Comments
An update today on this story. I spoke with Mike Sisk today, who's a reporter with Bank Technology News. Apparently Bank of America is denying that they have any part in this Alliance. So this could be a simple threat from between one and three large bank CIOs that is simply designed to impose pressure on their technology suppliers. Viewed most optimistically and taking the story at face value, this alliance is a realization of the vision of cloud computing - with more widely distributed common assets and a lower price paid for computing assets. My thought is that the truth lies somewhere in the middle, but even viewed most pessimistically, it has increased the credibility of the promise of cloud computing.
Hi Walter,
thanks for the comment and your blog which offers another point of view. I agree wholeheartedly that the security and privacy issues can be addressed and should not be considered insurmountable. We've had shared infrastructure within banking for decades now, and have been able to protect our transactions and data. I'm really waiting to see how both tehcnology vendors and other large banks respond to this initial foray. Should be fun!
I don't know if I'd put much more meaning on it than the demand for credit remains higher than the supply. What is important is that repercussions will be felt in commercial banking in 2010. Many corporates felt mistreated by their banks in 2008 and 2009 - either because of credit tightening or because their bank was acquired or failed. There's alot of business up for grabs and banks must act now to capitalize on the opportunity. But back to the question, for financial supply chain products to become more mainstream, banks need to continue investing - and ideally come to more standardization to build a real financial supply chain network that is broader than a single provider. And for the North American corproates that were the focus of this research, there needs to be more acceptance of electronic payments as a first step, before financial supply chain can become mainstream.
And the report is now available at idc-fi.com.
Hi Scott - I think internal clouds are for sure the first step for many banks. And your example is a good one - pretty much stand-alone technology that is not tightly integrated into business processes or additonal data sources is a good example of the kind of application or service that can be transitioned most easily.
Ash- thanks for your "from the field" comments. And sorry for the delay in responding - I've been on vacation and eschewing the digital world for the physical - but I'm back now coexisting in both. On your list - it seems that security is at the top of everyone's list - and rightly so. Securing data, securing access, and authenticating users is vitally important, and one that is particularly crucial for financial institutions.
I'd like to talk a little bit tho about your 3rd point - migration road map. We focus alot on the front end implementation and see many positives, but we also need to focus on the back-end - ensuring that when the time comes to transition away from the current cloud-based provider or applications - we can get access to the data, audit trails, user privileges, etc. so that we can transition easily. I think about the handcuffs that some vendors already have in place with their clients, and without forethought and appropriate legal agreements breaking a cloud-based relationship could be more difficult.
Brad - you bring up a really good point about vendor management. We've been thinking about best practices in vendor management, and really many banks now could do a lot better job of it. And although we're good at talking a good game about the need for agility and flexibility - vendor management becomes even more important when we move to more on demand technology. I think about how we could get to market so much faster to take advantage of new opportunities. We can use one vendor to get us to market, and then as offerings improve or the market moves in a different direction, we can switch out the original vendor and move to another with more scalable technologies or a different approach. I don't think all the issues have even been identified yet - never mind worked out!
Thanks for your comments Scott, and we were just talking in the office today aboutwhere traditional core fits when we talk about cloud processing. We've also been talking about SWIFT, and how there are a lot of cloud-like qualities in the SWIFT network, but it's not really cloud. What I think is interesting though as we think about both hosted core and SWIFT is that alot of those issues that seem insurmountable when you tak about them hypothetically - have often already been solved pretty well.
I won't say whether this is a good idea or not, but what it will do is further cull the banking herd. Marc is doing some analysis now looking at bank failures over time and looking for a trend in the relative "health" of the banks failing - are we coming out of the woods or still deep in them? I think we're at 123 US bank failures to date, so we definitely need to shore up the FDIC's insurance coffers - and make sure they are adequately staffed as well to respond to failing institutions. We're working on our predictions now for 2010, and we expect the pace of consolidaiton and failures to continue into next year. However, what will emerge are a smaller group of fewer institutions that willfigure out how to respond to upcoming regulations, retire "free checking", and increase efficiencies in their back-office operations so they can succeed.
I'm just back from the road and have been talking with bankers about social networking. Even as many institutions are investing in some aspects of social networking and web 2.0 as they revamp their internet channel, most do not support use of social networking sites by their staff. They cite concerns about security and employee productivity - and both seem about equally concerning to the banks I've talked to. However, just as banks relaxed controls until telephone usage in the 80s and 90s, I expect that they will loosen controls on social networking once policies have been developed and security controls established.
