Cloud computing has gradually transformed from being an innovative concept for banks to becoming the backbone that many financial institutions rely on and trust. We try to correct where they get it wrong
By Miljan Stamenkovic, General Manager at Mambu and Dave Murphy, Head of Financial Services, EMEA & APAC at Publicis Sapient
Over the last couple of years, there has been an increasing demand for the adoption of cloud computing. It has gradually transformed from being an innovative concept for banks to becoming the backbone that many financial institutions rely on and trust. Throughout the Middle East, governments have driven digital transformation initiatives that have been a significant catalyst in increasing the adoption of the cloud. In fact, major tech companies such as Google, Microsoft, and AWS have been opening data centers in the region as they see a great opportunity for cloud adoption.
According to Research and Markets, the Middle East cloud applications market is predicted to reach $4.5 billion by 2024. Across MENA, spending on public cloud is expected to have exceeded $4 bn in 2020, whilst growth has slowed to 11.3% compared to 29.6% in 2018-2019, spending is expected to bounce back in 2021 and is forecast to almost double by 2024 according to Gartner.
The global pandemic has resulted in changes to the workplace that the cloud enables - like operating remotely and having real-time activities updates. It’s no longer a question of whether or not to adopt cloud, but more of how to do it both efficiently and securely.
Many of today’s beliefs about the cloud are based on misconceptions fed by stories of adoptions gone wrong or fears of significant change. These beliefs get in the way of deeply understanding the positive business, operational, and economic impacts of the cloud and must be addressed to enable organizations to capture the cloud’s full value. Many decision-makers don’t quite understand the cloud, its advantages or how secure it is. Companies that have effectively counteracted these myths are the ones that have derived the greatest rewards from their move to the cloud.
There are four common misconceptions about the cloud:
Misconception 1: Security - Cloud is less secure than on-premise
Traditionally, banks believed that on-premise meant secure. But over the past few years, Chief Security Officers across the sector have acknowledged that on-premise data centers can be hacked remotely and that in fact, it’s manual processes and insider threats that pose a significant risk.
Cloud providers like AWS, Microsoft, and Google Cloud invest billions of dollars every year to ensure that their solutions are secure. These providers ensure that data can be encrypted and masked as it gets transferred. Similarly, while computing, the data can be secured via homomorphic encryption. This allows the service providers to perform operations on the data while having it remain encrypted. The client would be the only one aware of the private key which will allow them to decode the data.
Financial institutions that define the correct policies, adopt a secure DevSecOps operating model, and train or hire the right talent can actually achieve safer operations in their cloud environments than on-premises. They ensure a secure configuration by implementing single sign-on (SSO), password policies, multi-factor authentication, access permissions, and two-step verification procedures for specific processes.
Misconception 2: Control: The location of the data is unknown
For financial institutions, controlling data access is critical for protecting people’s data and privacy and maintaining customer trust. Many countries across the Middle East and around the world have enforced local data residency requirements because they believe it minimizes security risks around third-party access to data.
However, leading cloud providers have addressed these concerns and now support financial institutions in meeting data residency requirements. Their customers are able to designate in which data center region their business-critical data and apps are stored. Financial institutions can mandate the physical locations where data can be stored, and how and when it can be transferred.
Misconception 3: Cost - Cloud costs are more than in-house deployment
Cloud economics is a contentious question in current enterprise IT, where cost is highly dependent on a company's starting point. Some of the starting-point differences observed are companies’ maturity in the current on-premises purchase life cycle, existing license commitments, and types of workloads - meaning network versus data storage - where the latter shows a considerable economy of scale on the cloud. Starting point differences aside, many companies moving to the cloud have experienced cost benefits from the cloud’s shared-resource model and autoscaling. Rather than owning a cluster on-premises and paying for around-the-clock access, companies pay CSPs for CPU as they need it.
The core question for cloud economics is whether the reduced run-rate cost on cloud justifies the up-front cost of remediation, assuming all configuration and governance are done correctly.
Also, here is a whole range of calculations that can be applied to the cost of ownership – the most important being, the opportunity cost of not adopting the cloud. To evaluate the business benefits that cloud can bring to your business in the long term, start adopting cloud on a project basis and the results should reflect its value. Additionally, the cloud is designed to be flexible and scalable. This means if a business needs to scale up or down, costs can be managed much more efficiently. So it's critical when writing a business case and analyzing on-premises costs compared with cloud costs, enough focus is given to the main value driver of the cloud: the business benefits.
Misconception 4: Migration - After cloud migration, there is no going back
Cloud providers usually create copies of the content uploaded and store it in multiple locations as a backup in case their data centers are taken out for any reason. This ensures that the data would not get destroyed or lost for good. According to research conducted by IHS Markit, as organizations migrate to the cloud, they continuously move back and forth between traditional on-premise and cloud storage until they have identified how to best use it. Similarly, financial institutions and banks can adopt a hybrid cloud model, a combination of public and private cloud infrastructures, as best practice. This also offers great flexibility, agility, and free mobility of workload between both environments.
To summarize, COVID-19 has proven to business owners that a flexible workplace is no longer a luxury. In fact, cloud technology can offer financial institutions flexibility in the way employees work, and businesses operate. Due to its extremely agile nature, the cloud is extremely cost-effective, especially in the long run. As the market changes at an extremely high speed, the cloud allows banks to beat their competitors by rapidly evolving in tandem. They have the agility to easily scale up or down their cloud as the businesses respond to the industry’s pulse while being protected against cybercrimes and malware.