3 Reasons Hybrid Cloud Solutions Make The Most Sense For Financial Institutions
By Brandon Tanner, Senior Manager, Rentsys and ASCII Group Member Since 2016
Cloud data vaulting services have become increasingly prevalent in the financial services market, especially with the growing digitalization of customer transactions and low tolerance for downtime, but there is no one-size-fits-all cloud model for financial institutions.
The public cloud — which stores data in a multitenant environment where customers share the same infrastructure — is easier to scale on demand, making it ideal for functions such as application testing. However, for some financial institutions, the public cloud is a no-go.
According to the Cloud Security Alliance (CSA) report How Cloud is Being Used in the Financial Sector: Survey, 9 percent of financial organizations currently use a private cloud model only, and a further 18 percent plan to implement a private cloud-only model in the future. In the same survey, 86 percent of respondents with a private cloud-only policy stated that their main concern was data security.
The private cloud appeals to public-cloud-averse financial organizations because it offers the perception of being more secure since the organization’s data and applications are hosted in a restricted environment. However, the private cloud has its drawbacks. For one, because the environment isn’t shared with other tenants, the organization takes on the maintenance and cost burden of scaling the infrastructure as the organization grows.
To leverage the benefits of both public and private clouds, more and more financial organizations are turning to hybrid cloud solutions. CSA reports 61 percent of organizations are using a mix of public cloud providers, and MarketsandMarkets predicts the hybrid cloud market will grow at a compounded annual growth rate (CAGR) of 27.3 percent between 2014 and 2019. The hybrid cloud model has emerged as a logical option for financial institutions for the following key reasons:
- Security and compliance. In the CSA survey, 60 percent of the financial institutions surveyed ranked data confidentiality as their highest security concern when considering cloud computing. Due to the amount of sensitive data financial institutions handle, they must maintain high levels of control over their data. Using a hybrid model, a financial institution can maintain a sense of control over sensitive data by sending it to a private cloud without sacrificing the benefits of the public cloud for other uses.
Working with cloud vendors that are validated by third-party auditors and adhere to AT 101, SOC 2 Type II, FFIEC, FDIC, NCUA, Gramm-Leach-Bliley Act and other requirements also helps ensure compliance.
- Affordability. A hybrid cloud allows financial institutions to build a cloud strategy that’s more cost-effective than a dedicated private cloud model. While keeping sensitive data on-site, financial institutions can allocate process-heavy workloads to the public cloud with less long-term investment than a private cloud requires.
The hybrid design also allows financial institutions to take advantage of cloud bursting, which allows a company to move applications hosted in the private cloud to the public cloud when they experience an increase in demand for computing capacity. This saves the company from the cost of maintaining IT infrastructures made to cater to peak periods. Thus, hybrid architecture makes cloud storage resemble pay-per-use technology that doesn’t require a company to over-spend in anticipation of seasonal peaks.
- Efficiency and flexibility. By managing storage capacity based on a business’s needs, a hybrid cloud solution leverages the advantages of public and private clouds to increase process efficiency. By sending mission-critical applications to the private cloud and noncritical applications to the public cloud, sensitive data remains secure without being slowed by process-intensive workloads. The hybrid model also demands interoperability between different clouds, making for smooth portability of data.
Since the hybrid approach requires portability between cloud service providers, the model works to prevent operational setbacks due to issues with a cloud service provider, as long as it is not with a proprietary cloud solution. Combined with its cloud bursting abilities, a hybrid cloud can keep a business operating in case of a business interruption such as a natural disaster or vendor issue.
Hybrid cloud solutions offer financial institutions data security, a cost-effective infrastructure, the ability to efficiently manage workloads and the flexibility to withstand business disruptions. Private and public cloud models both have advantages, but a hybrid cloud solution enables a financial institution to have the best of both worlds while keeping data secure and meeting growing business demands.