Cloud slips away from CIOs’ grasp

By now those freaky acronyms SaaS, PaaS, and IaaS shouldn’t need to be spelled out for those in the IT know.

(For all the rest, they stand for, respectively, software, platform, and infrastructure as a service.)

They are subsets of what’s become known as the cloud, which previously was known as virtualization or hosted services, which previously were known as the internet, which once was capitalized as The Internet before it became commoditized.

Without further belaboring the terminology history, what’s important here is to know that businesses, and especially banks, are tearing ownership of the cloud away from the IT gurus. The other Cs beside the CIO—CEO, COO, and CFO—are waking up to the fact that cloud systems offer the potential for increased efficiency, lower costs, higher security, regulatory compliance, and world peace.

Okay, maybe not the latter (though you never know). As it happens, a number of really high-tech analysts recently have weighed in on this point:

• IBM—“For banks, the value proposition for cloud computing affects the entire business. Cloud technology offers a new model for delivering innovative client experiences, effective collaboration, improved speed to market, and increased IT efficiency,” say its researchers in a recent report.

It goes on: “Banks that take advantage of cloud computing are better positioned to respond to economic uncertainties, interconnected global financial systems, and demanding customers. They can use information to enhance customer segmentation techniques and to develop more focused services.”

It keeps going on, but you get the picture.

• Computer Services Inc.—“Cloud technology and IT outsourcing services are increasingly being adopted by financial institutions. Many institutions see outsourcing as a way to focus existing resources on priority technology projects while offloading the management of IT infrastructure,” say its researchers, in a separate report.

Some of their key findings include: 94% of the financial institutions it surveyed say they plan to outsource to the cloud at the same or higher level than they do today; the most commonly mentioned hosted functions are email encryption, backups, core banking applications, and security; and 45% believe shared management between the cloud service provider and an in-house IT team makes the most sense for their organization.

“This trend will continue to grow over the coming months across a wide number of infrastructure areas,” they say.

• Gartner Inc.—A recent survey of 651 organizations (not just banks) in nine countries found that while only 38% use cloud services now, 80% intend to use cloud services in some form within 12 months, including more than half of those not doing so today.

“Cloud computing is set to have a considerable impact on business in the future,” says Gregor Petri, research director at Gartner. He came to three main conclusions:

One, the road to increased cloud usage will be through tactical business solutions addressing specific problems, and not through broad, strategic infrastructure replacements.

Two, the business impact of cloud services increases as they continue to move up the cloud services value chain, from infrastructure to business process services.

(Here Petri starts to invoke the IaaS and PaaS acronyms, saying that as existing applications are replaced with higher level cloud services they “will have a much bigger impact on the way enterprises organize their business processes to serve their customers.”)

Three, the introduction of cloud solutions will lead to a more diverse solution portfolio with widely varying implementation and migration timelines. “Individual applications can be rehosted to run on IaaS, recoded or recompiled to run on PaaS, replaced with corresponding SaaS applications, or the business process can be resourced altogether,” he says. (There he goes again.)

• Compuware Corp.—Its study found that companies in general are increasingly leveraging the cloud to deliver business-critical applications. However, there’s a fly in the ointment. Most companies aren’t doing it right. Poor end-user experience leads to poor brand perceptions, loss of customer loyalty, and loss of revenue due to poor availability, performance, or troubleshooting cloud services.

“With cloud adoption topping the list of priorities for CIOs, companies are clearly seeing a benefit to the agility, flexibility, and time-to-value that cloud services can deliver,” says Bernd Greifeneder, CTO of Compuware’s application performance management business unit. “But CIOs are right to carefully consider the impact cloud and third-party services can have on end-user experience. The dynamic and remote characteristics of cloud-based applications require a new, smart, and automatic approach for deep, proactive monitoring that not only identifies end-user experience problems but also provides deep diagnostics for problem resolution.”

Such problem resolution in the cloud world has to go way beyond simple metrics such as availability or up-time. They should also incorporate the measure of response time, page-rendering time, and user interactivity time, he says.

In other words—in management-speak, not tech-speak—you ought to keep track of how quickly the customer can come to the head of the line, how quickly the bank can produce the product or service the customer needs, and how quickly the customer acknowledges satisfaction.

In yet other words: BaaS, banking as a service.

Sources used in this article include:

Compuware Study Finds 64% of CIOs Cite Poor End-User Experience as Biggest Management Concern with Cloud Computing

Study Reveals Continuing Rise in Cloud Adoption among Today’s Financial Institutions

Gartner Says the Road to Increased Enterprise Cloud Usage Will Largely Run Through Tactical Business Solutions Addressing Specific Issues

Cloud computing for banking:Driving business model transformation