Oct 05 2022

What Banks Should Know About Private Cloud

Financial services institutions are exploring the benefits of moving beyond on-premises data centers.

While many industries have eagerly migrated data and workloads to public cloud providers in recent years, financial services institutions generally have been reluctant to follow this trend. Many banks, credit unions and other firms instead have opted for the more traditional approach of hosting data and workloads on-premises. But some financial services firms are rethinking this approach. Even though on-premises infrastructure has provided a proven model for financial institutions, these organizations may be overlooking some of the benefits of migrating to the cloud. For example, cloud storage can improve flexibility, scalability, security and access while helping financial organizations save money. The private cloud model, specifically, is a great option for institutions that worry about the security of the public cloud but would like to take advantage of the benefits cloud computing offers. 

Weighing the Benefits of On-Premises Versus Cloud

On-premises solutions store and process data in an organization’s physical location, meaning they can be susceptible to damage in the event of a natural disaster or other localized disruption. Additionally, onsite solutions can be more costly, as organizations must pay for heating, cooling, manual hardware refreshes and disaster recovery capabilities. In a cloud environment, IT teams can focus more on high-value tasks and trust the cloud provider with system maintenance. A cloud provider also shares responsibility for security, further reducing demands on internal IT staff.

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Private Cloud Versus Public Cloud

As IT leaders at financial services institutions consider cloud services, it’s important that they understand what distinguishes private cloud technology from public cloud. Private cloud devotes computing resources to a single entity. An organization can host a private cloud at its own onsite data center, or the cloud can be hosted by a third-party service provider. In this model, the hardware and software are dedicated to a single organization and infrastructure is maintained on a private network — completely controlled by a single organization and not shared with others. By contrast, a public cloud setup is supported by infrastructure that may be shared by multiple organizations. The hardware, software and infrastructure of a public cloud are owned and managed by the cloud provider.

Users access data stored within a private cloud via a private connection such as a VPN, while public cloud assets can be accessed directly through the internet. The VPN provides financial institutions with an extra layer of security to protect sensitive data and helps meet regulatory and governance standards.

Financial institutions may also benefit from the cost structure offered by a private cloud. Organizations generally pay for public cloud services on a subscription basis, which costs more as they use more resources, while a private cloud model establishes a fixed cost that firms can budget for.

DIG DEEPER: Discover steps banks can take to safely migrate to the cloud.

Financial services organizations that want the benefits of private cloud, but don’t want to build out the on-premises infrastructure to support it, may elect to use a managed private cloud. In this approach, a third-party service provider manages and maintains the infrastructure in a single-tenant environment. This model can be expensive, but it provides significant benefits with security and customization. 

CDW can help financial services organizations gauge where they are in their digital transformation journey. We can discuss whether cloud technologies might meet their needs and explore options regarding public or private cloud models. It’s important to keep in mind that not all private clouds are created equal. Our experts can help organizations determine which offerings best meet their needs and help them set a plan of action as they explore cloud technologies.

This article is part of BizTech's EquITy blog series. Please join the discussion on Twitter by using the #FinanceTech hashtag.

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