August 16, 2010

Today, Lachal asserts, few banks have the monitoring and metrics to allow IT to allocate resources and costs in such an ad hoc fashion. "We are a long way, from a technology point of view, from that kind of ideal," he comments.

Still, Accenture's Greenway says he sees a lot of banks converting their existing technology infrastructures to private clouds, for everything from running mission-critical applications to conducting batch processing development and testing, and starting to supplement the private clouds by moving lower sensitivity and lower-priority apps to the public cloud. "That's a substantial journey banks are having to go through, and we see a lot of interest and discussion at the banks around that," he says.

External and Hybrid Clouds

External clouds, as you would expect, are flexible, pay-as-you-go computing environments (including hardware, software, networking and storage) hosted by outside providers, such as Google, Salesforce.com, Amazon, Rackspace, Savvis and IBM. According to our study, 16 percent of bankers say they are receiving services from a cloud provider today; 28 percent say they are considering using the services of an external cloud provider.

Amazon, IBM and Savvis provide base infrastructure; users can sign up for a certain amount of server or storage use, use it for a while and log out, paying only for the specific resources they used within that time period. Twenty-four percent of the bankers who responded to our survey said they currently use a cloud service for dedicated data center space, 13 percent plan to use one in the future and 31 percent are currently evaluating this type of cloud computing.

Google and Salesforce.com utilize the same on-demand model to provide applications and development tool kits. According to our survey, 34 percent of bankers currently use general business applications over a cloud; an additional 16 percent plan to use this model in the future and 34 percent are currently evaluating such solutions.

Hybrid clouds include a little of each of the above. For instance, a bank might run certain reports internally until the last few days of the month. At that time, so much more information needs to be calculated to meet the reporting deadlines that a bank would want to draw resources from a cloud provider such as Rackspace, Amazon, Savvis or IBM to run the work in parallel over several internal and external locations, splitting the workload so the job can be completed on time.

Ovum's Lachal strongly believes that hybrid cloud computing will be the norm for large companies. "Enterprises will mix and match public and private cloud elements with traditional hosting and outsourcing services to create solutions that fit short- and long-term requirements," he says.

Forecast Calls for Clouds

Banks that have a lot of legacy and mainframe-based applications will be the last to adopt cloud technologies, ING's Boehme observes. Institutions with many web-oriented applications will be quicker to build internal clouds, he notes.

According to Ovum's Lachal, though, retail banks and the banking industry at large are not rushing to adopt cloud computing, largely because of regulatory/security concerns.

Our research indicates that 42 pecent of bankers plan to deliver just 1 percent to 9 percent of IT services over the cloud in the next 24 months. But more than a third of respondents (37 percent) expect to deliver 10 percent to 25 percent of IT services over a cloud over the next two years. Very few bankers said they expect to deliver more than a quarter of their IT over the cloud in this time period.

These results fit with Boehme's prediction that big banks will move to the cloud space in a big way in the 2012-2013 timeframe. "Banks have some small things, such as proofs of concept or trials, going on right now," he says. "Next year, more will be added. By 2012, I think many of the technical issues that are of concern today will be solved."

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