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Cloud Adoption in Financial Services: Why Is Hybrid IT the Financial Industry’s Best Pathway to the Cloud?

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Why Hybrid IT Makes Sense for Financial Companies

For financial services, cloud computing and IT outsourcing haven’t quite become the game-changing technology strategies they are for other industries, but given the mass digitalization that’s taking over, the industry is definitely catching up. While IT decision makers in the financial sector tend not to be as open to the cloud or partnering with third-party providers, colocation, SaaS usage, and IaaS are on the rise, which means the tides are changing as far as how cloud is being used in the financial sector. Soon, financial organizations will be able to reap the innumerable benefits the cloud brings to businesses.

  • 75% of financial organizations support technology infrastructure in-house, suggesting that the industry will likely take the longest to adopt to cloud and outsourcing.
  • While a fair amount of ITDMs reported managing infrastructure on-premise, 39% outsource colocation, and 33% outsource IaaS. – Peak 10, Financial Services and IT Study: Tackling the Digital Transformation

Hybrid IT as a Stepping Stone

In spite of the mild hesitation, Peak 10’s Financial Services and IT Study: Tackling the Digital Transformation revealed that migration services are a common planned Financial Services initiative, which suggests that while financial isn’t in a desperate hurry to get to the cloud, it may become a key initiative within the next few years. The study also showed that the main factors for cloud hesitation are security and compliance, and the perception that businesses can deliver applications better in-house.

  • Security is at the top of the cloud concerns list, with 82% of businesses citing security and data privacy as the main hesitation, and meeting compliance standards at 61%–although banks are notably more worried about compliance.  – Peak 10, Financial Services and IT Study: Tackling the Digital Transformation

There’s a moderate amount of cloud fear lingering in finance, but it’s important to remember the increasing pervasiveness of digitalization, and the fact that every day, more financial institutions are writing their own applications to meet the demands of online and mobile-oriented consumers (which today, is almost everyone). Sooner or later, in-house technology infrastructure won’t make much sense for banks, but in the meantime, there’s a stepping stone: hybrid IT.

According to VMware, the forward-thinking organizations of finance are starting to make cloud moves in the hopes of increasing revenue and improving cost efficiency. The market and tech pressures precipitated by digitalization are leading IT leaders to modernize legacy apps and upgrade infrastructures. Those who are beginning cloud migration are choosing alternative cloud deployment models that address the IT nuances of the financial sector.

Unique IT Considerations in Finance

  • Microsoft explained that the financial sector operates around capital markets, banking, and insurance; and each profile has very specific regulatory requirements.
  • The myriad of regulatory requirements the industry has to oversee make varying application and infrastructure architectures necessary, yet all of them require scale, uninterrupted connectivity, and flexibility.
  • Financial services customers have high demands—they want their banking information at the tips of their fingers and available every minute of the day, which means new requirements for all of banking’s systems.

Given the distinct parameters financial IT operates on, hybrid IT can enable the capabilities they require without the need to commit to all-cloud, all at once.

Why Hybrid IT Works Well for Financial Services

It’s an interesting time for the financial sector. As evidenced by Peak 10’s study, the primary business drivers of finance that can be supported by hybrid IT strategies are:

  • Ambitious growth plans

    The financial services industry is showing a marked ambition in their ability to increase revenue in the coming years, as well as confidence in their ability to meet the hard demands of their customers through portals, applications, and the instantaneous delivery of data.

  • The takeover of digitalization

    Financial organizations have to respond to customer demand—the power is now in the hands of the consumer, and it’s staying there. Most banks and insurance offer customer portals and mobile apps, and the majority of internal initiatives need to go digital too.

  • Reluctance to changes in technology

    It’s not a lack of interest or resources that’s slowing the financial sector down where innovative technology adoption is concerned. Primarily, hurdles consist of greater government regulations and a resulting complex approval process.

All of these factors are impetuses for considering hybrid IT deployments; especially the general reluctance to adopting new technologies. Hybrid IT is a way to put the cloud to the test without carrying out a full migration and implementation all at once. Businesses can move ancillary applications to the cloud and keep mission-critical applications physical and on-premise until IT has been able to fully evaluate the benefits and security capabilities of the cloud offering they’ve chosen.

Direct Benefits of Hybrid

As further explained by Microsoft, traffic, data, and computing requirements can change suddenly in the financial sector. As a result, being able to effectively provision and de-provision as needs change is not negotiable. Since the industry overall tends to be slow with adoption, many organizations deal with legacy apps that can’t support all of the initiatives generated by digitalization (such as mobile app support and BI, for example). Here’s where hybrid IT brings considerable benefits to financial organizations:

  • Control over network topology and configuration is maintained.
  • Public cloud capacity can be managed the same way on-premises infrastructure would be.
  • Scale, power, and flexibility are all supported by the on-demand capacity and capability of a hybrid IT environment.

Hybrid IT Use Cases for the Financial Sector

Being able to move workloads between clouds makes hybrid IT a good option for finance as their cloud initiatives evolve, as pointed out by VMware. As an example, retail banks in particular share common use cases that make the hybrid cloud the ideal setup given the industry landscape of today:

Retail Banking IT Challenges Solved by Hybrid IT

  • Enabling digital capabilities for customers (online portals and mobile apps). The takeover of online and mobile banking that offer functionality nearly equivalent to visiting a physical branch mean the potential for latency as a result of sudden increased demand.
  • Supporting massive and steadily increasing data storage requirements. The proliferation of big data, analytics in general, machine learning, automation, and the domination of mobile apps require considerable infrastructure upgrades and continual development.
  • Greater high-performance computing needs. Technical capabilities like risk analysis or robotics involve a lot of complex computations, which causes greater strain on in-house systems and creates the need for more capacity.

Getting Ahead in Financial Services by Considering Hybrid

The financial services industry’s need to take on digitalization and manage the complex challenges it brings, as well as the industry-wide tendency toward slow adoption, are something of a double-edged sword. On one hand, digitalization is an exciting change for financial, and it’s empowering the majority of consumers to make life-changing financial decisions remotely. On the other hand, adoption reluctance, especially in the cloud realm, can be a barrier to supporting digitalization.
Hybrid IT is an excellent option for financial organizations who are prepared to get their foot in the cloud, so to speak. Agility, flexibility, and scalability are key in an industry which is now being dominated by data analytics, automation, and robotics—not to mention making sure customers have constant access to their information.

The beauty of hybrid IT is the ability to combine colocation, cloud environments, and in-house management and ultimately extend technology services in a way that might not be possible if infrastructure was kept in-house, and with new capabilities being added to Financial Services all the time, flexibility and the ability to make changes quickly is key.

The importance of professional and managed services are also a consideration point for technology decision making. As financial organizations continue to move workloads off-premise, considering migration and implementation services can make the process much smoother and less stressful; your IT team can focus on business as usual while a team of experts will manage the migration process. Outsourcing may also be a beneficial option post-migration, as well as looking into compliance packages to reinforce the overall integrity of your IT systems and infrastructure.

If your business is interested in exploring how hybrid can work for your IT initiatives, reach out to a Peak 10 expert to talk about your needs. Visit www.peak10.com/contact-us or call (866) 473-2510.

 

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