’ IT strategy, worldwide spending on cloud is expected to more than double in the next 3 years, reaching $7.2 billion by 2021. In the financial services industry alone, IDC estimates spending has reached $3.2 billion in 2017 and will reach $4.2 billion by 2018, an increase of over 23%.
Clearly, there has been consistent and sustained growth in demand for outsourced infrastructure, platforms and services. This is akin to the mainframe-based, client-server service model of a few decades ago, which grew consistently only to eventually fall out of favour, partly due to the availability of ever-more-powerful end-user workstations, but potentially also as a result of cultural drift which emphasised data ownership, promoting local, often on-premise processing. In the “cloud” model, actual provisioning of processing resources could be continents away (albeit the potential impacts of network latency, in particular, would be improved if locations of utilisation and provisioning were closer together). The fact that IT resources do not need to be provisioned locally can allow greater flexibility in the physical locations of organisations, especially those which have significant computer processing requirements. This distributed computing model is partly further enabled by technological improvements such as the ever-increasing speed, reliability and geographic spread of Internet connectivity.
There are obvious advantages to a ‘cloud first’ IT strategy; perhaps primarily the shorter timescales to fulfil resource requirements without potentially long and protracted procurement cycles. Once a vendor has been identified and an acceptable Service Agreement ironed out, the speed at which resource-dependent services can be deployed is almost always faster than sourcing and building on-premise infrastructure. This is important in the finance sector, where each organisation is looking to react, rapidly and efficiently, to competitors’ new service offerings – and ideally out-compete them through innovation leveraging the largest cloud providers’ latest technology offers. In what is a form of the “Red Queens Race” from Lewis Carroll’s “Through the Looking-Glass”: “Now, here, you see, it takes all the running you can do, to keep in the same place. If you want to get somewhere else, you must run at least twice as fast as that!” Indeed, Forrester had previously reported that Software-as-a-Service (SaaS) was the main driver of cloud adoptions which aim to speed up digital transformations within the banking sector.
The innate elasticity of the cloud allows organisations to respond rapidly to changing business needs – new requirements can be fulfilled in minutes. By the same token, services or resources can be ‘spun down’ almost instantaneously when superfluous to current needs. Not having to manage a large physical infrastructure also allows organisations to be more nimble and adaptable to change. A possible analogy is an oil giant scrapping supertankers and replacing them with an outsourced service of a continuous stream of much smaller vessels (maybe speedboats) that are much cheaper to produce individually, with each being used to transport oil “on demand”. A vessel that is not used by oil merchant can be used in short order by another, or not at all. The service provider carries the risk of infrastructure not being used (and prices the service accordingly), the oil merchant can react more quickly to changes in demand. In an era of unrelenting change, the ability to synch up with the prevailing trend, be it competition-, consumer- or regulatory-driven, is crucial to the organisation’s long-term survival, particularly in the fast-moving environment of financial services. As we get more speedboats, it looks like the Thames Estuary just became far more accommodating.
Dr Wendy Ng, CISSP, CCNP; 26th February 2018