In recent years, financial services firms have had to make some challenging strategic decisions to remain competitive in their marketplaces, writes Monica Sasso, EMEA FSI chief technologist, Red Hat. A major pivot point is whether to commit to manufacturing financial products or distributing them, or both.

The difference between building innovative new services for customers versus collecting and distributing third party services will inform the technology vision and operating model that a business needs for success.

A distributor will want to focus on developing a strong brand, an open platform, and tight customer and partner relationships.  Meanwhile, for a manufacturer, product feature innovation and strong application development skills become the pillars of the business.

What does business strategy have to do with the cloud? Today, the two are intrinsically linked. Businesses need to make sure they have scalable and flexible technology foundations to support growth and goals for manufacture or distribution. This leads them to another key decision point: whether to opt for public cloud-first, private-cloud first, multiple public clouds or a hybrid cloud infrastructure that incorporates all the above. As businesses set out to gain deeper understanding of what the cloud can help them achieve, we take a look at some fundamental considerations to help determine the most appropriate cloud strategy.

Sizing up the public cloud

There are several reasons companies choose publicly hosted cloud-based infrastructure. A primary driver is the need for ad-hoc resources or computing on-demand. The public cloud enables near-instant expansion, limited only by the cost of the environment.

This provides the ability to cope with peaks and troughs of demand, whether predicted, such as Christmas or tax season, or unexpected, like claims settlement after extreme weather or the surges in online banking during the first wave of Covid-19 lockdowns. For loads that cannot be estimated, it would be costly to provision spare capacity in a data centre, whereas bursting into the public cloud enables more client-centric reactions to changing demand.

The public cloud can also promote controlled, systemic growth of on-premise infrastructure by providing temporary expansion while the procurement process catches up with demand. We have seen some instances where it can take up to six months to provision on-premise compute power owing to procurement and governance processes. Public cloud capacity provides a stopgap and can be relinquished once compute power has been made available on premise.

Other benefits of public cloud include the ability to separate areas of concern and reduce some aspects of operational risk. For example, cloud infrastructure can be used to host front-end applications that need to be changed regularly, enabling access to company data through a secured backend integration, while segregating areas where needed for compliance or risk reasons. Similarly, the public cloud provides the ability to pool resources and be efficient with provisioning capacity.  This can save resources and time that can add value elsewhere in the organisation.

The cloud may also help reduce costs through pay-as-you-use models. Organisations can grow and shrink infrastructure without needing to build a data centre or decommission servers. CFOs can alter their cost allocations from capex to opex as well as directly distribute cost to projects and service, enabling a direct return on investment (ROI) calculation for a business or product line.

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