The allure of having applications and systems hosted on a cloud network is appealing to community banks and credit unions as it allows them to eliminate servers, internal infrastructure, and applications that would typically have to be hosted inside the institution, as well as the associated support each one requires. As a result, many organizations are considering, or currently in the process of, moving to cloud-based systems.
While the cloud can certainly help streamline processes and increase bandwidth for bank staff, there are a number of details that community banks and credit unions should consider before making this transition, beginning with the cloud destinations or management types:
The Infrastructure Management Types
All hardware is located on-site at the financial institution.
All hardware is housed at a third-party data center. This solves the issue of location.
A cloud provider hosts the infrastructure components traditionally housed in an on premise data center, including servers, storage and networking hardware. It solves the issue of location + hardware storage.
Cloud services offer many benefits for financial institutions, including system standardization, centralization of information, the simplification of IT management and the built-in ability to stay current with technology updates and vendor software releases. For cloud services to be implemented successfully, financial institutions must understand the different types of cloud environments that are available and which one best meets the strategic objectives of their institution. Each bank has a unique corporate strategy that will guide how it moves to the cloud, what type of cloud solution is best for its environment and what specific technology assets should be moved to the cloud.
Here are five questions you should ask before making the decision to move to the cloud:
- Which applications can we move to the cloud?
Evaluating which applications can be moved to the cloud and which vendors offer cloud-based solutions is really the first step. This will help organizations understand issues and elements that will be solved or created by the move to the cloud. For example, even with cloud-based solutions, financial institutions will still need to manage user work stations, security issues, connections to applications, and switches and routers, to name a few.
- Does moving to the cloud fit with our corporate strategy?
Some organizations consider moving to the cloud simply because they think it is the right thing to do; however, there is no set path that all financial institutions must follow. Each bank has a unique strategy that is driven by its market situation, such as the desire to expand service offerings, open new branches, merge with another institution or even be acquired. Your corporate strategy informs your institution’s IT strategy and will guide you in choosing the management type that best fits your overall goal.
- Is the connectivity at my bank strong enough to support cloud-based solutions?
Delays in loading cloud-based applications can be frustrating as well as costly. The increased use of cloud-based computing will place added demands on Internet speed and connectivity, making a strong connection critical for the success and health of the financial institution. This is a very important consideration when determining whether to move to cloud-based services. Confirming your institution has the proper connectivity will certainly help streamline this transition.
- Are there additional security, risk and compliance issues to consider when moving to the cloud?
Moving to a cloud-based application will mean giving up some controls to the cloud vendor. When selecting a cloud vendor, evaluate their practices and strategies for user identity and access management, data protection, incident response and SOC 2 Type II documentation. You should have a solid vendor management program in place to verify that your vendors are compliant and are following the service agreement.
- Will moving to the cloud save my institution money and cut down on IT costs?
Many financial institutions find that the transition does not translate to a lower price tag, and in-fact can result in the bank actually spending more. However, with this expense comes the simplification of IT management and the built-in ability to stay up to date with software releases. Migrating to the cloud commonly requires an organization to move from a capital expenditure (CAPEX) to an operating expenditure (OPEX) financial model, in which large capital outlays for purchase of servers, computers and networking hardware, are replaced by monthly, quarterly, or annual fees that an institution pays to operate the application.
An application hosted in the cloud does not require any major capital investments for the institution. While the monthly fee in the OPEX model may be higher than the hardware and software costs, it eliminates the responsibility and indirect expense of bank personnel having to maintain the IT infrastructure. Think of these pricing models in the same way as owning a car versus taking Uber. When you own a car, you are responsible for its general upkeep, paying for gas, cleaning the car, etc. When you take Uber you simply pay for the ride and the driver is responsible for the vehicle’s upkeep. While you may pay a little more for that Uber ride, you gain more free time to focus on activities you enjoy.
Working with a financial industry IT service provider, like Safe Systems, can help you with the decision-making process involved with moving to the cloud while ensuring the solution and applications are compliant and meet regulatory expectations. We work with each institution to create a plan, based on their goals and strategies, to determine what can and should be moved to the cloud. Ultimately, moving IT assets to the cloud enables your bank and IT executives to focus on the key capabilities that support your bank’s unique strategy.