The Business of the Hybrid Cloud
In recent years, financial services firms have had to make some challenging strategic decisions to remain competitive in their marketplaces.
A major pivot point is whether to commit to manufacturing financial products or distributing them, or both. The difference between building innovative new services for customers versus collecting and distributing third party services will inform the technology vision and operating model that a business needs for success. A distributor will want to focus on developing a strong brand, an open platform, and tight customer and partner relationships. Meanwhile, for a manufacturer, product feature innovation and strong application development skills become the pillars of the business.
What does business strategy have to do with the cloud? Today, the two are intrinsically linked. Businesses need to make sure they have scalable and flexible technology foundations to support growth and goals for manufacture or distribution. This leads them to another key decision point: whether to opt for public cloud-first, private-cloud first, multiple public clouds or hybrid cloud infrastructure that incorporates all the above. As businesses set out to gain a deeper understanding of what the cloud can help them achieve, we take a look at some fundamental considerations to help determine the most appropriate cloud strategy.
Sizing up the public cloud
There are several reasons companies choose publicly hosted cloud-based infrastructure. A primary driver is a need for ad-hoc resources or computing on-demand. The public cloud enables near-instant expansion, limited only by the cost of the environment. This provides the ability to cope with peaks and troughs of demand, whether predicted, such as Christmas or tax season, or unexpected, like claims settlement after extreme weather or the surges in online banking during the first wave of Covid-19 lockdowns. For loads that cannot be estimated, it would be costly to provide spare capacity in a data centre, whereas bursting into the public cloud enables more client-centric reactions to changing demand.
The public cloud can also promote controlled, systemic growth of on-premise infrastructure by providing temporary expansion while the procurement process catches up with demand. We have seen some instances where it can take up to six months to provision on-premises compute power owing to procurement and governance processes. Public cloud capacity provides a stopgap and can be relinquished once compute power has been made available on-premise.
Other benefits of the public cloud include the ability to separate areas of concern and reduce some aspects of operational risk. For example, cloud infrastructure can be used to host front-end applications that need to be changed regularly, enabling access to company data through a secured backend integration, while segregating areas where needed for compliance or risk reasons. Similarly, the public cloud provides the ability to pool resources and be efficient with provisioning capacity. This can save resources and time that can add value elsewhere in the organisation.
The cloud may also help reduce costs through pay-as-you-use models. Organizations can grow and shrink infrastructure without needing to build a data centre or decommission servers. CFOs can alter their cost allocations from capex to opex as well as directly distribute the cost to projects and services, enabling a direct return on investment (ROI) calculation for a business or product line.
Companies should also be aware of potential drawbacks – using the public cloud can necessitate application rewrites, and in some cases, providers require the adoption of new proprietary services, which can have a lock-in effect. In some scenarios, like development environments for proof of concepts, it can be difficult to estimate how much cloud resource will be needed and for how long, making it hard to plan and cost-effectively.
Hybrid Cloud in Practice
Many firms want to use both public and private clouds. In the 2021 Global Customer Tech Outlook, a Red Hat Report, when IT decision-makers were asked to describe their cloud strategy, 27% said they are taking a hybrid cloud approach and 11% said multi-cloud. A good portion – 18% – are still formulating their cloud strategies. This makes sense, given IT infrastructure plays a critical part in deciding the next phase of business evolution and will impact who joins the company as the next generation of technologists and financial experts. In a separate piece of research, Red Hat’s 2021 State of Enterprise Open Source Report, 69% of IT leaders stated they would prefer to use multiple vendors for their cloud infrastructure needs.
Financial services industry players are acutely aware that the desire for flexibility and agility has to be balanced with the need for control, oversight and accountability of computing and data. This is where the hybrid cloud comes in. More than simply having access to both public and private clouds, the hybrid cloud refers to the integration and orchestration between any cloud deployment, including multiple public clouds. A hybrid cloud platform based on container technology acts as a common layer across an entire organisation, interoperable with diverse hardware and software, thanks to the use of open APIs, open-source and open ecosystem collaboration. Businesses gain greater freedom to choose when and where to run workloads, and they can manage and scale applications and services in a consistent way no matter the underlying environment.
It’s a Journey
If the transition to the cloud seems like a long process, that’s because it is! Any transformational project needs time, and developing a cloud strategy is a lot more than just choosing whether to use a hyperscaler or have your own data centres. It’s about the journey to efficiency, agility and speed of innovation – to competitiveness. It means weighing up different approaches in the context of your business, including what else is going on in the tech stack and wider operation. It involves optimising existing IT, integrating apps, data and systems, adding and managing hybrid cloud infrastructure, and being able to develop cloud-native applications as well as automate and manage the full IT environment. Leaders need to prepare their organisations for constant and iterative change.
Updating culture and the way people work together is often the hardest part of the journey. Moving to the cloud is more than just signing a contract with a hyperscaler and training up your tech teams. Silos need to be busted open to spur collaboration and pan-organisational change. Teams need to embrace agile practices like iterative working and DevOps. This requires a drive from the top: grassroots change in IT can only do so much. Leadership needs to evolve and bring in the whole organisation to understand and support business changes in order to fully capitalise on technology investment and improve speed to market.
The good news is, any organisation does not need to go it alone. Strength will come from building an ecosystem of trusted partners, as well as exploring the skills of existing employees, and leaning on open source communities – where people from around the world contribute towards a shared goal, leading to rapid innovation. With greater collaboration, companies can tap a goldmine of experience and expertise to help on this journey. Finally, it’s important to remember that missteps are expected and allowed – indeed, most successful technology transitions occur when an organisation learns constructively from failure – and take time to celebrate successes with your teams, no matter how small.