Preetam Mohanty, Assistant Consultant,TCS Financial Solutions
Financial institutions no longer ask, ‘should we shift to Cloud’? Instead, they’re asking, how to choose between public and private cloud to get maximum benefit from hybrid/multi cloud. As cloud service providers have started to verticalize their offerings, CIOs have important choices to make about the type of cloud structure and the service model to support its applications and data capabilities. They must choose the right balance between private and public cloud assets.
The adoption of hybrid cloud service offerings is aimed at leveraging public cloud-like capabilities in an on-premises environment. Combined benefits of two service reduces the complexity and restructures the cost for enterprises that needs additional security, dedicated resources, and more granular management capabilities.
Hybrid Cloud Strategy Planning
Companies allow their application teams to select the higher-level services that best meet their needs across clouds to take advantage of best of breed services. A hybrid cloud strategy integrates elements of multiple clouds (public and private, public and public, public and on prem). The exact combination of cloud would be the organization’s call, so that it will work better than only a public or private cloud would do alone.
Strategy Checkpoints
- Define your goals/objectives and outcomes and conduct a thorough analysis of your apps, data, and workloads
- Run a Proof of Concept before adopting public/private strategy and check the connection (Orchestrate interoperability)
- Adopt right architecture encompassing storage, database, platforms, and security model
- Adopt the DevSecOps approach and implement security at every stage of your hybrid cloud adoption
- Create a journey that has several migration waves by bringing applications together on the basis of migration efforts, external dependencies, latency requirements and regulatory compliance
- Evaluate the performance of the strategy every six months
Benefits of Hybrid Cloud
- Cost flexibility - Switch from fixed to variable expenses as and when needed
- Business scalability - Hybrid cloud adoption supports immediate, unlimited scalability in the business functions. Highly customizable environment enables organizations to allocate resources more efficiently and adapt quickly to volatile conditions
- Market adaptability - Hybrid clouds support market agility, making it cheaper and easier to experiment with new competitive tactics. Complement existing legacy systems with cloud services, shifting components of user interface and data processing to a more efficient environment as and when needed
- Masked complexity - Hybrid cloud enables customer demanding, compelling and user-friendly experiences
- Effective risk Management - Financial institutions can spread risk widely with choices of different cloud
Challenges Around Hybrid Cloud
- Complex software architecture
- Hybrid operations - Ensuring the functionality of existing apps, operations, and tools while the move to the cloud occurs, and at the same time, ensuring that all apps and data work seamlessly irrespective of where they're located on public cloud, private cloud or on-prem
- Delays in the establishment of a cloud-compatible integrated security strategy
- Lack of necessary technical skills and know-how to integrate the world of public and private cloud
- Use of multiple new tools with poor control and limited coordination in security policies across clouds
Financial services firms traditionally are data driven, highly regulated and sensitive market. There is pressure from changing customer demands, new technologies and cloud born fintechs. Firms need to put strategies in place to move to the right set of cloud to tackle the industry pressure. Hybrid cloud could be one of the choices to adopt. With this, firms could chose cloud according to their workloads to accelerate their offerings. More than one of the cloud providers could be used by a firm, with each being used for specific workload types, or it could be where the same workloads are run across multiple cloud to drive regulatory or risk demands. This will mitigate the risk posed by multiple firms relying on the same underlying public cloud providers. Firms don’t need to have exit plans for public cloud. Hybrid cloud architecture is focused more on supporting the portability of workloads across all clouds, and on automation of the deployment of those workloads.
Hybrid Cloud Adoption in the Banking Sector
Banks are considering to diversify their cloud technology by having hybrid/multi cloud which helps in Safely storing sensitive financial information in private cloud but still scale with public cloud computing for banks. Banks separate data loads and transfer the relevant part to a cheaper public cloud. Banks make profit, meet the industry requirements, and remain flexible when it comes to the less regulated workloads. Hybrid cloud’s ability to bypass the binding limitations of legacy systems has motivated banks to embrace cloud in their front, middle and back-office applications.
Based on few parameters like scalability, security, legality, standards, regulation, and competition, consumer banking industry is adopting hybrid cloud for several use cases.
Hybrid Cloud – Use Cases @ Banking
| On-premise/Private cloud | Public Cloud |
| Document generation and account opening | Self-service channels (Online/web/IVR) |
| Deposit Maintenance (Credit withdrawal) | Pre-closure requests |
| Credit card and data management | Deposit servicing- rates, renewals, closure request |
| Document and signature capture | Support systems-HR, procurement, vendor & IT service |
| Signature capture and verification | Awareness - Talent management & training |
| Mortgage and loan | Mortgage loan - booking, disbursal servicing |
| Payment processing - customer regulatory | Customer credit analysis |
| Opportunity/prospect handling | Social media report analysis |
| Regulatory data, and competitor data analysis | Communication - alerts and reports delivery |
Hybrid Cloud Adoption in the Capital Markets Sector
Capital markets players are seeing high demand in trading volumes, market volatility, and in the demand for real-time, cross-portfolio risk analytics and regulatory reporting. These scenarios are intensifying the move from rather inflexible, cost-intensive on-premises environments towards high-performance, flexible infrastructures on Cloud. Front office functions such as CRM and market data applications are good use case for public cloud. Back-office functions involving sensitive data like orders, quotes, trade execution and risk management can be migrated to private cloud.
| On-premise/Private cloud | Public Cloud |
| Order routing and management | Trade strategy and order management |
| Trade capture and enrichment | Deal Capture and position management |
| Pre/Post trade compliance | Client management |
| Quoting/market making | Recordkeeping services |
| Portfolio recordkeeping | Risk and compliance control |
| Risk analysis | Clearing and custodial services |
| Income and dividend processing | Collateral management |
| Investment/fund accounting | Portfolio strategy |
| Portfolio strategy and models | Fund administration |
Hybrid cloud infrastructure would provide stock markets with low-latency access to its on-premises systems to deliver high-frequency trading capabilities as well as give its clients access to public cloud-based capabilities, including virtual connectivity services, market analytics, and machine learning (ML). Type of capital markets firm and the business model in use decides public or private cloud or both. Asset and wealth managers may choose to develop hybrid solutions while global markets players and investment banks that focus on competing in trading markets leverage highly scalable public cloud solutions.
Hybrid Cloud Adoption in the Insurance Sector
To balance the benefits of cloud-based systems with the need for privacy and security, many insurance firms are moving to the hybrid cloud model. Hybrid cloud has less failure point, which makes it an effective option for insurance organizations with huge variable workloads.
Hybrid Cloud – Use Cases @ Insurance
| On-premise/Private cloud | Public Cloud |
| Risk management | Human resource |
| Compliance | Policy production |
| Legal | Asset liability management |
| Product design | Document management system |
| Front-office apps | Data analytics |
| Agent and broker portal | Customer portals |
| Sales and distribution | Software for case management |
| Underwriting | RMS |
| - | Billing and accounting |
| - | Claim management |
| - | Reinsurance management |
| - | Bancassurance |
Hybrid cloud models offer insurers the flexibility and data analysis benefits of the public cloud in a way to make sense of big data. On the other hand, private cloud model provides full control over data storage and access on prem. Hybrid cloud models also helps insurance companies comply with increasingly complex regulatory demands surrounding data privacy and security. It also ensures compliance without blocking the company’s ability to leverage the public cloud for other purposes, like data analysis.
Conclusion
The rise of digital business and customer expectations has greatly influenced decision-making among financial services institutions to adapt to the hybrid cloud trend. This is taking over the financial services slowly and spanning across the front office with customer experiences, regulatory compliance used to onboard clients, conduct checks, and detect any issues of financial crime. The fact that most businesses see hybrid cloud as one of their IT strategies moving forward. Truly stitching together multiple environments in a unified, hybrid way across orchestration, management, and storage layers delivers the best-case scenario for data protection, performance optimization, cost optimization, and business agility. Competing and staying relevant in a digital economy which is hit by pandemic requires agility and flexibility. Hybrid cloud could be the IT strategy to accomplish this.