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Banks Still Face Obstacles to Cloud Computing

Security fears, old programs, vendor licensing issues and the risk of spreading the 'IT mess' stand between banks and a successful cloud.

What still stands between banks and cloud computing? To find out, we asked the 14 percent of our readers who, in response to the Bank Systems & Technology/InformationWeek Analytics survey, said they have no interest in cloud computing.

Not surprisingly, security was their No. 1 concern -- 58 percent said cloud technology does not provide adequate security safeguards (see related article, page 12) -- followed by "cloud technology is too new/untested" (38 percent). About one out of every three (31 percent) was concerned about auditing capabilities in cloud environments, and 31 percent also said cloud computing "has no perceived business value" (multiple responces were allowed).

But quite a few pointed to internal, cultural concerns as well -- 19 percent said other IT projects have higher priority, 19 percent said "management has no interest," 12 percent cited a lack of internal expertise and 8 percent felt that cloud computing is too expensive.

Old Apps, New Clouds

According to ING Americas SVP Alan Boehme, the biggest obstacle to migrating applications to a cloud is making the apps "cloud aware." "Applications traditionally haven't been written in a parallelizable format," he says. In addition, in-house grid and server environments typically are not set up to handle parallel processing, which is needed to enable an application to run over many processors efficiently, Boehme explains.

"One of the things we set up our proof of concept to learn was, what is required to make an existing application cloud-aware and cloud-enabled," he relates. "The real world is being able to take your legacy applications and deploy and operate them in a cloud in a more cost-effective, productive way."

The question is: Should banks invest the time and resources in making an application cloud-aware now, or wait until the cloud market matures in a year or so?

Vendor Pricing

In the meantime, vendor licensing is an important consideration, Boehme says. "Will the vendors have licensing models in place to support the uptake of the cloud, and will they penalize or discourage us from using a cloud environment?" he poses.

Vendors tend to sell a product up front, with a maintenance and support contract that's renewed annually, Boehme explains. But in a cloud environment, the user only wants to pay for the resources he consumes as he consumes them. "It's a different revenue model for a software company and a different commission model for the salespeople -- a real pay-per-use model has ramifications across the board," Boehme says.

Because the cloud phenomenon initially was powered by start-ups and pioneers such as Amazon and, many traditional software providers are playing catch up, he notes. "Some don't even know the difference between cloud, the ASP model and the managed service model," Boehme contends.

Spreading the Mess

Ovum senior analyst Laurent Lachal offers a different warning to bankers interested in adopting cloud computing: Plan carefully or you could end up making your IT environment more complicated, he cautions. "Instead of a nimbler IT, with their IT mess for less somewhere else, the ill-prepared will end up with their IT mess spread across a wider area," Lachal says. In one example of such "IT mess," some companies have developers using Amazon web services without anyone else in the bank knowing about it, he relates, adding that the finance department finds out, with a shock, when it receives the monthly credit card statement.

A similar issue crops up with software-as-a-service being purchased under the IT radar. "You may have one line of business buying one app and another line of business buying a similar application from a different company," Lachal says, explaining that IT winds up with two different applications doing the same thing, creating an integration nightmare. But constraining users from this kind of activity without hampering the benefits of the cloud is a challenge, Lachal acknowledges.

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