Dec 02 2020

How Are Tech Teams Using Metered Consumption, and Does It Make Sense for Banks?

The emerging offering provides a way to get the best of both cloud and on-premises IT models. Here’s how it works — and how it could benefit financial services firms.

With companies now looking for ways to balance the cost benefits of public cloud computing against the control advantages of on-premises private clouds, metered consumption offers a middle ground: onsite hardware solutions paired with pay-for-use billing structures.

Expanding market options from providers such as HPE, Dell, Pure Storage and NetApp have helped already-metered consumption frameworks make enterprise inroads in fields such as higher education — but does this cloud management model make sense for banks?

How Metered IT Consumption Allows Banks to Control Spending

Also known as “metered billing,” metered consumption looks to split the difference between offsite clouds and on-premises hardware. To offset the ongoing operating expenditure of public clouds and the upfront capital expenditure of private solutions, metered consumption models offer onsite hardware owned by technology providers combined with per-use billing of compute and storage services.

For banks, this means no large upfront CAPEX combined with OPEX tied to actual use each month. It’s worth noting that metered consumption providers typically require a minimum usage commitment for a fixed term — often three or five years — while allowing enterprises to “flex up” usage on demand. Regardless of overall use, monthly bills will always reflect this minimum commitment plus any specific overages for compute or storage. The result is an IT bill that much more closely matches actual use by organizations over time.

Cloudlike Pricing Plus On-Premises Security

As noted by Bank Director, financial firms are moving to the cloud to leverage three key advantages: innovation, cost savings and flexibility. This matches the general enterprise approach to cloud computing — companies are looking to do more in the cloud, quickly, without going over budget. For many banks, however, the cloud creates a compute conundrum when it comes to service and security.

As research firm McKinsey pointed out, for banks to better serve customers during the global pandemic, improved digital tools, products and services are essential. But security expectations are evolving simultaneously, with firms now expected to ensure due diligence around the collection of digital identity data, the increasing use of open-source banking solutions and the management of artificial intelligence tools.

This creates a potential paradox: While public clouds offer the compute scale necessary to deliver on-demand services, banks may be more comfortable with the security of on-premises solutions. Metered IT Consumption Offers Banks Security, Flexibility

Metered consumption offers a way to balance these competing needs without sacrificing either by providing two key benefits for banks:

Improved data security: By moving hardware back on-premises, banks gain the ability to more closely manage both data visibility and security. While simply having data onsite doesn’t negate the need for robust cybersecurity assessments and incident response planning, it shortens the distance between data and defense. With banks now responsible for ensuring that client data handling aligns with regulations such as the General Data Protection Regulation and the California Consumer Privacy Act — no matter where the data resides — moving critical data back on-premises removes a layer of risk.

Enhanced infrastructure flexibility: More so than in most industries, financial firms often see substantial and speedy growth via mergers and acquisitions. In practice, this means banks are often required to rapidly integrate large data volumes while simultaneously deriving insight from this newly acquired customer data. In pure private clouds, this type of expansion is both costly and time-consuming; in metered billing environments, flexibility is fundamental.

WATCH: Learn how to deploy a multicloud strategy to control costs and increase agility.

What to Consider Before Shifting to Metered IT Consumption

While metered consumption enables banks to reduce cost overruns without sacrificing performance, several considerations are critical before financial firms make the shift.

First is data quantity. Metered outcomes increase with scale — the more data, the bigger the benefit. Although even small banks often handle larger data volumes than comparably bigger enterprises in other sectors, thanks to increasing variety and velocity of digital transactions, it’s worth conducting a cost-benefit analysis to determine if public or metered cloud options make more sense for current data volumes.

Banks must also account for the longer sales cycle of a metered consumption solution owing to the custom model configuration required. Because all metered systems are custom-built to meet specific client needs, more immediate storage demands are often better served by traditional on-premises builds or the public cloud.

In addition, it’s important for firms to frame metered consumption as a tactical, line-of-business function rather than a technology-focused solution. To realize maximum benefits from metered models, CFOs and CIOs must work in tandem.

Metered consumption offers a way for banks to better manage costs, bolster security and boost flexibility by combining pay-per-use compute and storage delivery with on-premises hardware deployment.

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