According to an industry report, between 2016 and 2018 the number of organizations adopting cloud technology to promote innovation tripled. However, financial services institutions lag behind the curve relative to the technology industry–despite increasingly widespread agreement that the future of financial services is in the cloud.
Enterprise technology is evolving at a rapid pace and shows no signs of slowing down. Thanks to a number of breakthroughs, technology infrastructure has shifted from a pure cost center a decade ago, to a potential driver of competitive advantage today. New virtualization technologies allow for higher density deployments and reduced costs, as private cloud solutions power greater speed and agility, boosting productivity and developer satisfaction. And the public cloud has the potential to multiply both of these effects, driving economics and productivity superior to anything the industry has seen in the past. Organizations that adopt and use the cloud will benefit and win.
Making the case for cloud
The cloud offers financial institutions a number of advantages over existing legacy infrastructure. Perhaps most immediately and importantly, the cloud enables greater productivity and agility. A cloud-based environment allows software engineers to focus on developing innovative features that drive competitive edge, rather than configuring infrastructure or waiting for support teams to do so. The more automated the back-end of the developer environment, the better.
In addition, the cloud provides significant operational advantages that fit well with our always-on society. Advanced cloud capabilities ensure that software is highly available, can scale as needed to handle customer load, and will support seamless upgrades. Companies that successful manage through disruptive events such as the current COVID-19 pandemic or Superstorm Sandy, while continuing to back their customers, stand to win market share.
Moreover, the cloud offers an ever-expanding plethora of native cloud capabilities, ranging from large-scale distributed databases and data stores that allow seamlessly accessing and distributing data around the world, to artificial intelligence, machine learning and analytics. These empower software engineers to quickly and efficiently develop highly complex features that would previously have taken months or years of effort, as well as hard-to-find expertise and expensive proprietary hardware.
Finally, the cloud creates opportunities for long-term economies of scale and cost savings while providing the security and privacy customers expect and deserve. Large financial services firms might operate tens of thousands of servers, while cloud providers typically operate millions. Combined with cloud providers’ enhanced ability to engineer technology infrastructure fully for their purposes, these economies of scale will drive large divergence in infrastructure cost over time, benefiting those who adopt the cloud.
Looking toward the horizon
While financial services firms are at varying stages of cloud technology adoption, one thing is for sure: the cloud has progressed beyond being viewed as an unproven technology or an experiment. In fact, according to the latest research, the worldwide public cloud services market is forecasted to grow by nearly 20% this year. Over the next decade, it is highly likely that major financial institutions will implement cloud technology. The questions now are when and how.
When it comes to cloud deployment models, financial services firms have a variety of options from which to choose. They can elect to use public cloud, private cloud or a hybrid of both. According to a 2019 white paper, 51% of financial institutions are already using a public cloud, with another 16% planning to do so. Almost half have experimented with the use of private clouds. In total, 60% of financial services firms expect their IT environments to ultimately be multi-cloud in nature, and, according to a 2019 enterprise cloud survey, more than nine in 10 consider hybrid cloud their “ideal” IT model.
Moving forward, as organizations in financial services and beyond continue to fine-tune their cloud strategy and infrastructure, we should see a degree of consolidation and convergence. This will enable financial services firms to seamlessly move workloads between clouds (hybrid and public). The emergence of common standards and capabilities will unlock the true value of cloud, and in the not-so-distant future, could facilitate a complete reimagining of computing systems to better support cloud-based IT infrastructure.
Cloud technology has the potential to transform financial services in ways we cannot yet predict. By partnering with technology providers to leverage the cloud’s existing capabilities and drive innovation, financial firms will position themselves to capitalize on the promise of the cloud, and those that fail to keep up will find themselves weighed down by the burden of technology built for a bygone era.
Evan Kotsovinos is senior vice president and global head of infrastructure at American Express.