More banks are embracing the cloud and leaving the binding limitations of legacy systems behind. Yet, despite successfully implementing this technology for specific functions or processes (most commonly supporting back office functions), many banks still report an unwillingness to embrace cloud holistically.
So, what gives? A lot of this hesitation stems largely from banks’ lack of understanding about how to best implement the cloud beyond individual solutions for specific problems – a problem many banks find themselves still struggling with even five years after initial adoption timeframes expire!
Today, 83 percent of banks report that cloud initiatives are already part of a coordinated program or a fully integrated strategic transformation. Yet, according to the 2021 State of DevOps Report, while 65 percent of mid-evolution organizations report using public cloud, only 20 percent of them are using cloud to its full potential.
Let’s take a look at why banks are adopting a hybrid cloud approach and some of the benefits they’re seeing.
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What is Hybrid Cloud Banking?
The cloud has become an important part of the banking landscape with an increasing number of banks moving to the cloud to take advantage of its benefits. Yet, neither a private nor a public cloud on their own completely meet the unique needs of financial institutions.
According to McKinsey, some of the myths barring financial institutions from adopting the cloud include:
- Moving apps to cloud increases total cost of ownership
- Security set up around data centers is easier to control and superior to security on the cloud
- Applications suffer latency on public cloud
- A move to cloud requires organizations to lift and shift applications as is or refactor them completely
A study by 451 Research showed that 78 percent of organizations are using a hybrid cloud approach and that this number is only going to increase in the next few years. The reason for this trend is that a hybrid cloud (which is not necessarily synonymous with multi-cloud) can provide the best of both worlds – the flexibility and scalability of the public cloud combined with the security and control of the private cloud. With a hybrid cloud, banks can use public clouds for short-term needs and private clouds for long-term needs. This gives businesses the flexibility and scalability they need to respond to changing conditions and keep up with changing customer demands.
Hybrid Cloud Benefits
Banks have unique needs that are not always met by a private or public cloud when used on their own. That’s why more banks are turning to the hybrid cloud to enjoy:
1. Cost savings: Hybrid clouds can be very cost effective because businesses only pay for the resources they use. This benefit also gives financial institutions access to in-depth reporting that provides predictable, monthly billing. Additionally, businesses no longer need to manage and maintain their own physical infrastructure.
2. Focus on high-value-work: With some services and data hosted in a public cloud and managed by a service provider, in-house IT staff no longer need to focus on maintenance and management tasks. Instead, they can turn their attention to high-value work like application development, partner integrations, and data management, which will generate more revenue in the long-term.
3. Faster time to market: Hybrid clouds make it possible for businesses to quickly deploy new applications and services. In the public cloud, businesses can access a global network of servers, storage and other resources. Private clouds offer the added benefit of on-premises hardware and software development that can be tailored to specific needs. This combination provides banks with the speed they need to get their products and services to market quickly.
4. Increased scalability and flexibility: Hybrid clouds give banks the ability to move applications between private and public clouds without having to rewrite them. This flexibility lets banks take advantage of new opportunities as they arise and makes it possible to quickly scale up or down in response to fluctuations in demand. Further, hybrid clouds improve reliability because if one cloud goes down, the other can pick up the slack.
5. Greater control: Hybrid clouds provide banks with more control over their data because it resides in a single environment instead of being spread out across multiple data centers. In addition, banks can use the hybrid cloud to comply with specific regulatory requirements.
6. Seamless integration: Hybrid clouds make it possible for banks to easily integrate their applications with those of their partners. This capability is especially important for banks, which often have extensive partner networks.
Best Practices for a Hybrid Cloud Approach
In a hybrid approach, an on-premise cloud can be optimized for things like operational availability and stability, while an off-premise cloud can provide the speed and agility needed for enhncing customer engagement. Yet, getting started can be a challenge. Given the unique needs of banks, there are a few best practices that should be followed when implementing a hybrid cloud approach:
- Consult a strategic partner who has experience not only working with both public and private clouds, but that has served clients in the financial services sector. A partner with this type of experience can help your financial institution design a hybrid cloud that meets your specific needs. Further, take a look at their solutions portfolio – do they specialize in any technologies beyond cloud computing (i.e. machine learning) that your bank could derive value from? If so, they might be a winner!
- Create a governance model to ensure that your bank maintains control over data and applications. A governance model will help your bank maintain visibility and control over who can access what resources, when and how. Further, governance processes help manage changes and updates to the cloud environment, which will help reduce the risk of errors and ensure that changes are made in a controlled manner.
- Ensure that all systems are integrated and tested before going live. Hybrid clouds are only successful when all the systems are working together seamlessly. To avoid any glitches, it is important to test all systems thoroughly before going live. Therefore, test applications and services in both the public and private clouds before putting them into production.
- Develop a disaster recovery plan so you will be prepared in the event of an outage or other disaster. Your bank needs to have a plan in place for how it will recover its data and applications if something unexpected occurs.
- Define clear roles and responsibilities for both in-house and outsourced staff. This will help ensure that everyone is aware of their duties and can work together effectively.
- Regularly monitor performance to ensure that the hybrid cloud is meeting expectations. This will help identify and troubleshoot any issues that may arise. Focus on being proactive rather than being reactive. This approach requires that you regularly review your hybrid cloud strategy to ensure that it is still meeting the needs of the business. Remember, hybrid clouds are a dynamic environment and can quickly change in response to new demands or opportunities.
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Stefanini Is Your Cloud Partner
Banks should not be afraid to embrace the cloud, but they do need to take a hybrid cloud approach to get the most out of this technology. A hybrid cloud can provide the flexibility and scalability banks need to keep up with the ever-changing demands of their customers. In addition, it can help them comply with specific regulatory requirements, while still maintaining control over their data and applications. By following the best practices outlined above, your business can ensure a successful implementation of a hybrid cloud strategy.
Stefanini has more than 30 years of experience serving clients in the banking industry, including clients in retail banking, wholesale banking, investment banking and more. We offer digital banking solutions that automate compliance and risk, application migration refactoring, and more.
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