cio strategies in 2013 - cloud computing for financial services

CIO Strategies in 2013Cloud Computing for Financial Services

Savvis IT Infrastructure

2013 Global IT Leadership Report

www.savvis.co.uk

2013 Global IT Leadership Report: Cloud Computing for Financial Services 2

In 2013 the Pressure’s Not Easing Up for Financial Services CIOsGlobal financial services companies everywhere are facing increased market pressure. They need to be able to compete and grow, despite a tough commercial outlook and slow economic growth, made harder by minimal government investment and a general feeling of uncertainty in most of the financial centres across the world.

CIOs of financial services organisations are feeling the pressure. By aligning IT functions closely to the business, technology has become the engine that drives financial institutions forward, and the road has become bumpy. Independent research*, conducted by Savvis, tells us the top three priorities for CIOs in global financial services organisations are increasing collaboration; refocusing resources to create competitive advantage; and gaining greater efficiencies across the organisation.

Three Key Priorities for Financial Services CIOs in 2013:1. Increase collaboration across the organisation2. Refocus resource to align to projects that

create competitive advantage3. Gain greater efficiencies across the

organisation

The challenge for CIOs is intensified as achieving these objectives is impacted by budget constraints and, since IT is the engine that drives the business forward, CIOs need to drive efficiencies.

Varghese Thomas, Global Head of Financial Services at Savvis, believes the knock on effect is that IT leaders across all finance sectors are under pressure to rethink business models. “CIOs need to reinvent the way IT serves the business, as they strive to build a flexible, open, scalable infrastructure that responds to any demand,” he explains. “The challenge is to find the right approach.”

The right approach requires a decision to be made between buying or building the infrastructure yourself; running your own data centre or using that of a provider. Thomas recommends those considering doing it themselves, should ask whether they will be able to deliver the same levels of security and performance, and whether this is the best use of their time.

“IT leaders also need to ask themselves how IT departments can make the most of their legacy investment and adopt new technology in parallel,” continues Thomas. “Along with questioning what they should outsource and which cloud deployment provides the best route ahead.”

IT Outsourcing and Cloud Strategies — the Benefits are ClearSavvis research reveals IT Outsourcing as one of the ways financial organisations could meet the challenges of a constrained IT budget whilst seeking to improve collaboration and efficiency; and enhancing their competitive position. In fact, the cost savings financial services CIOs expect to gain from outsourcing are as much as 26 percent of IT budget. It’s not surprising therefore, that outsourcing is predicted to grow from the current level of 25 percent of IT infrastructure, to a global financial industry average of 40 percent by 2017.

Heads of IT in financial services organisations are very clear on the benefits of outsourcing. They told us the top reasons they need to increase the amount of IT infrastructure they outsource are to:• improve IT infrastructure agility to better

address the changing needs of the business• refocus on core strengths to help gain

competitive advantage• eliminate dependence on legacy infrastructures• realign expenditure from CapEx to OpEx• mitigate the risks of non-compliance.

“It’s clear financial services CIOs expect a lot from outsourcing,” says Varghese Thomas, “And they’re turning to outsourcing and cloud computing as a way to gain greater flexibility, scalability, innovation and market strength.”

The Future is Hybrid Cloud


Reinventing Financial Services IT Delivery Models in the CloudCloud computing offers compute resource on a user and per usage basis often with no fixed term contract or up-front fees, and can be used for individual projects, by department or function, or throughout an entire organisation. This type of delivery model is also known as utility computing and can be deployed within a private cloud infrastructure to assure security, privacy of data and SLA driven performance targets, or a public cloud infrastructure where cost reduction and capacity spikes are the priority.

In his role as Director of Cloud Solutions at Savvis, Andrew McCreath is regularly on site working with large enterprises. “The challenge is that most of them have legacy solutions with ageing or recently re-invested, infrastructures so they still need to own on-premise IT equipment and use colocation and other physical services,” he says.

“As a result, a hybrid data centre environment has been created, combining in-house services, collocated services, hosted services and public and private cloud computing”, continues McCreath.

McCreath advises financial services CIOs to select a service provider that has capability across the hybrid value chain from colocation, managed hosting, private and public cloud, as well as networking and consultancy services. “Without these”, he adds, “IT operators in an organisation will be seen as ‘infrastructure-tool-selectors’ for the financial applications, as opposed to value contributors to the industry, truly leveraging Cloud Services Providers and their capabilities”.

Financial services CIOs from both buy and sell sides of the industry understand cloud economics well, and from the industries surveyed, which include media, public sector, healthcare and software, the financial services industry is the third sector to have adopted cloud technology, along with the software and healthcare sectors. By divesting the responsibility of a complex but commoditised IT infrastructure to focus on generating core business value, IT departments and the business can only benefit and strengthen their position. Forty-six percent of IT heads of financial services companies use private cloud services, 21 percent use a hybrid model of part private and public cloud services and 19 percent only use a public cloud service.

IT leaders cited the two most important benefits of cloud computing as scalability and the ease of increasing or decreasing compute, storage and bandwidth consumption to match fluctuating demand which is often unpredictable, as well as to increasing the reliability of the IT infrastructure (35% and 28% respectively).

Figure 1:

Does your company use cloud computing?

0

10

20

30

40

50

Yes, we use ‘private’ cloud servicesYes, we use ‘public’ cloud servicesYes, we use a hybrid model of part private/public cloud

Figure 2:

Please select the two most important benefits of cloud computing

35%27%

24%

35% ability to scale up and down computer, storage and bandwidth consumption to manage fluctuating demand28% improved reliability27% environmental considerations e.g. reduced power use and CO2 emissions24% enhanced security

28%


Financial Services Industry — Cloud Computing Usage The CIOs surveyed represented large global financial institutions of between $1billion and $100billion, typically with large application sets, a high degree of customisation and tight integration into back-end systems and applications. From the range of applications that IT could potentially outsource, heads of IT are choosing those that are the most portable and easily separated from existing systems. These applications are often non-mission critical, and viewed as an overhead, so reducing the cost of maintenance is highly desirable: 56 percent of IT heads use cloud computing for email, 56 percent for intranet, and 43 percent for ERP applications.

When asked what applications IT leaders are evaluating for the cloud, 29 percent said batch processing of large quantities of data, for example, consumer transactions within retail banks or processing claims for insurers. Twenty-seven percent said Test and Development, perhaps in recognition of the flexibility and scalability it offers, as well as the ability to turn cloud services on and off quickly. Twenty-four percent are evaluating cloud for big data and analytics, leveraging the scalability of cloud providers to manage terabytes to petabytes of data easily, and 24 percent for mission critical applications, relying on the robust security of enterprise cloud solutions, high availability and back up options.

For some applications, financial services CIOs have completely committed to cloud computing based on a private cloud deployment. Nineteen percent of financial IT leaders are outsourcing their entire storage application to the cloud, 18 percent are outsourcing big data and analytics to the cloud and 16 percent outsource all their mission critical applications to the cloud. Figure 5. This demonstrates a high level of confidence and trust in cloud computing’s performance, particularly for those financial institutions that run important mission critical applications and core business functions in the cloud.

Figure 3:

Which of the following applications are you currently putting in the cloud?

0 10 20 30 40 50 60

Email

Intranet

Enterprise Resource Planning

Website & Microsite

Figure 4:

Which applications are you evaluating for the cloud?

0 10 20 30

Batch Processing

Test and Development

Big Data and Analytics

Mission Critical Applications

Figure 5:

For which applications does your company use private cloud throughout the organisation in this area?

Storage

Big Data and Analytics

Mission Critical Apps

0 10 20


Interestingly, there is a significant difference in the applications moved to public cloud infrastructures. Nine percent of financial CIOs outsource all their non-mission critical applications to the public cloud, 8 percent outsource back up and disaster recovery and 7 percent outsource all their storage to the public cloud.

“The variance between the two is because public cloud infrastructures are shared and potentially less secure than dedicated cloud,” explains Andrew McCreath. ”The good news is that financial services IT leaders are starting to have a better understanding of public and private cloud infrastructures, which applications suit which deployment model, and what is the optimum mix to balance cost efficiency with enterprise grade security.”

Varghese Thomas, Global Head of Financial Services at Savvis, continues to see increased confidence in cloud services from all segments of the financial services sector. ”Each of the financial services segments is adopting a private, public or hybrid cloud environment according to their specific business requirements and the proprietary and sensitive nature of their data,” he explains.

“A commercial bank or credit union will have different requirements and propensity to use the public cloud, than a broker running algorithmic trading strategies. A commercial bank may deploy a public cloud for commoditized, non-proprietary content such as hosting their website, whilst a broker may not, due to proprietary nature and sensitivity of their data.”

Thomas states that similarly a large universal bank will have operations covering most areas of financial services, such as retail, institutional and proprietary trading and broking etc., but as their IT infrastructure is large and complex, they will be likely to run a hybrid cloud model and select specific areas that make sense to migrate to the cloud.

Enterprise Grade Cloud Security for Financial ServicesIn the quest to rethink and reinvent IT delivery models, Andrew McCreath, believes that global financial services CIOs are investing more in the cloud and will continue to do so. ”Yet when asked why some IT leaders are not using cloud computing, they tend to cite concerns around security, legal and compliance,” he adds.

Financial services CIOs and Heads of Compliance are particularly worried about the security of sensitive customer and other data being shared with unauthorised third parties who reside on the same cloud infrastructure, as well as breaches of data protection through processing data outside of an authorised jurisdiction. Fear of data security has been caused in part by the many mass market cloud solutions available; which do not offer the high standards of security or SLAs which are available from enterprise cloud providers such as Savvis. It is also true that high profile attacks on cloud sites receive wide publicity, encouraging the perception that cloud computing is not secure.

Figure 6:

Which applications does your company use public cloud throughout the organisation in this area?

Non-mission Critical Apps

Back Up and Disaster Recovery

Storage

0 5 10

Figure 7:

What are the reasons for not using cloud computing within your company?

0

10

20

30

40

50

60

Security concernsLegal/compliance issues about processing workloads in an unknown geographic location


McCreath suggests most large financial services firms have very complex IT infrastructures built up over a period of time, with multiple interdependent applications and systems. As a result, cloud adoption requires a planned approach and usually takes place in stages and over a period of time, as IT leaders learn more about cloud operation and the IT infrastructure is evaluated, configured and made ready for a deeper cloud migration.

“Cloud adoption is essentially a journey of discovery on the one hand, evaluating and preparing the IT infrastructure on the other,” continues McCreath.

“Once CIOs have a better understanding of the cloud and have organised their IT Infrastructure into a cloud portable state, they will quickly see the benefits and move to the next stage of cloud adoption: a hybrid model that offers private and public cloud, with the ability burst into the public cloud when the need arises.”

What to Consider when Selecting an Enterprise Cloud Provider1. Hybrid cloud solutions provide optimum

performance Number one on the selection criteria is a provider that offers a hybrid cloud solution of public, multi-tenanted cloud services for commoditised content and non-sensitive data, and private cloud services for proprietary and sensitive data requiring a high level of security. IT leaders then have the control to choose the optimum mix of colocation, private and public cloud deployment to meet the end-to-end business requirements, security, privacy and performance. As a starting point, Andrew McCreath advises financial services CIOs to review the applications to be moved to the cloud. “Not all applications are suitable for the cloud,” he explains. “For example some corporate and ERP applications are so embedded into existing infrastructures that it’s simply impractical to migrate them to the cloud in their current form, whereas other applications could easily be adapted for the cloud.”

2. Security levels drive the cloud architecture Next, financial services organisations should review the data that will be stored, transmitted and processed in the cloud, classify it and understand the level of security that must be applied. The level of data security will dictate the cloud architecture, public or private, and the delivery model: Software-as- a-Service (SaaS), Infrastructure-as-a-Service (IaaS), Platform-as-a-Service (PaaS), as well as the service provider and security controls used. Proprietary and sensitive customer data needs the highest level of security that in most cases, only a private enterprise-class provider could offer. McCreath advises that the type of application determines the cloud architecture and the classification of the data determines the delivery model. “At Savvis, we recommend highly critical or protected data is best suited for private clouds, and non-critical, unprotected data is most economically managed in a public cloud, where infrastructure is shared,” he adds. Hybrid clouds offer financial institutions greater control enabled through private clouds, combined with cost savings enabled through a public cloud. An example of this might be an online bank placing its catalogue of products and other public facing marketing content on a public cloud, but choosing to place customer information, ordering systems, and other private information on a private cloud. “I’m confident that our data is safe in the cloud, we don’t have to internally worry about backups.”

2012 Survey Respondent

3. Security controls are key The last stage in ensuring enterprise-class cloud security; is to select a provider that can offer the full range of security controls: firewalls, intrusion detection and prevention, log management, application and API protection, database protection, identity and access management, encryption, vulnerability scanning and penetration testing and DDoS mitigation.


ConclusionThrough our ITO and Cloud computing survey, CIOs of financial services organisations told us they are under pressure to squeeze more and more value out of their IT infrastructure, and that they’ve turned to cloud computing to help them do that. In their quest to drive the business forward they’re having to build an open, flexible, scalable and cost effective IT engine that delivers all the advantages technology can offer.

Financial services IT leaders have increased cloud computing usage and continue to do so, but they are on a journey. Despite some fears around data security, the risk of compliance and the complexities of migrating legacy IT infrastructure to a cloud model, heads of IT in financial services are becoming more knowledgeable and confident about cloud computing, have a better understanding of the public cloud, and are realising how they can combine the two.

What’s fast emerging is a hybrid cloud for financial services. A cloud world where financial services CIOs will control what’s proprietary and core and therefore what should reside in a private cloud, and what’s non-proprietary or a commodity, and can be outsourced to a public cloud. An enterprise hybrid cloud combines the security, performance, flexibility and scalability demanded by financial institutions, usually at significantly reduced cost and optimum performance levels. 2013 will be the year of the hybrid cloud for financial services.

Find your solution with Savvis Financial services organisations around the world have turned to Savvis to help them achieve the IT infrastructure they need to excel in today’s constantly changing and competitive financial markets. Savvis will help to you make the right decisions about how and where to house your data and infrastructure. Using a blend of colocation, managed hosting and public and private cloud services, we can ensure you achieve the efficiencies you’re looking for, the agility your business demands, and the focus on what adds true value to your organisation.

About SavvisSavvis, a CenturyLink company, is a global leader in cloud infrastructure and hosted IT solutions for enterprises. Nearly 2,500 unique clients, including more than 30 of the top 100 companies in the Fortune 500, use Savvis to reduce capital expense, improve service levels and harness the latest advances in cloud computing.

For more information: Call us on +44(0)207 400 5600 email us at: [email protected] or visit us at www.savvis.co.uk

About the ResearchThis independent survey was commissioned by Savvis and conducted with 550 CIOs, IT Directors, Heads of IT and Senior IT Managers of global enterprises based in the USA, UK, Germany, Japan, Hong Kong and Singapore. 35% of the audience was from financial services companies with more than 500 employees and global annual revenue between $1billion and $100billion. The research used a combination of online fieldwork methodology and telephone interviewing and was conducted by Vanson Bourne, a research based technology marketing consultancy committed to the latest MRS Code of Conduct.

www.savvis.co.uk

© 2013 CenturyLink, Inc. All Rights Reserved. The Savvis mark, logo and certain Savvis product names are the property of CenturyLink, Inc.

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cio strategies in 2013 - cloud computing for financial services

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