The Bloomberg Debate on Private Clouds

How are financial institutions adopting Cloud technology? Are private clouds more appropriate for the industry, and if so what benefits do they bring to organisations?

On Tuesday I participated in a very interesting panel on Private Clouds at the Bloomberg Enterprise Technology Summit, mediated by Colin W. Gillis (BGC Financial), and made up of Bryan Beal from Juniper Networks, Forrest Norrod (Dell), Todd Papaioannou (Yahoo) and my humble self (Microsoft).

Firstly my compliments to Bloomberg for organising a full day event without a single PowerPoint - a refreshing change from most conferences. Every session was designed as a panel or interview which generated pertinent and varied conversations. A big hat off to Colin, our esteemed mediator, who drove a thoughtful discussion, free of any sales pitches!

The Cloud Tea Party

The first question of the day: What is the top benefit that customers are seeking when considering building their own cloud?

To answer, I tested out a new metaphor inspired by the Food Network. On a program about the kitchen of the future, they showcased a replacement to the traditional cupboard full of crockery of different shapes and sizes (most of which is hardly ever used). The concept was a stack of plastic discs with a special machine that moulds them into any shape, and flattens them back afterwards. So you're having a tea party for 40 people but don't own a tea set? No problem - the machine creates 40 cups and 40 saucers. Then after the tea party, they're returned to flat form and stored away. The following week, when you host a 6 course dinner for 12 people, including a soup and a salad, the machine moulds for the occasion 12 soup bowls, 12 salad plates etc.

A Private Cloud is the same! Its raw material are virtualised machines (resource efficiency); but its business value is agility: the ability to deploy the most appropriate software needed at any moment in time, very quickly and to the scale needed, whilst not taking up resources when not in use. What unlocks that value are the tools (i.e. self-service portals, an adapted service catalogue...) that empower Line of Business (LoB) teams to meet their needs without directly relying on central IT.

Private Cloud Best Practices

Appliances and reference architectures can help to build cost effective private clouds. That said, to deliver differentiated business value requires the self-service tools and options that meet a company's needs. For a bank that may be multiple storage options with different read/write characteristics (one targeted at real-time market data, another slower and cheaper for archival). It should also consider offering high-performing databases and Complex Event Processing as a service.

In addition, the CIO must operate IT as a service provider with SLAs and chargeback models, overcoming the organisational challenges this may pose.

Please read the excellent blog on the Context, Principles and Concepts of Private Clouds, by my colleague Adam Fazio, for more in-depth explanations and best practices.

Agility over Efficiency

Colin summed up the panel’s view that agility, much more than data-centre efficiency, is the top benefit of private clouds. Technology needs are constantly evolving. In particular in financial services, demand for burst computing is frequent: risk assessment, trading algorithm simulations, compliance reviews… Hence, the flexibility to rapidly deploy applications can be a strong competitive differentiator. 

Is the cost of running a private cloud going to increasingly diverge as public cloud costs grind down?

There are cost savings, both hardware and operational, driven by the standardisation of equipment and processes in private clouds. Unfortunately the economics of scale inherently favour public clouds.

Todd, who manages a very large scale private cloud for Yahoo, spoke about his personal experience in this regard. He argued that focusing on the minutiae of data-centre cost savings was an ineffective use of resources. On the other hand, by delivering the right mix of IaaS (Infrastructure as a Service), PaaS (Platform as a Service) and SaaS (Software as a Service), his teams improve time to market and save on opportunity cost. He quoted the example of a new composite app, built and released in two weeks - something that would have taken six months without a private cloud.

I referenced our similar experience with buy-side firms. In that case, we allow new hedge funds or innovative investment strategies to be successfully launched in a fraction of the usual time, by leveraging readily available infrastructure, services and data sources hosted in the cloud.

Hybrid Models

The mixture of on-premise private cloud, hosted dedicated cloud and public cloud was discussed.

With regulatory and security questions still open, banks are not yet prepared to fully embrace public clouds; but some data and programs are more ready than others. The best solution is to build PaaS-friendly applications that can easily be migrated between different infrastructure types. Developing software for platforms (like Windows Azure) that support a hybrid model is essential to avoid an unwanted lock-in. Based on security, demand and cost arbitrage, a business can then smoothly transition services between the clouds. 

Panel Conclusions

Unanimously, the panel said that:

• The agility to deliver new LoB applications at market speed is the number one benefit of the cloud
• This IT-as-a-service model is therefore essential for banks to be competitive
• For the financial industry, private clouds or hybrid models are the best option given security and regulatory concerns

It was a pleasure and privilege to be part of the Bloomberg panel - and animated conversations carried on with many of the conference attendees after the session. It was a true demonstration of how top-of-mind Private Clouds are in the industry.

Now is the time to act, for any firm wishing to gain that competitive edge!