Catching Up with Our CTO: Financial Services Reconsider the Risk of Public Cloud

The combination of reduced risk and better value will drive more financial services firms to the cloud in the next year. Here’s what they need.

July 23, 2020

Few companies understand risk better than financial services firms. Large banks, hedge funds, and private equity shops thrive or fail based on their ability to accurately assess risk. At Nasuni we count several prominent hedge funds and investment firms among our growing customer base. For years, though, I found it frustrating that many of the larger banks were reluctant to adopt cloud file storage and services.

That is finally changing.

The pandemic has forced firms to reckon with the risk of traditional on-premise infrastructure. Firms that rely on infrastructure at their physical locations have struggled to re-wire access to IT services in this new WFH world. SD-WAN beats MPLS when access has to shift quickly to support WFH. SaaS beats any application that needs hands-on IT in order to run smoothly. And file services, with the backend firmly anchored in the cloud, beat the need to provision and back up file servers any day. Cloud, by comparison, is safer and a whole lot more flexible. IT personnel used to believe that technology was somehow safer as long as we could keep our arms around it. That’s harder to do when everyone is working from home.

Everything as a Service is the new safe.

Large financial organizations have been slow to adopt cloud infrastructure because they could afford to continue with traditional architectures. There was no urgent need to reduce IT costs. But banks don’t want to waste money, either. They are in the business of generating profits, and they are beginning to see the value of cloud infrastructure. Three years ago, Bank of America wrote down a $300M charge to close three of its data centers. The company actually paid to start getting out of the infrastructure business, correctly arguing that it stood to gain much more in the long run.

The combination of reduced risk and better value will continue driving more financial services firms to the cloud in the next year. As I see it, these firms need three things from a cloud solution:

1. Scale

One of the factors that drives the adoption of cloud technology is how many locations you have to service with infrastructure. We have a handful of hedge fund clients with only a few offices, but Nasuni really starts to demonstrate its transformative potential at scale. Once you move past a few locations, up into the dozens or hundreds of offices range, the value of deploying cloud infrastructure increases tremendously.

2. Security

Banks are subject to tremendous regulatory scrutiny and oversight. Security is absolutely paramount. Early in the public cloud days, this was one of the reasons banks were reluctant to adopt the technology. I found this frustrating initially, because Nasuni was secure from the start. Our security model here at Nasuni has been consistent since the inception of the company. With the guidance of Chief Science Officer David Shaw, we established a strong encryption model that relies on customer-controlled keys, and our security model has since met the strict standards of some of the world’s largest enterprises.

3. Agility

The pandemic has shown every large organization that it needs to be agile and adaptive. Traditional banks are no exception. The firms that were best prepared for this shift were the ones that had already adopted SaaS offerings and begun to rely on cloud infrastructure. Anyone who had already upgraded from MPLS to SD-WAN, for example, had a major head start.

SD-WAN is basically the modern version of MPLS, built for multi-cloud and multi-site agility. Instead of relying on fixed infrastructure to deliver connectivity, organizations that transitioned to SD-WAN are constantly optimizing connectivity. SD-WAN lets you dial up access to sites quickly, using the Internet to leverage every possible pipe.

The Next Layer of Liability

An organization with SD-WAN in place can establish a robust VPN operation that has end users quickly connecting to their office from home. Giving employees fast remote access to files is possible, but you still have that file server residing in a physical location. This is the next layer of liability, as this file server has to be backed up and protected.

This is one of the reasons Nasuni is getting increased traction in the financial services space. Nasuni eliminates that risk by moving file storage and file servers to the cloud. Data protection is automatic and untethered to a particular location. If a company has SD-WAN technology, they can directly connect it to Azure or AWS, and place the Nasuni access points close to those offices. Employees working from home enjoy the same fast, secure access to the files they need, but the company no longer needs to babysit physical storage and data protection infrastructure.

Optimization and Reliability

The final piece of this shift in thinking has to do with the public clouds themselves. It is an argument I’ve been making for years. The large players in the public cloud space have been racing each other to build more and more of the biggest, most powerful, reliable, and energy-efficient data centers in the world. This is what they have been doing for nearly two decades.

Large banks might have data centers with tens of thousands of servers. Each of the large public clouds has millions of servers deployed around the world. This is what cloud providers do, and at this scale, they can afford every level of safety and optimization to ensure that the physical infrastructure performs beautifully and reliably in all scenarios.

We all let the banks handle our money. They are the experts.

Why shouldn’t they let the public cloud providers handle their infrastructure? It’s the logical next shift, and we will be here to help with the files.

Ready to dive deeper into a new approach to data infrastructure?