The report on the finance cloud market by the research firm, MarketsandMarkets, has predicted that the finance cloud market will grow at a CAGR of 24.4% to $29.47 billion by 2021. This growth will be driven by green IT, specialized services and the need for business agility and market focus, apart from customer management.
Some of the key findings included:
- During the forecast period, the professional services segment would dominate the market.
- Among the applications available in this market, the customer applications would have major growth because the BFSI companies want to leverage the benefits these applications offer, like improved productivity, lowered costs, advanced data analytics and more, to gain competitive advantage and long-term benefits.
- Regionally, North America would have the largest market share because of the wider internet penetration, strong economy and the shifting of isolated infrastructures to the cloud. This will result in reduction of Capex spend, lowered complexity in IT management and improved security and agility.
So, we know that finance companies are typically the first into technology trends, and the last out. Cloud adoption is no exception. As the above report concludes, and as we see in the marketplace as well, financial services is looking to move to cloud-based platforms for a few key reasons:
- The ability to provide unique types of services in marketplace, such as new investment types. Considering that their products are rather abstract, this becomes a core focus since they have much the same products as their competition.
- The ability to become agile. Most financial services companies are big and bulky. Over the years they have become siloed, and are hard to change. IT could not keep up. But with cloud-based platforms that are scalable on demand, and quick to change, they may be able to fix that problem.
- The ability to remove cost. At cloud computing’s core is the ability to provide more efficiency. This includes the ability to have much lower operational costs. While the financial sector has not had to economize much in comparison to other vertical sectors, today they want to tighten IT belts. Typically first on the agenda is a move to the cloud.
What about the risks?
What specific risks does the cloud pose for financial services companies? Security comes to mind most often, considering that they have the most to lose if breaches and security issues become a problem.
That said, cloud computing seems to be a security upgrade, and actually removes risks in most cases. What public clouds bring to the table are better security mechanisms and paranoia as a default, given how juicy they are as targets. The cloud providers are much better than traditional systems at systemic security services, such as looking out for attacks using pattern matching technology and even AI systems. This combination means they have very secure systems.
Just Look at the Top Cloud Consumers
Who’s who in cloud users is really around the financial sector. Capital One made one of the largest public cloud deals to-date with AWS, and other financial firms are following suit, in terms of both scope and size of their migrations, or net new application implementations.
Basically, when asked about the whys, they pretty much stick to the items outlined above, such as agility, cost control, time to market advantages, etc. However, the biggest pattern that we’re noticing in this industry is the fact that the financial sectors get more back from their investment in technology than other sectors.
In other words, if somebody who owns and operates a paper mill invests into a cloud migration project, they may get 10 times their investment back over a 5 year period of time. However, if a financial firm invests in the same types of technologies, they may get 200 times their investment back, considering the benefits listed above.
The Providers See It
Core to the financial sector’s movement to cloud computing is the enablement from the public cloud providers themselves. AWS, knowing where their bread is buttered, has launched a marketing area that is focused just on this vertical.
Cloud Technology Partners is an AWS Financial Services Competency member and has enabled AWS to implement solutions that can be customized for a specific client and sets of requirements. Again, each financial services company is looking to stand out from the crowd to gain competitive advantage. Thus innovation and customization are often needed from both the cloud provider, as well as professional services.
Despite the competitive advantages for financial services companies to embrace and utilize public cloud, it’s still believed that only a small percentage of the workloads are in the public cloud in this sector. That’s greater than most other verticals, but there is a lot of work to do to before financial services firms reach their value goals.