How Is Cloud Being Used in the Financial Sector, and What Are Businesses Concerned About Cloud Adoption?
Financial Services Trends in Cloud Computing
“After years of lagging behind other domains in cloud adoption, cloud is hot in all areas of financial applications. CFOs and IT leaders need to understand how to capitalize on the opportunities of transitioning finance systems and processes to the cloud without being caught out by the challenges.” –Gartner: Finance Moving to the Cloud: The Steps to Take and the Benefits You Can Expect1
The cloud has affected every industry—even financial services, though it’s known to have a comparatively slower technology adoption rate. Overall, workloads are increasingly being moved to the cloud in order to take advantage of cost and operational efficiencies.
The financial sector does show greater hesitation to using the cloud than other industries, but certain aspects of financial IT environments have already been migrated, while others are in the works. For example, SaaS usage is on the rise, indicating that the frequency and comfort level of cloud usage are increasing in the financial sector for both insurance companies and banks.
- 48% of banks are using SaaS for administrative functions.
- 24% of banks are using SaaS for mobility, while 15% of insurance companies are.
–Peak 10 Financial Services and IT Study: Tackling the Digital Transformation
According to Gartner, “In market terms, finance as a domain has been slower to adopt cloud compared to other administrative domains such as human resources and procurement. Although some areas of financial management (FM) applications, such as travel expense management, have a good level of cloud adoption, today the bulk of finance transaction processes are handled by on-premises applications.”
“Despite the slower adoption of cloud to date in the finance domain compared to human resources and procurement, the market is currently at a tipping point, especially with regard to moving core FM applications to the cloud. Gartner market forecasts show that spending on public cloud SaaS will increase over the next four years to account for around 47% of total spend on FM applications, up from around 30% in 2015.”1
All in all, the great cloud migration continues, though there remains to be some fear among financial IT professionals. What are the greatest causes for concern?
Top Five Financial Services Concerns for Moving to the Cloud
“We have security measures, we have to be doubly sure that the cloud is secure. It may take a while to change that perception.” – Virtualization manager at national insurance provider
Financial services cloud computing and IT outsourcing have the potential to be game-changing technology strategies for the industry, particularly in consideration of mass digitalization—it’s taking over the financial sector entirely. Financial IT decision makers are aware of the potential benefits, but they’re still hesitating to adopt cloud for a number of different functions. 75% of financial organizations still support technology infrastructure in-house.
According to the Peak 10 Financial Services in IT Study:
- Security and data privacy are the #1 concern for moving to the cloud.
- Meeting compliance standards is the #2 concern for moving to the cloud, though banks are more worried than insurance companies.
- 58% of respondents reported loss of control over data as the top cloud fear.
- 52% of respondents felt that in-house management would be more cost-effective.
- Connectivity speed was cited as a major concern among 38% of participants, though insurance companies were notably more worried than banks.
“Public cloud is difficult due to data retention policies and the fact data cannot leave its country of origin – there is a lot of red-tape, and we can’t really pick the best option.” – VP of IT at global investment bank
Taking on Cloud Fears: There are More Benefits than Risks (Not Vice Versa)
It is true that financial decision makers tend to want to keep production-grade workloads as close to the business as possible (on-premise) for the above reasons. Security is such a major concern amidst today’s aggressive risk environment that in the financial sector, an industry which is directly tied to the U.S. economy, making a decision like migrating to the cloud can seem like nothing but a bad, risky idea.
However, there is relief for worried decision makers. Cloud actually offers more benefits to the financial sector than risks:
- Cloud computing in financial services can bring the industry the same benefits it does to every other without increasing risk. In reality, when working with the right partners, moving to the cloud actually enhances an organization’s security posture. It is truly a safer option than in-house IT management.
- Meeting compliance standards is also often easier in the cloud than in-house, particularly when partnering with a cloud provider who specializes in financial industry compliance. The right partner will have proven expertise in PCI DSS, HIPAA, and regulatory bodies affecting financial services, and will be prepared to signed business associate agreements (BAAs).
- Financial IT teams will still have visibility into their data when making use of the cloud, as well as the authority to make changes when necessary. There is no loss of control—at worst, IT team members will have more time to focus on the critical initiatives of their roles.
- It is very rare that the capital expenditures required for in-house IT management don’t exceed the cost of cloud computing. There are some costs associated with managing IT internally that are eliminated when working with a cloud partner, such as hardware, licensing, and other operational costs, etc.
- Connectivity speed also typically improves by taking advantage of the cloud. Depending on your infrastructure, as applications are added and business grows, connectivity would be of greater concern to those managing IT internally, whereas the cloud offers multiple configurations and redundancies which allow users to remain unaffected by other customers’ usage—you won’t even know they’re there.
Looking at Cloud for Your Business
If your organization is unsure of how the cloud can be integrated into your IT strategy, Peak 10 can help. Contact a cloud expert today at www.peak10.com/contact-us or (866) 473-2510 to speak with one of our experts.
In addition to feedback regarding cloud adoption in financial services, The Peak 10 Financial Services and IT Study: Tackling the Digital Transformation brought insights on overall technology delivery models, IT budgets, decision-making processes, security concerns, and more.
Learn more about how you can make current trends work to the benefit of your IT organization. See the Peak 10 Industry Spotlight: Financial Services and IT.
- Gartner “Finance Moving to the Cloud: The Steps to Take and the Benefits You Can Expect” August 22, 2016 by Nigel Rayner, Christopher Iervolin & John E. Van Decker