Is Your Bank Ready for the Cloud?

Financial services firms, like other companies, are running out of computing and storage space with available resources, and they are turning to cloud computing as a way to deliver information technology services on an as-needed basis. Firms are now looking for ways to stretch their existing data centers, as they often need more computing and storage capacity than their own facilities provide, especially during peak high-demand times. With the importance of this from a strategy and security standpoint, the board of the bank needs to provide proper oversight over this issue.

What is Cloud Computing?
Think of the cloud of a collection of computers where services such as compute (crunching numbers and data), and storage (a place to store the data that is being crunched and the results of that), are delivered dynamically as a service, rather than as a product. These services are typically delivered over the network, and in many cases, the Internet.

Instead of a line of business requesting 40 servers for a new data analytics software package, an IT team could deploy that software package on a cloud environment and provide access to the software. A dynamic cloud environment may give more compute and storage capacity when the application needs it and allocate less in periods of slow volume. This system of dynamic resource allocation makes the cloud an economical solution for large organizations.

Challenges With Financial Services IT Delivery
Data centers are a considerable investment to build and operate. Banking in the cloud lets banks extend their data center and current infrastructure when needed, while also providing additional data storage and computing capabilities offsite. In many cases, additional computing capacity is needed only for a short time in order to run certain risk models or to provide additional reporting for regulatory requirements. In this instance, a cloud-based infrastructure could be used to augment current big data and risk/analytics environments that banks have deployed.

The Trend to Hybrid Clouds
Today’s banks are in various stages of their cloud journey. Some have built their own private cloud hosting, defined as a single-tenant environment where the hardware, storage and network are dedicated to a single client or company. The resources and equipment required to run it are usually deployed in the firm’s own data center and managed by their own IT staff. Others utilize third parties to augment their own in-house application development efforts, a hybrid approach. A hybrid cloud service is a cloud computing service that is composed of some combination of private, public and community cloud services, from different service providers. Typically in this environment, a firm may have its own in-house private cloud environment, but may connect its private cloud to another provider’s cloud. In some cases, these facilities are located off-shore in foreign countries, and are not permitted to connect to, or utilize the bank’s internal network. In these instances, banks can benefit from using cloud solutions that allow temporary computing capacity, without a significant capital expenditure or time.

The Cloud’s Differentiated Services
Financial institutions can build secure hybrid clouds that only allow certain credentials to access bank data. Private cloud solutions provide a purpose-built, secure environment in which financial services institutions can very efficiently expand their compute capacity at a very low cost. In addition, the institution has full transparency to the environment from a monitoring and systems management perspective. When the bank needs additional space, it can use a public cloud, which shares data from a number of different sources and will require a higher level of security or care in what kind of data is housed there.

Board Oversight
Given that banks are increasingly turning to cloud computing, it makes sense for the board to know whether and how the institution is using cloud computing, and provide proper risk management oversight. Questions the board should ask include:

• Is our bank currently using cloud computing services?
• Do we intend to?
• Do we have a private “cloud” or do we use third parties?
• What security do we employ?
• What kind of data is housed there?
• How do our regulators view the use of cloud computing?
• What are the advantages and disadvantages of the various types of cloud computing?