$72 billion SaaS company doesn’t use the cloud for its own IT

NES Financial moved $72 billion in financial transactions for its banking and other customers in 2010 using a software-as-a-service (SaaS) delivery model. The company knows cloud computing yet it keeps its own IT assets on its own premises, not on Azure or any other cloud infrastructure. Its operating system is Windows Server, its database is SQL Server and its software applications are developed on the .NET Framework. It’s like the company never heard Steve Ballmer’s “We’re all in” rallying cry for cloud computing. The fact is, says NES’s CTO, that while delivering this service in a SaaS model is proven, cloud-based technology to build and run its business is not.

Izak Joubert, who wears both the CTO and CIO hats at NES Financial, speaks for many people running IT who’ve heard all the hype about cloud computing from Microsoft and others but still aren’t convinced to go “all in."

"I don’t think that the delivery model has been matured enough that it mitigates enough of the risk,” Joubert says.

NES Financial administers complex financial transactions for banks, title companies, law firms and Fortune 500 companies. It specializes in handling 1031 transactions, referring to the citation in the Internal Revenue Service code, which allow an individual or corporation to defer their tax liability, such as capital gains on the sale of an office building, an oil rig, heavy construction equipment and the like. Other funds NES manages include escrow accounts at a title company or deposits held by an attorney, a nursing home or funeral home.

NES Financial started in 2005, recognizing that these accounts are largely unregulated and that money was being pilfered from them “at an alarming rate,” says Michael Halloran, CEO of the company.

It released a survey today of customers that notes, in seeming contradiction, that while 80 percent of them believe their money in those accounts is safe, more than half think there should be more security and transparency about how those funds are managed. At the same time, new financial regulations created in the wake of the banking crisis of 2008 will have implications for these accounts as well.

While NES began as a company that internally managed these accounts for clients, it later began delivering services to customers online in what today would be called a SaaS model.

“SaaS solutions allow [customers] to provide greater services in discrete sectors without having this incredible burden of technology,” says Halloran, citing the commonly understood argument for SaaS.

And yet, NES Financial, in the parlance of Silicon Valley, doesn’t eat its own dog food.

Joubert admits to being conflicted about the cloud. Wearing his chief technology officer (CTO) hat, “you always want to go with the bleeding edge, use the latest and greatest technology” to develop new software applications and the technology stack on which they run. But with his chief information officer (CIO) hat on, he’s responsible for the data centers and the whole rest of the IT organization. That role is marked by “a little bit of doubt and some caution,” he says.

Joubert raises some of the same questions others have raised about how well cloud service providers protect his data -- especially in a highly-regulated field like financial services -- and who takes responsibility when something goes wrong.

We report all the time about the new products and services cloud providers offer to address these risks and allay these concerns, but the message is obviously still taking some time to sink in.

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Copyright © 2011 IDG Communications, Inc.

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