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US financial firms embrace cloud

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Network security no longer the top concern

Only two years ago, an outage similar to the one that struck Amazon's cloud services last month would have reinforced US financial firms' view that shifting data and systems onto the public cloud was just too risky.

The fact that the Feb 28 shutdown had no visible impact on the industry's use of cloud services goes to show how far it has progressed since then in embracing the cloud after nearly a decade of hesitation.

That change of heart came after providers Amazon Inc, Microsoft Corp and Alphabet Inc's Google took steps to assure financial firms and regulators that the cloud not only made tech systems cheaper and faster, but also more reliable and secure than their own server-filled warehouses.

The benefits are so unquestionable that last month's outage caused by an employee who typed in a wrong code, was barely a bump on the road to the cloud, and merely a reminder that no technology is foolproof, financial executives, Silicon Valley vendors and analysts who work with them said.

"You can't just say if you use Amazon you get the magic cloud sauce and everything will work perfectly," said Mr Yevgeniy Brikman, the co-founder of Gruntwork, a start-up that helps big companies deploy cloud services.

"And similarly, if you use your own data centre that somehow magically everything will work perfectly. These are just tools."

About two thirds of global financial firms will be using cloud services in a significant way by next year, IDC predicted.

The payoffs of using the cloud are clear for an industry engaged in rounds of relentless cost-cutting.


Calculations performed for Reuters by research firm IDC Financial Insights showed the biggest global banks saving US$15 billion (S$20 billion) by 2019 from cloud adoption, cutting technology infrastructure costs by 25 per cent.

About two thirds of global financial firms will be using cloud services in a significant way by next year, IDC predicted.

Developing an application on the cloud can help reduce the time it takes to launch from 89 days to 15 days, according to consultancy McKinsey & Company.

JPMorgan Chase & Co, Goldman Sachs Group Inc, Capital One Financial Corp and Liberty Mutual Insurance Co are already using shared cloud services from large technology vendors, executives and spokesmen said.

So are institutions such as Nasdaq Inc, The Depository Trust and Clearing Corporation (DTCC) and the Financial Industry Regulatory Authority (Finra), the brokerage industry watchdog. State Street Corp is considering the same.

Amazon is the biggest provider, with 40 per cent of public cloud business, according to Synergy Research.

That market totalled US$7 billion in the fourth quarter, and is growing at an annual rate of 50 per cent.

Finra now runs 90 per cent of its critical applications, including market surveillance, on Amazon's cloud, saving US$20 million annually.

The recent outage did not affect its satisfaction.

"The capability and flexibility to recover quickly is much greater, and it is far more cost-efficient than operating your own geographically dispersed data centres," said spokesman Ray Pellecchia.

Cost savings alone would not have been enough to lure big financial firms.

For years, the industry sat on the sidelines due to concerns about data security and regulatory compliance as other corporations took advantage of the cloud's benefits.

Silicon Valley took notice and made changes. For instance, Amazon has expanded its number and locations of data centres around the world to allow customers to choose a particular centre to comply with different countries' privacy rules.

Customers can also get dedicated servers to avoid sharing them, or can access information through private networks.

Customers, regulators and lawyers acknowledge that cloud failures could, in theory, wreak havoc.

That is why large financial institutions have mostly kept highly sensitive data off the cloud and have back-up plans, like using multiple vendors.

An apocalyptic scenario where many data centres fail at the same time is highly unlikely, they say.

At a conference this month, Mr Scott Mullins, the Amazon executive responsible for generating new cloud business from financial firms, said security has given way to other issues as financial customers' top concern when making the decision to move.

"About four years ago, when we began in earnest talking to financial institutions... security was the No. 1 topic," he said. "Today we don't spend as much time talking about security." - REUTERS

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