How Large Banks Are Able to Balance the Best of Two Worlds: Public and Private



By Tony DeLisio, VP, Enterprise Financial Business Strategy, Infinidat

All financial enterprises, both large and small, are following the same conventional “wisdom” by moving to the cloud as rapidly as possible. The balance that they need to maintain is not only what goes into the cloud, but, more so, determining if the financial institution’s data should be in a public vs. an onsite private cloud.

Larger financial institutions have demonstrated they have the ability to reap the benefits and the economies of scale of the large public cloud providers. The benefits of the cloud for most institutions are indisputable. However, the larger firms are taking a second look to determine if transferring all data storage into the public cloud really is the right thing to do for a large bank.

The tide of opinion is changing in the answer to this question. Deeper analysis indicates a truth under the surface that strikes at the heart of what matters most to a bank: risk. Are banks risking too much by embracing an “all public cloud, all the time” approach?

The Three C’s: Control, Cost and Compliance
By moving data to the public cloud, there will be an invariable loss of the control of data. In smaller firms, that risk is greatly outweighed by the benefits. For larger firms, however, where the improvement that is realized could be much less, the loss of control over the data is far less appealing.

This is further complicated by the changing social and geopolitical world we live in. The norms of how financial institutions conduct business have been completely upended by the new economy and, as a result, priorities are evolving.

We have seen digital business initiatives accelerated due to COVID-19. Indeed, the large firms are accelerating digital business initiatives to restore their business growth.  These initiatives are fueled by the fact that customers have sped up their adoption and adaptation of online engagements. These initiatives, with the exception of risk and security, are receiving budgetary priorities, which further shrinks the budget for legacy and “normal” business requirements. Compounding these considerations are the exorbitant costs associated with movement of data to and from the public cloud.

In addition to the control and cost issues, another factor also affecting the decision for large banks to go “all in” with the public cloud is the evolving compliance landscape. Regulators are increasingly getting more involved and saying that certain things cannot be in the public cloud; they are saying that certain types of data, which a bank has, need to be in an internal storage system (a private cloud).

Recently, we have also seen changes in the political, economic or social climate and, most importantly, how dramatically and rapidly these changes are occurring. It is in these unsettling times that some of the larger firms are internally regrouping and opting for the safety and security of maintaining the control of their own critical data.

The key to balancing the best of both worlds is an effective hybrid strategy—one which addresses the security, compliance and data management issues within a hierarchy of data that asks a question: How critical is it for each type of data to be on-site or off-site?

A financial institution cannot risk losing control of costs, losing control of compliance, or losing control of its business. The way a bank handles data storage will impact the future of the enterprise.

Hybrid Cloud Strategy for Large Financial Institutions
A better strategy for large banks that want to tap into the benefits of cloud capabilities for computing is to map out and embrace a hybrid cloud approach. They can still benefit from cloud capabilities, while keeping their data under their own control with an enterprise-class storage solution that is flexible in capacity, adaptive to sudden surges in data storage and access, and cost-effective in balancing a private cloud and public cloud for optimal value.

One way that a large financial institution can deploy hybrid cloud capabilities is to take advantage of the integration between AWS Outposts and Infinidat. While AWS is bringing cloud operational models on-premises, Infinidat, which is a leader in multi-petabyte scale data storage, is complementing AWS Outposts with elastic pricing models that cloud users demand.

AWS Outposts is a fully managed service that extends AWS infrastructure, AWS services, APIs, and tools to virtually any datacenter, co-location space, or on-premises facility for a truly consistent multi-cloud experience. As an AWS outpost Ready Partner, Infinidat offers an integrated storage solution for large enterprises.

AWS has created the ability for enterprises to integrate with Infinidat’s storage more easily for high performance and scalability at a lower cost. In late 2020, Infinidat achieved the AWS Outposts Ready designation, part of the Amazon Web Services (AWS) Service Ready Program. This designation recognizes that Infinidat has demonstrated successful integration with AWS Outposts deployments.

In a public statement last December, Joshua Burgin, General Manager, AWS Outposts, Amazon Web Services, Inc. stated: “Customers are looking for better ways to store and manage their data across the enterprise as part of a comprehensive digitization initiative. With Infinidat’s Infinibox for AWS Outposts, customers can benefit from a comprehensive data management solution for any application in their environment, on AWS Outposts, or in AWS Regions, for a truly consistent hybrid experience.”

Infinidat’s technology foundation delivers data storage solutions with 100% availability, high performance and the lowest possible total cost of ownership (TCO), at large scale.

Why Keeping Control Is So Important
The storage needs in financial services are only going to intensify this year and beyond. Data-hungry initiatives continue to rule, trying to squeeze more and more value out of the data that large banks possess. Finance has long been built on the ability to amass large quantities of customer data, and applications such as fraud detection require huge amounts of data to operate at peak efficiency.

This has caused financial services organizations to re-evaluate the hierarchy of data and technology. Historically, processes were concentrated at the server level. As data requirements increased, more storage was added. However, in the new era, servers play a more peripheral role in an enterprise’s efforts to meet the exponential growth in data mining. Today, storage is at the center of the wheel.

It may seem “easy” for a large bank to decide to “put everything in the cloud.” It may seem like it’s transferring the responsibility of data storage to someone else. But, in reality, it’s only temporary relief. The loss of control and cost, along with the risk of being out of compliance, is looming on the horizon and will come back to haunt the organization’s decision-makers.

You can keep throwing money at the public cloud and its economic premium because you may think its “fast and easy.” However, you lose control of performance and how productive it is. With an on-premises implementation, such as Infinidat’s solution, which has cloud functionality and flexibility, you maintain better control, are able to manage guaranteed availability and can determine the level of protection to put into data. While doing this, you save money with an agile, more cost-effective private cloud. You can have the benefits of both, without getting locked in.

Furthermore, regulatory pressure is forcing banks to collect, retain and report more data than ever before. Introductions of new regulations force banks to disclose more granular information to regulators. Banks also have to collect data in a more controlled way, so they can report it automatically and also make it available in case regulators make ad-hoc inquiries.

Banks that fail to leverage the right data and report it correctly will struggle to compete. Storage is key to this equation. Banks that create data-centric architectures collect information, store it cost-effectively and make it available at the right time will gain a strategic advantage. 

Compared to the Competition
Upstart fintech players are leveraging the public cloud to create hyper-efficient, cloud-first businesses that offer new apps, processes, products or business models—all online. They are forcing larger, more traditional banks to make more strategic investments in storage, data analytics and customer experience.

Data that used to be collected and regularly disposed is now retained for longer periods of time to ensure that banks have every angle of the customer relationship covered. This requires immense amounts of storage, access to third-party data and a highly agile mechanism for retrieving key informational nuggets exactly when they’re needed. For example, segmentation of customers based on available data allows a bank to perform predictive analysis for a particular customer’s next purchase.

Banks need to keep pace with “new economy” players. Any bank that isn’t able to monetize data to the fullest extent possible—and do a good job storing it—simply won’t survive.

However, just because the upstart fintechs are taking a public cloud-first approach does not mean that it’s right for everything, all the time, in large banks. Consumers want to do business with larger, more established banks because they want less risk and less potential disruption, and they want to know that the big bank is in control.

Trusted Implementation of On-Premises Storage

As much as transferring all data to the cloud seems attractive for operational purposes, taking a hybrid cloud environment approach is a much more customer-centric line of thinking for large enterprises conducting financial services and other financial transactions.

To do it successfully requires a trusted implementation of on-premises storage. Major parts of the equation include having a fully redundant architecture and adopting a flexible consumption model that ensures that your bank only pays for what the bank uses.

If the demand for data capacity grows rapidly in a short period of time, you have the capacity on demand, but you are not paying for the unused capacity when it’s not needed. With the Infinidat solution, you can reduce high operational costs with a private cloud when the project is not operating at its peak. There is no compromise in performance or availability.

De-risking your bank’s data storage now on your own terms proactively is better than having it thrust on you later when the risk will be so much higher because you didn’t de-risk when you had the chance to do it in 2021. IT teams do not need to compromise going forward. You can still maintain control and achieve savings with an on-premises, private cloud, while avoiding the future cost proliferation of the public cloud.