Measuring Performance on Cloud-Based Infrastructure

November 1, 2018


As macro forces like open-source software and cloud architectures have created more opportunity to innovate at a higher pace and lower cost, we’ve seen a general movement in the industry toward digital frameworks and digital business models. — Don Duet, Former Partner, Technology Division, Goldman Sachs

Businesses across industries face a number of similar IT challenges, including infrastructure scalability requirements, the need for application modernization, and a pressure to use data to build better customer experiences. Additionally, financial institutions also face some of the most stringent security and compliance standards in dynamically changing, ever-complex regulatory environments. IBM emphasizes the role of cloud technology as a powerful tool for meeting these demands simultaneously.

The Federal Reserve Bank of Atlanta emphasizes that technology has brought a host of benefits and challenges to the financial services industry.

Increasingly, banks depend on technology to provide services for customers, including online banking, financial advice, and mortgages. One type of technology banks have started to embrace is cloud computing. Cloud computing creates an opportunity to reduce capital investment and increase operational flexibility. Banks had been slower than other industries to adopt cloud computing due to security and regulatory concerns. However, improvements in technology and additional guidance from regulators have bank managements starting to see the cloud as the future for their companies. — Ernesto Mendivil, Senior Examiner, Supervision & Regulation Division, the Federal Reserve Bank of Atlanta

Cloud models

According to the Federal Financial Institutions Examination Council’s (FFIEC) Information Technology Examination Handbook, cloud computing involves the use of shared IT resources from third-party service providers via the Internet. One of the models of cloud computing is Infrastructure as a Service (IaaS), where data are stored in the cloud service provider’s network. This model provides processing capability, storage, networks, and other computing resources to run software. The end user does not manage or control the underlying cloud infrastructure but has control over operating systems, storage, and deployed applications. The end user also possibly has limited control of select networking components.


Source: Cloud banking or banking in the clouds? - BBVA

In its research paper called Cloud banking or banking in the clouds?, BBVA explains that there are three main cloud computing models: Software-as-a-Service (SaaS), Platform-as-a-Service (PaaS), and Infrastructure-as-a-Service (IaaS). Cisco forecasts that by 2019, SaaS will account for 59%, IaaS for 28%, and PaaS for 11%. According to BBVA, banks are already using SaaS for non-core services in cases when they are able to outsource business processing, such as billing, payroll, or human resources, and are actively exploring moving more critical services to the cloud, but so far, only relatively small banks have transferred the entirety of their core services onto the cloud. When they have done so, they have relied on the PaaS or IaaS models.

BBVA explains that when moving core services to the cloud, banks have four deployment models:

  • Private cloud (banks generally appreciate the security that private clouds provide, but this comes at the expense of some scalability and cost)

  • Community cloud (a deployment model in which the cloud is used by a community of users with similar needs and concerns, while the public cloud implies use by multiple unrelated users)

  • Public cloud

  • Hybrid cloud

These models differ by the level of exclusivity offered. The banks that have already moved core services to the cloud have used private or hybrid cloud models with one of the big providers (AWS, Google, and Microsoft being the market share leaders) to keep sensitive data within firewalls, and in that way, fulfill local regulations and client confidentiality requirements.


Source: Cloud banking or banking in the clouds?, BBVA

Weighing private and public cloud solutions, some professionals put private cloud as the first step towards cloud computing. The private cloud emerges stronger than the public cloud, Cisco notes, because it grants banks control over their IT while providing reduced complexity, increased flexibility, and all other benefits associated with cloud computing.

Private clouds allow more systems to operate at high transaction volumes without loading the network or slowing the process, ensuring better customer experience. They promise cost savings and efficient services by having dedicated resources for each business unit in an enterprise. Since resources are rented instead of purchased, it helps in converting CAPEX to OPEX, thereby reducing the total cost of ownership. Private clouds come with the advantages of affordability & safety and enable a transition in banking. To guarantee long-term success, banks need to properly understand the technology and develop new applications that would benefit the customer. – Parag Arora, Former VP, Banking & Financial Services, Cisco India; currently MD, Cloud Networking Business, Asia-Pacific & Japan Region, Citrix

Some of the measurable benefits of cloud-based infrastructure for businesses that moved their services to the cloud with leading providers including:

  • Flexible and efficient utilization of infrastructure investments

  • Faster deployment of physical and virtual resources

  • Higher application service levels

  • Less administrative overhead

  • Lower infrastructure, energy, and facility costs

  • Increased security


Source: Cloud Adoption Practices & Priorities Survey Report, CSA

Cloud computing is reshaping the way companies do business: from decreasing the total cost of ownership to making it easier to quickly and flexibly deploy new SaaS solutions, to increasing collaboration internally and even between companies and partners – the cloud is truly transformative. SaaS is a key component of the cloud: in 2014, about 21% of the software that companies used was delivered as a service, and that number will grow to 44% by 2019.

IBM predicted the global SaaS market to grow from $18.2 billion in 2012 to $45.6 billion in 2017. About 88% of surveyed EU-based financial institutions were already using cloud-based services by June 2015. ERP and CRM software are the most popular applications rendered through the cloud. A number of private companies established leadership in cloud computing in a variety of applications.

What businesses are able to achieve with cloud-based infrastructure

An increasing number of businesses in the financial services industry and beyond turned to cloud services for a variety of purposes and found the move to be highly advantageous in numerous ways.

  • Spanish bank Bankinter, for example, was able to bring down the credit risk simulations time from 23 hours to 20 minutes using AWS.

  • For the Commonwealth Bank of Australia, the cloud has reduced the time and cost of standing up a new server from 8 weeks and several thousand dollars to 8 minutes and 25 cents, making the bank much more responsive to changing customer demands.

  • The Federal Home Loan Bank of Chicago (FHLBC) began its journey to the cloud by migrating its analytics and disaster recovery solution to AWS. Since fully migrating all of its internal production workloads on the cloud, FHLBC was able to lower costs by 30%.

  • Using Amazon VPC to provision an isolated, virtual network in the AWS Asia-Pacific (Sydney) Region, Melbourne-headquartered ME Bank (474,000 customers; total assets $28.3 billion) was able to accelerate the provisioning of development and testing environments by up to 6 weeks. The company was able to reduce the cost of delivering development and test environments for new applications and services by 75%.

  • With AWS, Nubank developed its credit card processing platform in only 7 months and can add features with ease.

  • Deploying their solution entirely on the AWS cloud, Ohpen, a Dutch company that provides banks with a modular platform for administering retail mutual funds and savings accounts for consumers, was able to deploy new features in three months or less, compared to a year or more using traditional IT, and company leaders estimate that their institutional customers can save up to 80% in IT costs by using the Ohpen platform in the cloud.

  • As a result of moving its TurboTax AnswerXchange application to AWS, Intuit was able to reduce costs by a factor of six because it no longer had to maintain idle servers for an application that was only active during tax season. After this first success, Intuit subsequently moved 33 applications, 26 services, and eight enabling tools to the AWS Cloud.

  • NAB’s Global Equity Derivatives Group (GED) partnered with TickSmith (runs on AWS) to use its big data platform for recording, storing, transforming, analyzing, and delivering structured and unstructured financial data TickVault. The organization’s business analysts conduct post-trade analysis much faster than before. With AWS, data manipulation, processes that took days have been brought down to one minute. The post-trade analysis that used to take weeks is done in just a few hours with the ability to look at both current and historical data.

  • Banking software provider Temenos has developed its new version of software on the Microsoft Azure platform, which allowed the company to offer cloud banking capabilities to companies that have traditionally used on-premises solutions. As a result, banks using T24 in the cloud can deploy the application in only a few months, meet security requirements, and meet close-of-business deadlines faster.

  • By using AWS to run its virtual banking platform and meet payment card industry (PCI) data security standard (DSS) compliance for its development and production environments, Simple automated processes that once took months to complete and instead focused on its customer service rather than managing IT infrastructure.

  • By choosing to host its supporting IT infrastructure on AWS cloud in order to minimize the burden of PCI compliance and bring its mobile EMV payment platform to market as quickly and cost-effectively as possible, CardFlight was able to bring down its capex and opex costs by around 40% lower with AWS compared to building out infrastructure in traditional data centers.

  • As a result of shifting work to the cloud, the World Bank aimed to move from five data centers to two. Currently, IFC COO Stephanie von Friedeburg shared that the IT group has shed 10-15% of its headcount, repositioning many staff positions and cutting a lot of contractors. The run rate to manage Lotus Notes went from $12 million to $4 to $5 million with Office 365.

  • Suncorp Group, a diversified Australian financial services company, runs a complex and expensive IT environment to support 14 brands and 4 lines of business in 5 countries. By choosing AWS to support Agile principles and practices, Suncorp was able to launch a working virtual private cloud and virtual data center in under three months and plans to move 2,000 applications to AWS Cloud.

  • Vodafone found that traffic for the applications peak during the four-month period when the international cricket season is at its height in Australia. Vodafone needed to be able to meet customer demand but didn’t want to invest in additional resources that would be underutilized during cricket’s off-season. Using AWS, Vodafone went from supporting a maximum of 3,000 simultaneous live streams to being able to provide up to 10,000 simultaneous live streams and accommodate live scores requests at the rate of 1,000 requests per second (RPS) during peak periods. Traffic management has been an important area of development for another company: NTT DOCOMO, a mobile phone operator in Japan, created a voice recognition architecture on AWS that helps the company scale for better performance during traffic spikes and accommodate its large and growing customer base.

  • The on-premises database solutions of the healthcare division of Philips couldn’t handle the amount of data in 37 million records, which led the company to AWS. Philips set up Attunity CloudBeam, an AWS Marketplace product for Amazon Redshift, in less than 1 minute to simplify, accelerate, and automate data transfers to the AWS Cloud. Before AWS, the company’s fastest data transfers were 434 records per minute. Using AWS, the company transferred 37 million records in 90 minutes and can optimize large data sets within two hours.

The list can go on for much longer:

Challenges and considerations

The Fed emphasizes that though the cloud offers opportunities, it also introduces risks not posed by in-house processing and is an area of focus for regulatory supervisors and industry groups. Successful use of a cloud environment depends on management’s knowledge and understanding of the platforms they are using. Moving data outside the institution’s physical environment creates additional risk-management considerations around controls, contracts, cybersecurity, disaster recovery, and more.

Cisco notes that although cloud computing is not a new concept for banks; this sector has been slow in adopting the technology. The key concerns are that such deployment models could lead to an environment sprawl and a lack of control in terms of change management. This can further lead to security risks, reliability issues, and a lack of effective business continuity planning, the company emphasizes.

Parag Arora, former VP, Banking & Financial Services, Cisco India, shared that from the public cloud standpoint, the issues are around regulation, location, liability, and recoverability in the cloud. These are some of the reasons that have slowed down the adoption and deployment of cloud computing and rather led most banks to start building private infrastructure clouds.

To reduce this risk, the management of the infrastructure that underpins these computing environments needs to move away from complex IT provisioning requests to the presentation of a series of standardized services. Through the use of standardized processes and workflows, implementation risk is minimized, while established change management practices are supported. Reaching this state is the beginning of the journey to the cloud. — Parag Arora, Former VP, Banking & Financial Services, Cisco India; currently MD, Cloud Networking Business, Asia Pacific & Japan Region, Citrix

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