Software as a Service (SaaS) is an emerging mechanism of releasing software applications to customers, which is gaining increa

Cloud Computing for Banks

For quite some time now, organizations have sought quicker, better and cost effective business models in the areas of application development, deployment and management. Rapid changes in business computing models - from fixed (static) to dynamic are forcing enterprises to look for innovative models and architecture. Though technologies like conventional grid computing, virtualization, utility computing, dedicated servers and SOA offer partial solutions, these alone are not enough to achieve greater scalability, agility, reliability, fault tolerance, and better management capabilities for enterprise infrastructure and the applications that run on it.

Cloud computing, which is the convergence of these independent technologies, resulting in a new computing paradigm, attempts to counter these challenges.What is cloud computing? Cloud computing provides the facility to access shared resources and common infrastructure, offering services on demand over the network to perform operations that meet changing business needs. The location of physical resources and devices being accessed are typically not known to the end user. It also provides facilities for users to develop, deploy and manage their applications on the cloud, which entails virtualization of resources that maintains and manages itself.

Some generic examples include:

Amazons Elastic Computing Cloud (EC2) offering computational services that enable people to use CPU cycles without buying more computers

Storage services such as those provided by Amazons Simple Storage Service (S3)

Companies like Nirvanix allowing organizations to store data and documents without adding a single on-site server

SaaS companies like Salesforce.com delivering CRM services, so clients can manage customer information without installing specialized software

Within the next five years, the annual global market for cloud computing is expected to surge to $95 billion. Reports estimated that 12 percent of the worldwide software market would go to the cloud in that period. Analysts believe that by 2011 the volume of cloud computing market opportunity will amount to $160 billion, including $95 billion in business and productivity applications (e-mail, office, CRM, among others) and $65 billion in online advertising.

Research indicates that IT spending towards cloud computing is expected to grow at an annual rate of 27 percent as compared to an annual growth rate of 7 percent for overall IT spending, between 2008 and 2012.

Characteristics of cloud computing Cloud computing, typically entails:

High scalability

Cloud environments enable servicing of business requirements for larger audiences, through high scalability

Agility

The cloud works in the distributed mode environment. It shares resources among users and tasks, while improving efficiency and agility (responsiveness)

High availability and reliability

Availability of servers is high and more reliable as the chances of infrastructure failure are minimal

Multi-sharing

With the cloud working in a distributed and shared mode, multiple users and applications can work more efficiently with cost reductions by sharing common infrastructure

Services in pay-per-use mode

SLAs between the provider and the user must be defined when offering services in pay per use mode. This may be based on the complexity of services offered

Application Programming Interfaces (APIs) may be offered to the users so they can access services on the cloud by using these APIs

Support for all service oriented applicationsComparison with related technologiesSeveral technologies are related to cloud computing, and the cloud has emerged as a convergence of several computing trends. It seeks to address certain key aspects that may have been lacking in each of these trends, individually. The features of each of these related technologies and how they compare with cloud computing has been outlined in the table.

Types of cloud computing environmentsThe cloud computing environment can consist of multiple types of clouds based on their deployment and usage.

Public clouds This environment can be used by the general public. This includes individuals, corporations and other types of organizations. Typically, public clouds are administrated by third parties or vendors over the Internet, and services are offered on pay-per-use basis. These are also called provider clouds.

Business models like SaaS (Software-as-a-Service) and public clouds complement each other and enable companies to leverage shared IT resources and services.

Example

New York Times archive project which used 100 Amazon EC2 instances and 5.5TB of S3 storage to generate PDFs of 11 million articles for the papers archives, at a small fraction of traditional costs

Advantages

Public clouds are widely used in the development, deployment and management of enterprise applications, at affordable costs

Allows organizations to deliver highly scalable and reliable applications rapidly and at more affordable costs

Limitations

Security is a significant concern in public clouds

Private cloudsThis cloud computing environment resides within the boundaries of an organization and is used exclusively for the organizations benefits. These are also called internal clouds. They are built primarily by IT departments within enterprises who seek to optimize utilization of infrastructure resources within the enterprise by provisioning the infrastructure with applications using the concepts of grid and virtualization.

Advantages

They improve average server utilization, allow usage of low-cost servers and hardware while providing higher efficiencies; thus reducing the costs that a greater number of servers would otherwise entail

High levels of automation, reducing operations costs and administrative overheads

Limitations

IT teams in the organization may have to invest in buying, building and managing the clouds independently

External cloudsThis cloud computing environment is outside of the boundaries of the organization, though it is not necessarily a public cloud. Some external clouds make their cloud infrastructure available to specific other organizations, but not to the general public.

Hybrid cloudsThis is a combination of both private (internal) and public (external) cloud computing environments.

Variations of cloudsClouds can be classified as:

Infrastructures

Platforms

Applications

Infrastructures

Salient features

Known also as IaaS (Infrastructure-as-a-Service), acknowledged as the most potent cloud

Provides access to shared resources on need basis, without revealing details like location and hardware to clients

Provides details like server images on demand, storage, queuing, and information about other resources, among others

Vendors who provide this type of service enable cloud platforms and cloud applications. Some may even leverage others within the space to provide competitive viability as well

Offers full control of server infrastructure, not limited specifically to applications, instances and containers

Example

Amazons EC2, through which users can request Linux Virtual Machine instances that are created on the fly and billed based on actual usage

Limitations

Service providers may demand higher prices for services offered

Issues pertaining to resource and server down time

Platforms:

Salient features

Known also as PaaS (Platform-as-a-Service)

Empowers developers to deploy, deliver and manage their applications. They can build applications, upload (deploy) the same into the cloud platform and simply run and test them

Developers can also leverage additional benefits like authentication and data access provided by the platform

This cloud takes away the concept of servers, while providing an application centric environment

While creating this kind of cloud computing platform, a vendor builds a cloud platform first and then develops applications that run on it (OR) develops a hostable application and then plugs it into the cloud. But considering the advantages and disadvantages, the latter would be the better approach

Limitations

Significant dependency on cloud infrastructure providers

Applications:

Salient features

Companies host applications on the Internet and users sign up and use them, without concerning themselves about its maintenance and whereabouts. This is also called as SaaS (Software-as-a-Service)

Advantages

Mostly free, very easy to use, feature-rich, easy to access and promises good consumer adoption

Limitations

User can only use the application and would not know the technology leveraged to develop the application; thereby user has little control over application development

Cloud computing for banks

With increasing business complexity, banks are seeking innovative business models and specialized technologies to cater to customer demands. Cloud computing technologies can provide banks competitive advantage in the market, cost reductions, higher margins, simplified maintenance and management of applications across the enterprise, greatly extended scalability, agility, high availability, automation, large data storages and reliable backup mechanisms.

By using cloud computing environments, banks can focus on their core business as opposed to concerning themselves about infrastructure scalability. Banks may explore use of cloud computing initially for better performance through peak demand periods but eventually adoption could spread to other areas.

The current adoption rates are still very low in the banking industry, and some of the functionality on offer to customers is in the area of personal money management, resulting in mixed reactions from users.

From a potential point of view, benefits for banks from cloud computing can be accrued, primarily, in the following business areas:

Business Process Management (BPM)

Business Intelligence (BI)

Enterprise content management

Customer interaction archival and search, e-mail archiving, e-mail security and document creation

Back-office activities

Example: credit card processing

Different types of payment processing and consolidation

Enterprise risk management - IT frameworks for financial services

Enterprise portals

XTTPS - Extreme Transaction Processing Platforms.

Enabling transactions in the cloud through XTP (Extreme Transaction Processing)

XTTPS provides the foundation technology for certain classes of cloud computing and services as Application-Platform-as-a-Service (APaaS)

Printing services (printing opportunities in the enterprise)

Identity management

Enterprise CRM

Consumer credit reporting

Sales force automation

Customer support systems

Retail banking and stock trading

Foreign exchange

DNS (Domain Name System) management

Larger storage areas and back up mechanism

Critical batch job scheduling

Example: month/year end interest calculations

Concerns around cloud computing for banks

When banks start using public cloud computing environments, they must move their critical data and systems on to the cloud. Securing this data is crucial and a clear priority for the bank. Solution vendors need to concentrate on this aspect particularly to convincingly build the case for enterprises to move on to the cloud. The ISACA (Information Systems Audit and Control Association) has suggested that two factor authentication systems connected to a robust encrypted communications infrastructure, be deployed to secure Internet connections to cloud computing-based services.

Certain other concerns could include:

Service providers demanding higher prices for services being provided

Issues surrounding the down time of resources and servers offered by providers

Response times from the cloud may be too slow for certain time-critical transaction management processes critical in banking

Undue dependency on cloud infrastructure providers

Lack of visibility into the technology used to develop the application; therefore lack of control over the application

The IT teams at the bank would have to buy, build and manage the cloud (internal clouds), entailing significant resource and time investments

ConclusionCloud computing brings significant promise in terms of scalability, reliability, competitive advantage, cost reductions, simplified maintenance and management of applications across the enterprise, along with high availability and automation. Rated as one of the key area of innovative implementation for enterprises, by experts and analysts, it is expected to bring ample change in the way computing is approached in todays world.

Though the current adoption of cloud computing at banks is low, the benefits it assures will result in cloud computing gaining prominence and the years ahead will see a higher adoption rate

References1.Merrill Lynch Estimates Cloud Computing To Be $100 Billion Market, http://www.virtualizationconference.com/node/604936

2.IT Cloud Services Forecast - 2008, 2012: A Key Driver of New Growth, http://blogs.idc.com/ie/?p=224

3.Daryl C. Plummer, David W. Cearley, David Mitchell Smith, 19th June 2008, Cloud Computing Confusion Leads to Opportunity, a Gartners Research Special Report.

4.Unlocking the Promise of Cloud Computing for the Enterprise, Appistry White Paper, 2008.

5.Rachael King, 4th Aug2008, How Cloud Computing is Changing the World, http://www.businessweek.com/technology/content/aug2008/tc2008082_445669.htm

6.http://cloudcomputing.sys-con.com

7.http://weblogic.sys-con.com

Sriramkumar VoonaProject Manager - Finacle Architecture,

Infosys Technologies Ltd.

Ravi VenkataratnaSenior Product Consultant - Finacle Architecture,

Infosys Technologies Ltd.

Review AcknowledgementDeepak N. Hoshing

Head - Finacle Architecture

Infosys Technologies Ltd.