The tide has begun to turn among financial services firms when it comes to their willingness to move to a public cloud. However, Dan wonders what is still stopping some firms, and what it will take for everyone to take the leap.
Regulation is a unique thing, as it can create the need for innovation or stop it right in its tracks. Look no further than the adoption of public clouds in the capital markets, as compliance requirements have served as a double-edged sword for those looking to make the move.
When I first joined Waters almost two years ago, I was tasked with looking at where IT budgets were trending. What I found was that, for the most part, firms’ budgets were stagnant at best. The regulations written following the financial crisis were coming into effect and firms were scrambling to make sure they had the necessary systems in place to remain compliant. To put it lightly, budgets were spread thin.
I spoke to Chris Perretta, who was State Street’s CIO at the time, for the story, and he mentioned his interest in getting involved in a public cloud. He openly admitted to not considering it an option back in 2010. However, the technology had improved and the benefits in terms of scalability were just too good to turn down at a time when every dollar in a firm’s budget mattered so much.
Testing the Waters
Fast forward nearly two years and a majority of firms are at least dipping their toes in a hybrid-cloud environment. RBC’s Bruce Ross, this month’s cover story, was vocal about his interest in moving his firm’s workloads into a hybrid-cloud environment.
But there are still those who are hesitant when it comes to migrating to a public cloud. Coincidentally, it was while I was in Canada this past June that I heard the other side of the public cloud argument. A panel at this year’s Toronto Financial Information and Technology Summit touched on what was holding back some firms from getting involved with a public cloud.
Interestingly enough, it had nothing to do with technology, as one panelist went as far as to say that the vendor’s technology in the space was light years ahead of what was being produced internally. The problem arose in the regulatory space. Damian Smith, director of infrastructure strategy at TD Bank, questioned what regulators’ expectations were and what kind of audit rights firms had.
It’s a true dilemma, as regulators can’t set a precedent without any past cases, and firms are timid about getting involved because no precedent has been set.
Stuck in the middle are large cloud providers like Amazon and Google. Often, these vendors aren’t willing to provide customers with a complete view of where their data sits, according to Dennis Cote, a former vice president of infrastructure planning and engineering at Toronto-based bank CIBC, complicating things even more.
Ready to Go
Something’s got to give—and soon—as firms are primed to make the move to a public cloud. According to a Tabb Group report written by Monica Summerville and Terry Roche, widespread adoption of public clouds within the capital markets can be expected within the next two to five years, with “significant decisions to be made around cloud adoption” done this year.
The report, A Look Through the Keyhole on Cloud Adoption Within Capital Markets, surveyed C-level executives and heads of businesses on the buy and sell side and at exchanges.
So, with the majority of the industry believing in the benefits of the public cloud model, where do we go from here? As big and powerful as public cloud vendors are right now, I think the opportunity that lies within financial services is too great to pass up. I think they’ll end up bending at the knee, to a degree, to appease the concerns of firms.
Regulators also need to step up to the plate and clarify issues pertaining to capital markets firms using public clouds. Putting things in writing and defining what is and isn’t needed from a public cloud vendor would likely alleviate some of the industry’s concerns. As I said, sometimes it takes a little bit of regulation to help innovation.
James talks about his trip to Chicago and some of the interesting topics that came up (including a look at disaster recovery demands). Then Anthony and James touch on ISDA's initial margin rules, with Phase 3 going live next year.Subscribe to Weekly Wrap emails