PERSON OF THE WEEK: If you pay close attention to the high-tech media, there is a good chance you've seen the expression ‘cloud computing’ pop up with increasing frequency. This concept is having increased visibility in all aspects of the economy, including the financial services industry. But what exactly is cloud computing, and what does it mean to this corner of the financial services world?
This week, MortgageOrb asks computer consultant Eric Robichaud, CEO of 401 Consulting LLC in Woonsocket, R.I., to shine some sunlight on cloud computing.
Q: For those unfamiliar with the subject, what exactly is cloud computing? And where does it get its unusual meteorological name?
Robichaud: ‘Cloud computing’ is a term that describes a configuration of computer resources. It's not a specific brand or type of technology, but rather a higher-level metaphor for the general concept of placing centralized computer resources (e.g., servers or task-specific applications) at a remote location and accessing them over the Internet.
The origins of the term are rooted in diagramming and flow-charting. When creating diagrams or flowcharts of systems or processes that involve the Internet, a cloud shape is used to represent the ‘black box’ that is the Internet. Illustrations will show a flow of information going ‘into the cloud’ and magically coming out the other end. What happens in between is unimportant and merely ‘…the cloud that is the Internet.’
Using the cloud shape to represent the Internet among IT professionals is ubiquitous, and led to the nomenclature ‘in the cloud.’ As it became more and more common to deploy Web-based applications, the term ‘cloud computing’ evolved to denote processing that takes place on servers in the cloud. Essentially, this just means the processing occurs on servers out on the Internet somewhere, and exactly where is relatively unimportant.
The most common use of cloud computing is by third-party service providers that offer specific software or hardware services (such as CRM applications, or accounting systems) that can be accessed remotely over the Internet. By merely signing up for a service, a company doesn't need to buy and deploy its own hardware or software, or worry about upgrades and required resources – it simply logs in to the system over the Internet and uses it. The service provider worries about all of the aforementioned technical IT issues – for a fee, of course.
Q: How can cloud computing improve the IT effort in regard to performance efficiency?
Robichaud: The promise of cloud computing is that an IT department is freed from worrying about the minutiae of configuration, deployment, management and maintenance issues. Much in the way we have no idea what kind of resources are involved in our public telephone network – we merely pick up a phone and dial and expect it to work in exchange for our $30 or $50 per month service fees – an IT department can quickly and easily deploy a solution to its corporate users and/or end customers, and not have to worry about the hardware or software requirements, upgrades, deployment and so forth.
Furthermore, there are no up-front costs to purchase huge and expensive hardware resources, or concerns about ‘rightsizing’ the computing resources. Again, much in the same way you just expect your phone to work (regardless of how much or how little you want to use it), cloud computing offloads resource planning onto the service provider. A company can just start paying a fixed amount per month to consume the service, without investing millions into infrastructure.
And finally, in this recession-marred era of ‘do more with less,’ an IT department can deploy advanced systems with less staff and resources internally, since all maintenance, support, etc. is offloaded onto the service provider. If systems are slow or a server crashes, it's the service provider's problem to deal with fixes, updates, capacity planning, upgrades and so forth. The end customer merely ‘turns it on’ and expects it to work as advertised.
Q: Are there any significant security concerns involved in cloud computing, or is this a safer way to do business?
Robichaud: There is no clear-cut answer to this – it can vary wildly among types of services and among individual service providers. Each situation has to be explored on a case-by-case basis.
Q: Can you provide some scenarios?
Robichaud: Here is an example: A very small business with limited resources may not have the experience, expertise and capabilities to properly secure credit-card data that its e-commerce system collects in the process of taking Web-based orders. In this case, it makes tremendous sense to use outsourced resources to process and manage the credit card data, not only offloading systems and equipment, but also transferring liability and risk to a larger, more secure service provider (i.e., a bank).
On the flip side, there's a line that can be crossed where an enterprise that's too large, with too much financial risk exposure, may determine that it prefers to manage data internally, where it can keep it under its thumb, so to speak, versus entrusting a third party with a potentially multibillion-dollar liability risk.
Finances aside, similar parallels can be drawn in terms of how mission-critical the systems are. Companies that can't (or don't want to) deploy and manage specific types of resources that are deemed mission-critical may prefer to outsource them, whereas others may deem certain systems too critical not to maintain in-house.
Finally, one must also consider the nature of the data that will be stored ‘in the cloud.’ If it's very sensitive data, one must assess the risk level of having that data off-site, which also means out of direct control. This opens up issues of continuity (what happens if the service provider goes down, or goes out of business – is your data gone?), security (who can see and access your data?), and more. Obviously, trust is a major factor in these decisions.
Cloud computing, by its very nature, is tightly tied to outsourcing, and thus many of the same risk-reward assessments involved in outsourcing are directly analogous.
Q: Can cloud computing benefit financial services companies with branches in multiple locations?
Robichaud: Cloud computing is a general concept – not so much a specific technology or solution – so there's no clear-cut answer to this. In general, the risk-reward tradeoffs must be assessed on a case-by-case basis.
Technically, the ‘cloud-based resources’ could be in-house at the financial institution's corporate data center and made available to all branch offices over the Internet. Cloud computing doesn't necessarily imply that the resources are absolutely outsourced, although in general, day-to-day use is usually assumed.
One example where cloud computing can be beneficial to a financial services group is in the call center. A financial services group may deploy a cloud-based CRM system for outbound telemarketing calls. Regardless of location, all remote workers can access and work from the same, centralized CRM system.
Even mobile workers or home-based workers (including workers who call in sick and work from home just occasionally) can remotely access the system from anywhere, on the fly, over the Internet, without requiring specialized virtual private network deployments or other complicated technologies.
Q: If a company wants to bring cloud computing into its operations, where does it begin?
Robichaud: The decision to explore cloud-computing options is typically driven by business needs, such as cutting costs, enabling greater workforce mobility, and deploying new systems without increasing internal resources. So, the first step is really to decide whether it even make sense to look at a cloud-computing solution.
Then, it's important to analyze the business risks and determine risk-reward tradeoffs. Then, research specific solutions and vendors to determine costs, requirements, ramifications and, again, assess the risks involved.
