How can cloud hosting affect banking?

Accenture, the IT consultancy reported this year that “cloud computing will increasingly provide banks with new lower cost operating models thanks to virtualisation, greater automation, and the ability to push more activities offshore.”

What does this mean?

In years to come, we should start seeing banks handing a lot of their online infrastructure over to managed hosting companies.

The multiple benefits of managed hosting have already started becoming apparent and many banks are taking strategic measures to incorporate more and more cloud software into their already existing legacy systems. They have started moving non-critical business components over the cloud, such as HR and procurement.

This is reducing internal IT complexity as well as costs.

Still some way to go

Many countries are wary of cloud hosting and question its security. As such, there are still many regulations as to the storage of critical data, in particular the manipulation of confidential information across international borders.

There has therefore been some considerable degree of caution who are also aware of the potential for devastating breaches of privacy, security or even brief downtimes in things such as ATMs and anti-fraud and credit card systems. Banks have preferred to keep their data all under one roof.

Many banks also still think of the servers and server information in a geographical sense and it is possibly difficult for many older board members to come to terms with the ubiquitous nature of cloud servers.

The whole concept is still being evaluated and there needs to be a comprehensive education of internal IT departments.

The pioneers

Some banks have adopted cloud based systems but using many cloud solution companies rather than just one. Wells Fargo uses cloud technology to help the company fulfil its three year integration project after having acquired Wachovia.

This system is not a public cloud but purely internal. Wells Fargo is still not ready to commit totally to a cloud system model.

They started by converting their server to a virtual format allowing multiple ‘virtual servers’ on one hardware set thus improving efficiency. Wells Fargo saved approximately $1 billion through this virtualisation process.

It seems that cloud systems, especially the more secure private cloud systems are increasingly becoming the nature of business IT infrastructure, proving to be cost-saving as well as well as more efficient.

We are likely to see many more 'hybrid-cloud' strategies and complex IT solutions developing.

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