The banking and finance industry have been hit hard by the recession and shrinking profits. In efforts to both bolster network performance while battling rising costs, analysts in the financial sector feel as if the cloud is the answer to rising costs associated with the old way of doing IT. Technology has notoriously been touted as an expense and not a profit generating endeavor for many financial firms. Since the cloud has shaved costs in other businesses that deal with sensitive data such as the healthcare industry, the financial industry has taken note and now the sector is forced to evolve even when many financial networks still use archaic technology to facilitate transactions.
Gartner’s research agrees with this shift in the banking industry. The renowned research firm has said that 60% of the financial institutions around the globe will have to move their transactions into the cloud purely for the motive of cost reductions. Brad Anderson is the VP of Cloud and Enterprise Business at Microsoft. In American Banker magazine, he was quoted as saying “Some large U.S. banks are facing mandates to cut IT spending by $1 billion to $2 billion. This is a substantial chunk of the budget for these banks, whose annual IT budgets are estimated to be between $7 billion and $10 billion.”
Tony Bishop, a research analyst at 451 research, completely agrees with this sentiment. He mentioned that financial services are “Experiencing a fundamental shift in enterprise IT while it suffers from a credit crisis hangover.” It should be noted that Bishop is credited as being one of the chief cloud architects at Wachovia. He went on to say that the shift in banking technology is “Remaking how enterprise IT must support customers, employees, and partner.”
Once the benefits of the cloud are realized wholly in the banking sector, you will start to see small institutions move their operations into the public cloud as the perceived risk level goes down. Since hybrid clouds and private cloud integration are on the rise, look for this model to be used in conjunction with existing information services provided by banking institutions in efforts to save money and increase profit margins.