This American Banker article makes it appear a vast majority of banks are racing to the cloud, but a survey of banks with 5 Billion in assets or less conducted by Mercator Advisory Group for Finastra indicates this is likely an exaggeration. While this article highlights the benefits large institutions such as Capital One and RBC expect to gain by jumping into the cloud, the Finastra research indicates some smaller banks are less comfortable taking that leap:
“IBM’s announcement Monday that it’s buying Red Hat, the large Linux enterprise open-source software company that also offers infrastructure services for companies that manage private or public cloud services, is likely good news for the many banks moving to the cloud.
That includes Capital One, which has said it will migrate all its computing to the cloud by 2019. Other institutions aren’t far behind.
For any bank tempted by the promise of lower costs, quick deployments and ease of management they can get from adopting cloud computing, using an IBM firm may ease any qualms their compliance, risk departments and board of directors have.
“IBM is one of those vendors we trust to help deliver mission critical systems,” said Bruce Ross, group head, technology and operations at Royal Bank of Canada. “This will put them in a much better position to compete with these other three players in the market,” he said, referring to the cloud computing providers Amazon, Microsoft and Google.
That could help explain why IBM was willing to pay $34 billion, making Red Hat its largest acquisition ever. In addition to offering services for the cloud, Red Hat’s technology, which includes a “wrapper” for open source software and a development platform, runs on all cloud platforms.
A boon for RBC
Like many banks, RBC has been building newer applications such as mobile banking and advanced analytics that need to coexist with legacy systems and applications. The newer work is done in the cloud, using agile development methods and Red Hat’s Ansible software development platform.
Use of the cloud gives these projects the ability to consume large data sets and to be set up and deployed faster and with less cost, Ross said.
“We end up in the cloud, either local on RBC’s premise or in the public, and we’re 30% faster than we were under traditional methods,” he said. “We’re also getting capability to market much faster. An example is our mobile app, where we’re getting up to 10 releases a year out to our customers, we can release new capability whenever we want to, whatever makes sense for the customer.”
The merger of Red Hat and IBM will improve this dynamic, he said, as legacy and newer applications will work more seamlessly together.
“With the two organizations working as one, I don’t have to referee between the two of them,” Ross said. “I don’t have to think about the transition from one company’s software to the other; I can think of that part of our assembly line being through one. That helps me manage it.”
Over time, he expects to be able to move applications easily between IBM, Azure and other cloud platforms because Red Hat works with all of them.
This is important to RBC because its cloud computing environment is hybrid. Most work takes place on an internal, private cloud. But at times, the bank needs to run fast-moving projects in a public cloud. For instance, a regulator might ask the bank to assess its exposure to a type of market risk, prompting it to rapidly analyze a huge amount of data.
“In some of those cases, it’s good to be able to do that on a public cloud because you don’t have to spend all the capital to build all that infrastructure. You can dial it up when you need it and shut it down immediately,” Ross said. “The key is to be able to move from one environment to the other as you need to.””
The rest of the article describes the concerns of some that IBM may not let Red Hat continue to innovate independently of the IBM hardware and operating systems solutions, but also points out the acquisition will put IBM into the same ranks as Amazon, Google, and Microsoft as some of the largest cloud providers in the world.
Overview by Tim Sloane, VP, Payments Innovation at Mercator Advisory Group
