Why Can’T Our Financial Institutions Build Clouds
Cloud Society: What’s preventing our financial institutions from building IaaS clouds for themselves?
An industry event a couple of days ago, I bumped into an old friend who happens to be an active and experienced technology architect (his title is CTO, no less) working for a major investment bank. We discussed an interesting question: why aren’t top finance houses building their own Infrastructure as a Service clouds?
Now there’s cloud and there’s cloud, of course. We weren’t just talking about using virtualisation on commodity hardware for internal systems – plenty of that is going on already. Rather, the conversation turned to building what the likes of Amazon, Microsoft, Facebook and Google have been able to build for years – that is, fully, dynamic, distributed infrastructures that can be turned to whatever use is thrown at them.
Behind the question lies an important constraint – that externally provided IaaS platforms can’t be used for the core functions of investment banks, for a variety of convoluted but important governance reasons. So if banks want to build on similar platforms, goes the argument, they will have to do create them themselves.
So, what’s stopping them? The answer, it would appear, is the conjunction of scale and complexity. To ‘do’ IaaS in any useful way requires creating a certain size of infrastructure - but at the same time, organisations have to take into account existing infrastructure and applications.
One thing banks have been very good at traditionally is creating new IT systems. Back in the glory days, I remember being told, it was simply easier to build a new system than try to adapt an old one. While those days may now be over (at least for the time being), the result is a smorgasbord of systems, an unmeasured quantity of which are mission critical.
The challenge for IT in the finance sector has always been for management to keep up with delivery. As we discussed, one of the biggest issues faced in finance organisations today is asset management. To paraphrase another old friend and colleague, analyst Tony Lock of Freeform Dynamics, “The first problem is that people don’t know what IT systems and services they have.”
This lack of knowledge derives from a historical lack of adequate process. Asset management isn’t the only problem for banks: in IT terms, there are systems to migrate, data to classify, DNS rules and firewalls to configure, the list goes on. And then the sheer numbers of people who need to be consulted along the way, each with their own strategic goals and even personal ambitions.
When we look at the operations of the ultra-efficient data centres employed by cloud providers, we see a zealot’s attitude to IT management – everything is controlled, managed, labelled to the N’th degree. In a way, Amazon got lucky (http://itknowledgeexchange.techtarget.com/cloud-computing/amazons-early-efforts-at-cloud-computing-partly-accidental/) as it implemented its elastic cloud infrastructure relatively early in its existence.
Given that such an approach isn’t so straightforward for decades-old institutions, what’s the answer? Perhaps it would be best to create an entirely independent infrastructure. That would require a massive amount of investment of course – as banks struggle to respond to the new capital requirements imposed by Basel III, funding looks increasingly unlikely. Indeed, exceptions such as Deutsche Bank and National Bank of Australia only (http://www.americanbanker.com/issues/177_117/public-cloud-or-private-banks-map-a-path-towards-both-1050188-1.html) prove the rule.
So, why do finance organisations not build clouds? Despite their ability to build what were seen as some of the most powerful computer systems on the planet the answer, quite simply, is because they can’t.