'If you pick a favorite and you're wrong, you're fired': Banks are debating how to work with AWS, Microsoft, and Google as they shift to the cloud


banks and public cloud providers 2x1

  • Banks, eager to cut costs and innovate faster to keep up with agile fintechs, are becoming more comfortable using the public cloud.
  • Despite the big plans that banks have, a majority remain unsure of whether to work with a single or multiple cloud services.
  • How banks decide to engage with the public cloud will be closely watched by the providers because Wall Street represents a significant revenue stream that until now has been largely untapped.

After years of hesitancy — owing largely to concerns over security and regulatory compliance — Wall Street is finally turning the corner on its acceptance of the public cloud.

A recent survey of banks’ IT budgets showed that 60% of respondents at large firms believed more than half of their workload would reside in the public cloud within the next three years. As it is, just 20% of respondents said they’ve moved that much to the public cloud.

It shouldn’t come as a total surprise that banks are finally interested in moving some of their systems off premise and on to shared remote servers. In making the shift, banks stand to save money previously spent to maintain older technology systems. But, more importantly, the move will allow banks to innovate faster — a key benefit for Wall Street as it competes with fast-moving newcomers looking to steal market share from them.

And while banks are no longer questioning if a move to the public cloud is the right one, they’re worried about how they’ll do it. With three cloud businesses dominating the space — Amazon Web Services, Microsoft Azure, Google Cloud — the choice either to pick one or to work with several remains top of mind.

It’s a difficult decision for firms with no clear answer because they risk being locked in to a single cloud service or sacrifice using the public cloud to its full potential. Experts estimate 60% of all banks remain undecided on exactly how they’ll approach their cloud strategy. The remainder are evenly split between a single- and multi-cloud approach. 

Amazon, Microsoft, and Google are all also eager to see where Wall Street lands on its public-cloud approach. In general, all three companies want to work with larger corporations, which represent big revenue opportunities. And while Amazon holds the most market share thanks to its early-mover advantage, there remain plenty of areas for Microsoft and Google to pick up business as banks shift more of their software and services into the public cloud.

Picking a single public cloud allows a bank to use the unique offerings of the cloud service without worrying about how to transfer that work to another cloud that might not have the equivalent tools or applications. But working with both Amazon and Microsoft, for example, offers protection against sudden price increase or outages from either company. Banks could also quickly move their applications or tools if the relationship with a cloud service sours.

“One of the things that has held banks up from cloud adoption for the last several years — they have been trying to figure out how they could do it in an abstract way and how they could try all the cloud providers so that they don’t look like they picked a favorite,” Anthony Skipper, the founder and chief technology officer of Galactic Fog, which helps firms design applications to work across multiple clouds, told Business Insider. “If you pick a favorite and you’re wrong, you’re fired.”

Some things are best done with a single provider

One of the biggest reasons a firm might choose to work with just a single cloud company comes down to data. Tools that require the use of large data sets are difficult to manage across several clouds since the data needs to be replicated multiple times in each cloud, which is a costly and complex process.

Allison Gorman Nachtigal, a managing director at Morgan Stanley that heads the bank’s cloud center for excellence, told Business Insider that while the bank aims to have flexibility in its cloud strategy, anything involving large databases is an area it would likely look to work with a single public cloud.

“You have to be pretty thoughtful as you get into applications that have a big data dependency that they can’t take with them in a more modular way,” Nachtigal said. “It’s a long time before we’re going to be comfortable, even if it is reaching between clouds, letting the data rest in one place, and paying the network charges to reach between clouds.”

And the alternative ‘cloud agnostic’ approach can be challenging

The alternative approach of being “cloud agnostic” — that is, being able to easily move workflows between public clouds — is also a challenge, as it limits the user’s ability to fully take advantage of the benefits of each individual cloud.

One route that banks can take is using an abstraction layer that sits between themselves and the public cloud, allowing them to move applications between different providers. While there are commercial offerings in the space, such as Cloud Foundry and OpenShift, banks often opt to try and create their own abstraction layer internally. 

Ashok Kalyanswamy, the chief information officer at Saxo Bank, told Business Insider that building out that type of layer becomes incredibly difficult to maintain. Public clouds are constantly updating their products, he said, making it nearly impossible to keep pace. Using cross-platform cloud management tools might simplify the task, but it also means that you lose the ability to take advantage of each platform’s most cutting-edge tools. 

When the Danish bank began its cloud journey, the goal was to be cloud-agnostic. But Kalyanswamy said the additional complexity that came with building cross-cloud management tools caused the bank to scrap the project and commit entirely to using Microsoft Azure.

“If you really, truly want to use the benefits of the cloud you cannot avoid some level of lock-in,” Kalyanswamy said. “If you do, you’re using the cloud at such a high level that you are not completely harvesting the benefits of whatever cloud you are on, in terms of the services they offer.”

Containerization, or the process of building applications in software containers and managed with tools like Kubernetes so that they can be moved and managed more easily, is another option for firms looking for cloud flexibility. Yet this approach, too, has its limits since the user isn’t able to leverage some tools specific to individual public clouds.

The more features a bank uses that are specific to an individual cloud, the greater difficulty it will have transferring its services to another public cloud that might not have equivalent offerings.

There’s also the sheer amount of work a firm needs to do to move to a single public cloud, let alone several of them, Matt Kerner, the general manager of financial services and blockchain at Microsoft, told Business Insider. Guidelines around usage need to be developed and contractual terms ironed out. Workers need to be trained.

“There is a tremendous amount of work that a financial-services institution does when they are making a technology adoption choice,” Kerner said. “Multiplying that burden across multiple different platforms incurs substantial costs financially, but then it’s also just a drag on their business.”

There are some tasks banks want flexibility with

But even with all the hurdles a bank must clear to be cloud-agnostic, there are some areas banks are willing to take on the challenge to avoid lock-in with one public cloud. Nachtigal said risk calculations are a classic example of an instance where the bank pursues a multi-cloud approach by using containers. It also speaks to the bank’s overall strategy of trying to avoid lock-in with any specific service.

These applications are the type that might need to be scaled at a moment’s notice, such as during a large market event, and therefore could benefit from having the ability to move between different public clouds. In a perfect world, the bank could simply do its risk calculations in whichever cloud is cheapest, or otherwise has the right technology to do the necessarily analysis. 

“If we just really want to be able to see an event coming in any kind of financial or geopolitical landscape and run some additional scenarios in an ad hoc fashion, than being able to deploy those at the cheapest rate possible in whatever vendor looks appropriate for that day,” Gorman said. “That is a target state vision for us. That brings some real value.”

But not all banks see the need to consistently switch between public clouds. JPMorgan maintains a multi cloud approach, working with Amazon, Google and Microsoft, in addition to running its own private cloud. However, the bank picks a specific public cloud service that compliments the type of application or tool it’s building out, Andrew Lang, JPMorgan’s chief technology officer, told Business Insider.

The bank still maintains the ability to move applications and tools between its public clouds, Lang said, if necessary. But the current focus during the early stages of JPMorgan’s cloud strategy is to move tools and applications on to thw public cloud that is best served to handle it, as opposed to having the additional complexity of quickly moving between public clouds. 

“To me, there would have to be a compelling reason why you would want to take on that additional overhead of dynamically migrating workloads from one cloud provider to another,” Lang said. “You are adding in additional levels of complexity because you’re pushing workloads from one provider’s operating platform to another provider’s platform, and there would need to be a compelling operating advantage or need to do this.”

Even some of the public-cloud companies recognize the desire among financial firms to be flexible.

Ulku Rowe, Google Cloud’s director of financial services, told Business Insider the company has pushed to make its cloud offering as open as possible and avoid forcing financial firms to be locked in.

“They want to be able to choose the best that every cloud platform has to offer, and they do want the flexibility to be able to move their workloads around depending on the capabilities,” Rowe said. “It’s driven by this desire to keep flexibility and agility in terms of being able to run their workloads where and when it makes sense for them.”

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