November 04, 2013

Demand High But Challenges Persist For Cloud-Based Analytics

Unlike document management, placing data and analytics functions in the cloud still has significant obstacles to widespread adoption in the banking industry. The biggest challenge is around data privacy.

Many countries have different — and sometimes inhibiting —regulations around moving data across national borders, says Padmini Ranganathan, senior director, technology marketing for industries, SAP. That can be a big problem for providers such as SAP looking to deploy cloud-based data and analytics applications on a global scale, Ranganathan relates. “The regulatory issues make some markets easier than others, and banks are going to have to face those challenges as well to figure out these regulations,” she notes.

Furthermore, corporations and governments are becoming more sensitive about the issue of letting IT data cross international borders, says Rick Sizemore, a director at Alsbridge, which provides outsourcing consulting to financial institutions. For example, when one company that worked with Alsbridge had to send data outside of Belgium’s borders, it had to get a royal decree to do so, which took six months, Sizemore shares.

“With the news about the NSA’s spying, lots of multinational corporations have fears around their data traversing the U.S.,” he explains, adding that such concerns have prompted some companies he works with to consider moving their data centers outside the U.S.

Despite this regulatory barrier, there is a growing demand in banking IT for cloud-based data and analytics offered on a subscription basis, SAP’s Ranganathan says. SAP reached a deal with Hewlett-Packard earlier this year to offer its SAP Hana analytics solution-as-a-service.

“Now more than ever banks want to get closer to their customers and need to get to know them better, … but handling all of their data in-house is often a challenge,” Ranganathan explains.

Turning to the cloud can help solve many of the data challenges that banks face. This is particularly true of smaller banks that rarely have the resources and expertise necessary to launch big data and analytics projects, says Roji Oommen, managing director, financial services at Savvis, an infrastructure-as-a-service provider. “People want the analytics capabilities, but they don’t want to worry about all of the infrastructure underlying them,” Oommen says.

Savvis is pursuing partnerships with data and analytics providers to offer its data centers to those providers so they can offer their systems through the cloud. “The economics of putting data and analytics in the cloud is really compelling,” Oommen notes. “The infrastructure investments you have to make for data and analytics have to be really big to do it effectively. Otherwise it’s not worth doing it on your own.”

The cloud may enable smaller banks to leverage analytics capabilities that they don’t have the resources or talent to manage on their own, but that lack of data talent still presents risks for banks even if they are outsourcing, says Julien Courbe, PwC’s financial services technology leader.

Without the IT talent who understand data and analytics, a bank may not be fully aware of the regulatory or security risks of leveraging the cloud for those functions, Courbe explains. “Leveraging cloud-based services for data analytics will require banks to enhance their data loss prevention capabilities to protect against vulnerabilities,” he advises. – J.C.