US financial companies embrace cloud
Only two years ago, an outage similar to the one that struck Amazon’s cloud services last month would have reinforced US financial firms’ view that shifting data and systems onto the public cloud was just too risky. The fact that the February 28 shutdown had no visible impact on the industry’s use of cloud services goes to show how far it has progressed since then in embracing the cloud after nearly a decade of hesitation.
That change of heart came after providers Amazon Inc, Microsoft Corp and Alphabet Inc’s Google took steps to assure financial firms and regulators that the cloud not only made tech systems cheaper and faster, but also more reliable and secure than their own server-filled warehouses. The benefits are so unquestionable that last month’s outage caused by an employee who typed in a wrong code was barely a bump on the road to the cloud and merely a reminder that no technology is foolproof, financial executives, Silicon Valley vendors and analysts who work with them said.
“You can’t just say if you use Amazon you get the magic cloud sauce and everything will work perfectly,” said Yevgeniy Brikman, the cofounder of Gruntwork, a start-up that helps big companies deploy cloud services. “And similarly that if you use your own data centre that somehow magically everything will work perfectly. These are just tools.” The payoffs of using the cloud are clear for an industry engaged in rounds of relentless cost-cutting.
Calculations performed for Reuters by research firm IDC Financial Insights show the biggest global banks saving $15 billion by 2019 from cloud adoption, cutting technology infrastructure costs by 25 per cent. About two thirds of global financial firms will be using cloud services in a significant way by next year, IDC predicts. Developing an application on the cloud can help reduce the time it takes to launch from 89 days to 15 days, according to consultancy McKinsey & Company.
JPMorgan Chase & Co, Goldman Sachs Group Inc, Capital One Financial Corp and Liberty Mutual Insurance Co are already using shared cloud services from large technology vendors, executives and spokespeople said. So are institutions such as Nasdaq Inc, The Depository Trust and Clearing Corporation (DTCC) and the Financial Industry Regulatory Authority (FINRA), the brokerage industry watchdog. State Street Corp is considering the same.
Amazon is the biggest provider with 40 per cent of public cloud business, according to Synergy Research. That market totalled $7 billion in the fourth quarter, and is growing at an annual rate of 50 per cent. FINRA now runs 90 per cent of its critical applications, including market surveillance, on Amazon’s cloud, saving $20 million annually. The recent outage did not affect its satisfaction.
“The capability and flexibility to recover quickly is much greater, and it is far more cost-efficient than operating your own geographically dispersed data centres,” said spokesman Ray Pellecchia.