Finacle from Infosys explains role of cloud computing in today's banking industry. From cloud implementation for banks, cloud deployment models, benefits of cloud model to risk and challenges involved in it, the whitepaper covers it all.
1. Reach for the clouds
Thought Paper
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2. Reach for the clouds
Cloud computing, the latest buzzword in on both hardware and software. For instance,
technology circles, refers to the provisioning they require core banking, wealth management,
and usage of hardware and software over the e-banking and other software solutions to
Internet, using Web technologies. This simple capture information, and hardware in the form
business model allows enterprises to avail of a of huge repositories, databases and servers
range of IT services, over the Internet, as and etc. to store the same. Cloud computing offers
when required on a ‘pay-per-use’ basis, without these services so that banks can operate
‘owning’ them. without investing in software development and
hardware maintenance.
Banks have accumulated a huge amount of
data over the years and are heavily dependent
Cloud service models
• Software as a Service (SaaS): Cloud service tools, an execution environment like a Virtual
providers have the business software installed Machine (VM) to run and test their new
at their location. Their clients can access it or existing software, and web servers and
over a network and use it via a web browser. databases enabling deployment and storage.
Related activities like software upgrades, data
• Infrastructure as a Service (IaaS) or Hardware
backup etc. can be handled at the provider’s
as a Service: Service providers extend
location with the option of discontinuing
hardware resources and support, i.e., physical
the arrangement at the client’s behest.
equipment like storage devices, servers
Examples: Enterprise Resource Planning and
and networking components. They install,
Human Resource Management
house, run and maintain the hardware so
• Platform as a Service (PaaS): Service providers that clients can directly use it and thereby
provide an environment to clients to develop, save on capital investments and maintenance
run, test, deploy and store their software. costs. This model also enables demand-
The platform could include an operating based usage.
system and other software development
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3. Cloud deployment models
• Public cloud: The service provider owns and objectives and requirements come together
maintains the infrastructure and charges the to share cloud resources, maintained
general public for these services. This is a either by the companies themselves or the
scalable and cost effective model. service provider.
• Private cloud: The infrastructure is dedicated Hybrid cloud: Here, the cloud infrastructure is
to a single client for private use. It may be a combination of two or more clouds (public,
delivered over an On-site Private Cloud – private or community), with each of them
managed and implemented at the client’s existing independently as separate entities,
premises or an Outsourced Private Cloud – while collaborating to provide optimum
outsourced to the service provider, who also services to the client. This combines the
maintains it. In this model, data is very secure. public cloud’s advantages of scalability and
• Community cloud: This is a cost-effective low cost with data security.
model wherein several companies with similar
Cloud implementation strategies for banks
• The “BIG” decision: Banks need to exercise infrastructure. The bank should consider cost
caution before moving to the cloud model by effectiveness, data security, and scalability
first implementing it on a smaller scale. They while making a choice and monitor vendor
should proceed with the cloud approach only activity to ensure accuracy in billing.
if a thorough impact analysis yields positive
• Choosing the right cloud model: There are
results, else look for alternative models.
pros and cons to each model. The choice
• Transition strategy: In order to ensure a of the right model should be based on the
smooth transition to the cloud, banks should bank’s requirements and have the right
chart out a transition strategy from both the balance of economy, security, ease of
technology and staffing perspective. implementation etc. Banks may adopt the
private cloud model to start with and move
• Hiring the right people: Cloud computing
on to hybrid clouds as they gain confidence.
being relatively new, there is a dearth of
qualified personnel with implementation • Migration planning: After zeroing in on the
experience. Hiring competent professionals, vendor and the cloud model, the next crucial
who adopt appropriate strategies in tune step is to properly migrate the data from
with the bank’s requirements, will enable existing systems on to the cloud system. This
successful transition. is a very critical task as the slightest glitch
can lead to exposure of sensitive client data
• Choosing the right cloud vendors: The right
and jeopardize the entire process.
vendor recommends the models most suited
to the bank’s needs and provides relevant
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4. Benefits of cloud model
• Cost saving: Banks save on costs of software • Only banking, nothing else: With the IT
and hardware installation and maintenance. functions outsourced to cloud vendors, banks
Also, they can consume and pay for the would be able to concentrate on their core
services as and when needed, thereby business and not have to waste energies
minimizing the idle time for systems while on extraneous IT-related activities, such as
providing greater mobility. ramping up peak time server capacity.
• Differentiation: In a highly competitive • Go green: The decrease in hardware results
environment, a cloud model could serve as a in a smaller carbon footprint, contributing
differentiating feature and offer first movers towards a greener environment.
significant advantage.
Risks of cloud model
• Data exposure: Since all information resides • Vendor issues: With sensitive data being
in the clouds controlled by the vendor, stored in vendor-operated clouds, close and
customers might perceive cloud computing constant vendor monitoring is imperative to
as risky or a breach of confidence. ensure security and accuracy. Before forging
relationships, banks must think about how
• Data leakage: In cloud computing data is
they will safeguard and migrate data, in
accessed over the Internet, and is therefore
the event of the vendors closing down
susceptible to hacking.
their business.
• Cloud outage: Total dependence on cloud
computing can grind banking operations to
a standstill in the face of technical problems.
Challenges implementing cloud model
• Network problems: Internet connectivity • Staff issues: Extensive training will help the
and speed form the backbone of this model staff adapt to this new technology with
and in turn have a significant impact on the greater ease.
bank’s performance.
• Reliability issues: Cloud computing being
• Replacing existing technology: Replacing at a nascent stage and plagued by security
existing infrastructure to accommodate the concerns, banks are still skeptical about
cloud model may not seem viable to banks investing in it. Trust and reliability are key
in the short term. factors in forming long-term partnerships.
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5. Future of cloud computing in banks
Technology and innovation have always been banking, stand testimony to this. It is, therefore,
the cornerstones of the banking industry. a matter of time before cloud computing
Computerization, core banking, online and transforms the banking sector in a big way.
branchless banking, ATMs, POS, and now mobile
Conclusion
The following are the key considerations in 3. Partners and cloud models should be chosen
cloud implementation: in alignment with the bank’s requirements
to mitigate inherent risks in implementation
1. The decision to move to the cloud should be
and ensure a smooth transition.
driven by business reasons only.
2. should not be seen merely as a cost
It
cutting technique but rather, as a technology
of the future with huge long-term benefits.
Rajesh Kumar Sahu
Senior Associate Consultant, Infosys
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