Lieberman Software
Wednesday October 22nd 2014
Innovation Leaders in Privileged Management

Banking and the Cloud

Banking and the CloudA trend that has caught the attention of some in the technology media is the reluctance of banks to move to the cloud, despite the benefits. The reason is that over the past 15 years banks, to a large measure, have lost control of their IT environments. This situation stems from a combination of M&A and a rush to outsource IT operations.

The attitude toward the cloud among many of the IT executives I’ve dealt with is that they’re already using “cloud” services in a hybrid model. However, while they may redefine the cloud to mean having parts of their datacenters hosted or managed by external parties, the reality is that these institutions are not using the cloud as we have come to know it.

From a PR perspective, this situation probably couldn’t get much worse; and the legacy of outages and leakages suffered by several banks over the past few years does not add credence to the common argument that the cloud presents more security risks.

Morale in IT throughout the banking center is low. Outsourcing has robbed many of these organizations of the brightest and best in IT, and the reduction of IT budgets over the past few years has made it difficult for the banks to be innovative. Banks have traditionally been at the leading edge of innovation, but in the case of the cloud they are, in general, being the least innovative.

Another contributing factor is the prevalence of legacy applications, many of which run on platforms such as mainframe (and in many cases long defunct operating systems), for which there is no cloud offering. The banks no longer have the resources, or the skills to migrate these applications to up to date platforms. You can’t replace pieces of string with fibre optics!

Concerns related to information security in the financial industry are no different than any other industry. A litany of failed security projects that have never been fully implemented is common. For example, the most frequent cause of an IT breach is the compromise of Privileged Identities, and although most – if not all – banks have tried to address this problem, few have succeeded. The solution to this problem alone would significantly increase the willingness among IT executives to take on more cloud services.

Ultimately, the move to the cloud is not necessarily in the interest of the banks’ outsourcing partners, many of whom have been caught flat footed by the growth of cloud services. Eventually they will have no choice because the dependence on technologies for companies such as Microsoft, Oracle, SAP, and others is going to force the banks to adopt cloud services, simply because their suppliers are moving in that direction. Besides, the financial benefits of adopting more cloud services will mean that the banking industry will eventually be dragged kicking and screaming into the cloud.

What are your thoughts on the reluctance of banks to adopt cloud services? Leave a comment below.

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