TORI Perspectives Summer 2018

Gathering Clouds Or A Perfect Storm? By Philip Freeborn, Head of Banking

Issue 10 | Summer 2018

organisation). This has the impact of negating many of the benefits of moving to the Cloud in the first place. Over the last 5 years, many banks have developed internal Clouds in their own data centres. Some of these have had limited take up as they are perceived to be difficult to use and have added another variant for infrastructure to support. Others have been more successful, and the running costs can be significantly cheaper than the external Cloud (as Robin Paine explores on page 8). Virtualisation technology has also dramatically improved. The latest generation of virtualisation infrastructure can radically improve the density in the data centre and allows one to virtualise twice as much as previous generations. There are many reasons why the changes required to architect for the external Cloud are challenging, but in our experience, one that is significantly underestimated is the resistance to the move from the middle to senior management in the hosting and networks organisations of the infrastructure groups. Why is there this resistance when the external Cloud should be a good addition to most people’s CV? In my experience, the human side of change in these areas is underestimated and there is a perceived loss of power which causes a lot of resistance. Unless these issues are dealt with up front, the road to Cloud will take much longer. So, if you are running infrastructure, how do you resist the calls from the business and the developers to allow them to move to the Cloud? Can you stop the inevitable trend? Should you? In our view, the move to the Cloud needs to be considered in the light of: • A clear data centre strategy • The suitability of apps to move to the Cloud • The leverage of internal Cloud solutions versus external solutions • The operational cost increase of the external Cloud • Controls around the usage of the public Cloud • The cost avoidance of CAPEX • A clear architectural strategy that controls the applications that are fit for Cloud • The Cyber Security risks • Stakeholder approval including regulators.

Philip has over 24 years experience in investment banking, wealth, corporate and retail banking IT and operations, programme management and procurement. Philip has held several CIO/COO positions at Barclays.

Since 2012, intense cost pressure has been applied to banks’ IT departments and in particular, the pressure has been felt by the infrastructure elements areas of technology (networks, data centres, hosting, desktop support, and helpdesks). These areas are a product of investment decisions that were made when business conditions were very different and have been compounded by investment in ‘cost to achieve’ programmes. These promised cost elimination by spending more; but have instead generally net added complexity, applications and new infrastructure and led to more upward pressure on costs through long tail depreciation and contracts. At the same time CIOs are being asked difficult questions: am I getting value for money? Are your developers productive enough? Why is IT so expensive? Wouldn’t it all be better if we moved to the Cloud? Some challenger banks have done exactly that and moved to the Cloud as their default hosting platform and claim little legacy. They don’t own large data centres and they claim productivity benefits by working in an agile way throughout their organisation. Of course, these productivity

benefits can only be achieved if the organisation has transformed its way of working and has embraced Agile techniques, and structured the IT organisation to take advantage of DevOps. The other big impact is on Cyber Security. The change from the network being the primary defence to protect the organisation and securing your data, to controlling security at a data element is a major challenge and regulators, operational risk, and internal audit are all concerned that customer data is not inadvertently compromised. But it is more complicated if you have the mixed estate that most established banks have. So, is moving to the Cloud the right answer? Well it depends: if this is yet another option for developers to choose from, then probably not. What established banks usually have in common are a number of data centres and a large heterogeneous infrastructure - so one approach is unlikely to fit all. The other challenge that most established banks have is that their external Cloud programmes try to replicate the internal offerings as opposed to taking the Cloud offering natively (or as close to natively as is feasible in a large complex

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