Nov 09 2023

What Banks Need to Enter the Cloud with Confidence

Financial institutions have moved slowly with digital transformation. That’s about to change.

Financial institutions have been on terra firma for centuries, which may be part of why it took the sector a while to explore the cloud.

But the industry’s perspective on cloud services is shifting: A 2022 McKinsey survey shows that while only 13 percent of financial services leaders had moved at least half of their IT footprint or more into the cloud, 54 percent say they expect to reach that threshold over the next five years.

Given the industry’s particular sensitivities, experts predict that one specific approach — hybrid cloud — will jump to the fore in the sector.

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Why Hybrid Cloud Solutions Are What Banks Need Now

A combination of private data center infrastructure and public cloud services, hybrid clouds are positioned to offer financial services what they need from each type of infrastructure. Banks need proprietary services because of their sensitive nature; the cloud approach offers more ease in sharing data and applications. Hybrid clouds support financial institutions in their efforts to be agile by giving banks geographic and technological flexibility.

A successful migration to hybrid cloud services (such as those from Nutanix, NetApp, and IBM) will require banks to adopt new tools to manage them. These tools can include orchestration solutions from vendors such as VMware and HPE, which enable automation to streamline operations and reduce the burden on in-house IT teams. Such tools can stage an entire pipeline filled with automation scripts that help keep services flowing.

RELATED: Find out the facts about managing data in the hybrid cloud.

Three Ways Hybrid Cloud Solutions Boost Banks’ Performance

The elastic nature of the cloud brings challenges, such as transitioning legacy infrastructure, navigating banks’ unique compliance standards and the toll on operational resources, particularly at launch. But handled with care, the cloud’s benefits — chiefly, security, cost and streamlined IT operations — can anchor longstanding institutions in the world of finance, keeping them competitive.

1. Banks can use hybrid cloud solutions to improve security.

According to a Cisco survey of 2,500 IT decision-makers, 37 percent of IT leaders say security is a significant challenge when using multiple clouds. But when financial institutions are selective about which workloads are stored where and develop a cloud foundation accordingly, they can determine the most secure solutions to take advantage of both private data centers and public cloud services. In fact, 44 percent of developers are deploying cloud-native technologies to improve their security, according to the Cisco survey.

2. Banks can use the hybrid cloud to reduce costs.

To be clear, the costs of launching a hybrid cloud solution are also a concern for financial institutions. In fact, the Cisco survey indicates that one-third of IT leaders are facing cost-related challenges on their path to the hybrid cloud, and cost optimization is a contributing factor for only 18 percent of organizations.

Part of this may be due to the biggest push the hybrid cloud has seen in financial services to date. When the great hybrid cloud migration began during the pandemic, some IT leaders were left scrambling to balance the need for agility with the costs of launching and maintaining a hybrid cloud under severe time constraints. Now, though, a defined strategy can help IT leaders save costs by directing services to the most appropriate spot.

DIG DEEPER: Take these three steps to maximize the value of your hybrid cloud environment.

Cloud services can help institutions understand the most affordable data storage options available to them — a crucial benefit in a complex industry with strict regulation and compliance standards. Cloud services often offer pay-as-you-go pricing, making for a relatively low initial investment once organizations are ready to make the leap. And the cloud’s partner in the hybrid world, the private data center, tends to be large, slow-moving and expensive, making a hybrid solution ultimately the most cost-efficient choice in the long run.

3. Banks can use the hybrid cloud to streamline IT operations.

Organizations are already seeing this play out: 55 percent of respondents to the Cisco survey have created a cross-functional team, and 41 percent said that collaboration among network and cloud operations teams helped improve operational efficiency. To be as streamlined as possible, organizations may need to upskill some of their IT staff, but the payoff of more agile, scalable and centralized operations will likely be worth the upfront investment.

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