Holding Cloud to Account, How Cloud Adds up in Financial Services

By Dom Poloniecki, General Manager, Western Europe and Sub-Saharan Africa at Nutanix

Cloud computing and the deployment of increasingly cloud-native technologies is happening across every industry vertical. Even in industries where a degree of previous inertia existed such as legal and finance, the drive to cloud flexibility and scalability has become a primary driver for the technology fabric that firms in these markets run on.

As traditionalist operations in the legal trade start to undergo increasing levels of digital transformation, the weighty behemoth systems running financial institutions are also now being carefully and strategically replaced by more efficient, more flexible and more cost effective cloud installations. Now a proud owner of its sub-sector label and hashtag, FinTech is the new financial IT… and FinTech was born on the cloud.

As part of the Third Annual Enterprise Cloud Index report by Nutanix, a specific analysis of the 3,400 IT decision-makers questioned is now dedicated to examining how financial services organisations are using cloud technologies. Looking at the key data points related to Financial Services, we can start to understand the implementation, workload separation and (in most cases still, as of 2020) the migration issues that these firms are experiencing.

In the world of Financial Services cloud computing, the importance of an integrated and intelligently managed hybrid framework can not be overstated. Financial operations can of course draw upon the resource backbone of public cloud for their foundational operational technology requirements. However, they often still need to run a carefully deployed private cloud footprint commensurate with the privacy and security needs of any organisation operating in the financial sector.

The central importance of hybrid

Hybrid cloud and the use of Hyperconverged Infrastructure (HCI) is therefore a key cornerstone for Financial Services hybrid cloud development. This is the route to a cohesively managed hybrid cloud environment, where workloads are optimised according to the security, performance and compliance needs arising from the use case of the data and applications at hand.

The Nutanix Enterprise Cloud Index findings back this reality up and show that the majority (86%) of financial services respondents identify hybrid private/public cloud as the ideal IT operating model for their organisation. So much momentum is there now in this space that financial services companies are running more applications in private clouds than most other industries polled. Their reported usage of private cloud (39%) outpaces all other industries except for IT, tech and telecoms (40%).

As a further validating and driving factor here, HCI is the lower substrate technology behind the big public cloud offerings from Amazon, Google and Microsoft. So HCI and the wider hybrid approach is no longer perceived as ‘just’ a route to cost savings, which perhaps it was as recently as half a decade ago; it now represents an important enabling and facilitating technology to reduce complexity and increase scalability. In the hybrid cloud world where cost is no longer the main driver for cloud implementation, we can say that we have moved on to a point where we identify the ability to ‘achieve business outcomes’ as the primary driver.

HCI for modernised financial challengers

Given the growth of so-called ‘challenger banks’ shaking up financial services with new online services, extended customer loyalty offers driven through dedicated mobile banking applications and other fast-moving business models, traditional financial institutions have realised that they need to become altogether more agile.

Adopting hybrid cloud in Financial Services allows even older and more established firms to build scalable and easily managed private clouds as part of a hybrid cloud model. This scalability can be engineered for rapid growth when and where it happens, but it is also scalability that enables financial organisations to rein in compute resources serving banking products that have proved to be end-of-life and ultimately laid dormant or retired.

It’s important to remember that, as powerful as it is, cloud can still be a complex consideration, especially when aggressively deployed in an essentially hybrid mix of public and private cloud instances. The Enterprise Cloud Index found that for every aggressive hybrid design being deployed, there is an equally aggressive drive to deploy Hyperconverged Infrastructure (HCI).

This is because HCI helps accelerate cloud adoption by sharply reducing the time it takes to build the software-defined infrastructure necessary to support private cloud. It also supports the rapid capacity expansion that enables the scalability benefits of cloud technology. Nearly 50% of the financial sector respondents said they’ve either fully deployed HCI or are in the process of doing so. Another 38% said they will be deploying HCI within the next 12 to 24 months.

It is difficult not to mention the impact and legacy of 2020 and the global pandemic on the financial services technology market space. More than three quarters (78%) of financial services respondents said Covid-19 has caused IT to be viewed more strategically in their organisations. In addition, 50% of financial services respondents said they increased their investment in hybrid cloud as a direct result of the pandemic.

Choice: from the bank teller to the backbone

The key point we keep coming back to here is choice. As financial institutions will be working to offer corporate and individual customers the widest choice of products and services, so too will they need to gain choice of operational compute fabric in the shape of the cloud deployments that they do actually make. More specifically, it’s about these Financial Services businesses having the flexibility to concentrate on the delivery of strategic business outcomes quickly, easily and – crucially – without the need to keep within the limitations of a particular supporting IT model.

As previous Nutanix surveys have shown, companies consistently express a desire for the ability to run workloads in the infrastructure best suited to them, based on a variety of criteria. Be that wanting to enhance security; rapidly on-board new apps during takeovers and acquisitions; reach new markets with different compliance needs and so on.

Over the next five years, financial services organisations expect a significant drop of 13 percentage points in their use of non-cloud-enabled datacentre technology, taking them down to less than 1% penetration. As in almost all aspects of life, some products, tools and processes that we took as standard parts of the way the world works are eventually superseded.

Nobody uses a ‘flatbed slider’ paper-slip credit card reader anymore to take a payment – and nobody will use non-cloud financial services IT functions in the very near future. There may be a few archaic legacy hangers-on, but they’ll be nothing more than the exception that proves the rule. Hybrid cloud for our Financial Services’ future? That’ll do nicely.