In response to market trends and growing consumer expectations, financial services firms are turning to the cloud to revamp their operations and transform the way they work. Like many new technologies, the cloud involves tradeoffs. Financial services firms should balance security and regulatory compliance with innovation, efficiency, and creating moments of customer delight.

But what if firms did not have to make this choice?

A Hybrid Cloud Model is an emerging technology strategy that allows a firm to have its cake and eat it too—if executed properly. The basic idea is simple: use a combination of on-premises private cloud resources and third-party public cloud resources to increase the benefits of cloud computing.

Key benefits of the Hybrid Cloud Model

There are many benefits to leveraging the Hybrid Cloud Model. The most important include: 

  • Smoother compliance and regulation: A purpose-built hybrid cloud environment can make it easier to meet many of the stringent regulatory requirements of the financial services industry.
  • Reduced costs: A Hybrid Cloud Model can lower costs across the enterprise, which could be re-invested in the business or passed on to the customer.
  • Better security and data loss prevention: Cloud services providers understand security, data loss prevention and compliance. A purpose-built secure hybrid cloud environment can provide the right precautions and assurance, key for sensitive financial data.
  • Improved flexibility: A hybrid cloud platform is also well suited to meet the fast-shifting digital demands of today’s marketplace because it allows applications to be quickly scaled while maintaining superior regulatory compliance and security compared to a public cloud solution.
  • Greater application mobility: Using the Hybrid Cloud Model allows firms to leverage capabilities of both public and private clouds, with minimal retooling or re-architecting required. It also provides improved interoperability between various cloud types and the flexibility of not being locked-in to a single cloud vendor.

Overcoming barriers to adoption

While the Hybrid Cloud Model offers many attractive benefits, adopting means overcoming three significant challenges.

Costs associated with cloud service consumption

As noted above, the Hybrid Cloud can save money over the long run. However, scaling up adoption does pose financial risks. Firms may wonder exactly how much they will have to invest and whether the investments are worth it. 

Most of the risk here is rooted in a lack of automated governance policies to manage consumption of public cloud services in a Hybrid Model. This can cause budget overruns when a firm overprovisions resources to meet peak demand and then does not decommission such resources when demand stabilizes.

Building governance policies with global visibility and granular enforcement can help to control hybrid cloud financial spend and mitigate security vulnerabilities.

Costs associated with cloud application migration

Cloud migrations can be complex and expensive—and since a Hybrid Cloud Model is more complex than a conventional strategy, there is risk that Hybrid Cloud migrations can be even more so. Making the right choices about which applications should be in the public cloud and which in the private cloud is the key to managing these costs.

For example, some legacy applications are simply not suitable for the public cloud because the scope of work required to adapt them outweighs the benefits. Other applications that traditionally run in data centers are better off operating in a private cloud. Still other “burstable” applications operate better in public clouds because they can use the automated elasticity and scalability of the public cloud to meet peak user demands.

Security risks

There are also several cloud security risks and challenges that financial services firms should mitigate when leveraging a Hybrid Cloud Model. These include:

  • Encrypting data transfers between private and public clouds to prevent eavesdropping and cyberattacks (including volumetric denial-of-service (DDoS) attacks) that cannot be mitigated by leveraging typical authentication security measures
  • Compliance with financial industry standards and government regulations for handling sensitive data by adding security controls to prevent data leakage
  • Education and training of employees to protect against many cloud security challenges given the threats posed by cyber-attacks (many data breaches can be traced to human error)

Another challenge facing financial services firms concerns how to address incidents like data leaks since Hybrid Cloud Models typically rely on a clear operating model with assigned providers around shared responsibilities. This is key to establishing responsibility for addressing incidents and how the organization and Cloud Service Providers can work together to rectify incidents and issues.

Also worth noting, a Hybrid Model requires maintaining key staff as part of the operations in order to run on-premise services effectively. A potential issue when considering the challenges around retaining or finding skilled resources.

Key takeaways

Public cloud computing has transformed the way companies use technology to drive business outcomes. However, for financial service firms, maintaining a private network environment may be necessary to safeguard and access sensitive regulated data.

A well designed and executed Hybrid Cloud Model could provide the best of both worlds, permitting different business outcomes and unlocking new business models by mitigating risks associated with security, complexity and costs. Financial services firms are strongly encouraged to weight the benefits and challenges of the model in relation to their individual situation. Key to this is having a clear cloud strategy.

If you’d like to continue the conversation on Hybrid Cloud, we’d love to hear from you. I can be reached here, while my colleague Arshad Rizvi, who contributed to this article, can be reached here

Chad Duncan

Managing Director, Cloud Enablement Lead, Financial Services Technology Advisory North America

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