Financial firms pause private cloud plans to mull public cloud

They’re being wooed by price cuts

cloud savings

In the summer of 2013 Constellation Research analyst Holger Mueller hosted an event where IT leaders from about 30 financial institutions met in New York to have an off-the-record, behind-closed-doors discussion about their latest technology endeavors.

At that time, each of the 30 banks was exploring a private cloud build out plan.

Fast forward to one year later and the landscape looks remarkably different. Mueller says at the same event in the summer of 2014 all but two of those institutions have put their private cloud plans on hold.

Continued price cuts and evolving maturity of major cloud vendors have caused most major financial firms that Mueller met with to reconsider: Is private cloud really the best way to go?

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Public cloud vendors have made it hard to ignore their services. These companies drop their prices so frequently, and by such large amounts, that its causing even the most security-sensitive businesses in the world to take a closer look at whether they can make the public cloud work for them.

(Mueller says because of the nature of the meetings he’s had, he can’t release the names of the financial institutions who have evolved their thinking on the issue.)

Was there a turning point that caused this shift? Mueller believes he’s pinpointed it. In March of 2014 Google announced across-the-board price cuts to its cloud platform. Compute Engine virtual machine prices were cut by one-third. App Engine, the application development platform prices were cut by 37%, and cloud storage dropped by 68% while BigQuery data analysis prices dropped by 85%. It was a watershed moment, Mueller says. Hardware companies aren’t dropping prices like that, he says. Furthermore, the day after Google announced its price cut, AWS dropped its cloud prices too. Microsoft has a commitment to keep its prices in line with Amazon’s, so it elicited a chain reaction across the industry. “The Google moves were a bombshell,” he says. And it turned heads.

Price isn’t the only consideration for moving the cloud though. Security is still a major concern, and it’s the reason Mueller believes that these financial institutions are not jumping all in on public cloud yet. But they’re exploring their options. Mueller says at industry conference trade shows he sees a lot more enterprise evaluators. Whereas in 2013 some of these financial institutions may have sent a couple of junior members to Amazon’s annual cloud conference, at re:Invent this year he saw firms with large cadres of senior IT folks attending.

So what’s it going to take for these financial services firms to get comfortable using the cloud? Mueller says AWS is taking what he believes to be an ingenious approach: Instead of convincing each of these financial institutions individually, AWS has gone to the regulators that oversee the financial organizations and gotten them comfortable with the cloud. The Financial Industry Regulatory Authority (FINRA) uses AWS’s cloud to analyze more than 30 billion market transactions each day now.

If their regulators are going to the cloud, why can’t they?

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Copyright © 2014 IDG Communications, Inc.