Even as cloud services have begun to proliferate among a variety of businesses, the financial services industry has remained largely resistant to new approaches. Burdened with stricter data protection needs and regulatory standards than many sectors, financial firms have been hesitant to adopt any technology seen as potentially risky, especially cloud computing solutions. However, the maturation of cloud offerings has dispelled traditional concerns, and businesses in the financial sector can embrace such solutions to achieve gains in IT delivery, business agility and cost efficiency.
“Cloud computing in the financial space has sufficiently matured and long-held industry concerns with security have been addressed and resolved through the customization of service offerings for financial market participants,” Nigel Kneafsey, founder and CEO of Options IT, wrote in a column for Wall Street and Technology. “Adoption rates should grow quickly, as the technology has hit its tipping point. Thus the long-held positive attributes of cloud computing – cost efficiency, speed to market and flexibility – will increasingly appeal to market participants creating demand for services and prompting new providers to enter the space.”
In a white paper on cloud strategies, Cisco noted that such services can reduce the time required to market new business services by 50 percent or more, cut total cost of IT ownership by more than 60 percent and improve transaction performance by more than 50 percent. Additionally, the cloud use can create a consistent, rich, secure and integrated user experience that allows employees and customers to connect and collaborate from anywhere.
Building the cloud into workflows
To make such performance gains, businesses can implement a more flexible IT infrastructure and communication architecture that integrates security, computing networking, storage and other business applications in a single system to improve collaboration and workflows, Cisco analysts noted. For instance, a desktop trader using unified communication tools can improve peer collaboration with functions such as instant messaging and content sharing that integrate with other trading applications. Additionally, this trader can better handle CPU-intensive trading processes by shifting tasks to a virtual data centre infrastructure.
While data protection and compliance concerns keep many firms from moving into the cloud, financial services companies can begin cloud implementation with services that fall outside core business functions. A University of Toronto study noted that financial institutions can benefit from cloud services for actuarial analysis, commodity pricing, credit derivatives pricing, currency exchange, risk analysis, portfolio optimization and fraud detection.
“Insofar as cloud computing systems permit very flexible and scalable combinations of solutions from many solutions providers, they represent a form of organized open innovation,” researchers wrote.
The University of Toronto study added that Canadian financial services firms are often more prudent about change and therefore tend to lag behind their U.S. counterparts in innovation. However, as Canadian financial firms increasingly enter the U.S. market, many are shifting to more closely mirror their stateside competitors.
Catching up with cloud innovations while navigating compliance issues can be a challenge, and financial services firms can benefit from working with a managed services provider to determine where cloud computing fits into their business processes, to navigate compliance solutions and to implement the technology best suited to driving their specific KPIs.