Most banks are pursuing virtualization to varying degrees these days. But how far they should go with these efforts, and how much of their infrastructure can be virtualized, are up for debate.
Virtualization -- the process of running programs in virtual storage and creating virtual versions of hardware or operating systems -- can help financial institutions reduce costs and improve services, but there are concerns about the potential risks of too much virtualization and of virtualizing legacy applications. It's a technology that banks must be vigilant in using, experts say.
Since virtualization technology is fairly mature, most banks should be leveraging it in some capacity, says Nord Samuelson, managing director in the IT and applied analytics practice at Boston consulting firm AlixPartners.
"Virtualization can be very beneficial from a financial standpoint," Samuelson says. Those benefits include speeding up time to market, reduced costs for IT resources, greater agility and connectivity to run applications, accelerated service delivery and server consolidation.
"You can set up low-cost environments, and for certain organizations being able to do things quickly translates into a huge cost savings," he adds. "It's a worthwhile thing to start to leverage."
There are, however, still some concerns about the implications of server virtualization, Samuelson says. "One issue is, it's so easy to adopt [that] you can get server sprawl," he says. "It can create a bit of a mess if you aren't disciplined about it, but that's true of anything regarding technology. But with virtualization you may need to be a bit more vigilant."
Another limitation of virtualization has to do with the presence of legacy systems and older applications that most banks possess. "You've got these old mainframe apps from the '80s churning in a back room, and people touch them maybe once a year. You wouldn't put something like that in a virtual environment," Samuelson says. "And there are some applications -- especially in top-tier banks -- that require an extraordinarily high performance and use an extreme level of system resources. In those environments, it can be very difficult to virtualize."
Still, Samuelson believes that by and large, virtualization is beneficial to banks. In fact, he says, there are two "easy wins" banks can pursue quickly with virtualization: development and test environments and disaster recovery.
Many third-party vendors will set up test sites in a virtual environment, but Samuelson says that for banks it's also easy to set them up yourself.
"If you have a virtual environment, you can take a piece of hardware and put a development environment up and mirror a production environment and save an extraordinary amount of money on that alone," he says.
Regarding disaster recovery, Samuelson believes all banks should be using virtualization in that area.
Using virtualization for disaster recovery has been an emphasis for several years at Woodforest National Bank (The Woodlands, Texas, $3.3 billion in assets). The bank's data center is almost 100% virtualized. Virtualization, in and of itself, wasn't the goal; rather, the bank recognized the benefits of virtualizing for disaster mitigation, especially after Hurricane Ike in 2008, say Richard Ferrara, Woodforest's chief technology officer, and technical architects Stephen Jones and Philip Sinquefield.
Ferrara envisioned a twice-a-year migration between data centers, and the bank has achieved that vision. At the beginning of every hurricane season, Woodforest's virtualization efforts let it completely fail over to its colocation facility and operate from there until the end of the hurricane season. "We're moving every six months," says Ferrara. Even though there hasn't been a major hurricane in the area since Ike, Ferrara does this "so I know my plan will work" in the event of a disaster.
Woodforest began its virtualization efforts in 2009 with a refresh of its Hitachi SAN, and in 2010 it began the necessary upgrades to both the primary data center in its The Woodlands headquarters and the colocation facility in Austin, Texas.
"Virtualization gives you a common hardware platform, and it also makes it a bit easier to upgrade," Ferrara says.
In addition to its data center, Woodforest is working toward virtualizing nearly all of its applications, something Ferrara admits is "an ambitious, larger-scale project."
Another financial institution that has gone down this path is Orlando, Fla.-based Fairwinds Credit Union ($1.6 billion in assets), which has completely virtualized its Oracle database. The bank completed virtualization on the server level a little more than a year ago. Fairwinds selected a Linux variant to handle back-end tasks and ran the virtualized database, which is powered by VMware (Palo Alto, Calif.), in test mode for a full year. Ted Spero, VP of IT infrastructure at Fairwinds, explains that about five years ago, the credit union realized its databases "were definitely showing their age in performance and scalability." After achieving about 98% virtualization, the bank finally virtualized its Tier 1 mission-critical databases earlier this year, after Oracle announced that VMware would support its 10g database product.
"We haven't really looked back ever since," Spero says. "The challenges involved were less about the virtualization than the replatforming. A lot of the learning curve was moving over to a new platform."
Fairwinds' next big project will be virtualizing its entire phone system, Spero says. "It's a massive project, a rip and replace," he says.
Spero attends many industry conferences dealing with cloud and virtualization "to stay on top of trends," and believes that banks will continue to move toward more virtualization of key infrastructure pieces.