December 9, 2010 – Most banks say they're really interested in cloud computing, but so far it's been used primarily for non-core activities like systems testing and HR functions-there hasn't been much traction yet for transactional and customer data-intensive processes - "a lot of teasing going on but not much in the way of marriage proposals" says Forrester's Ellen Carney.

But facing IT budgets that are engulfed by regulatory demands, and the value of "speed-to-market," even skittish CIOs are now under pressure to consider expanding cloud computing, making Azure's bulk, agility, incremental deployment options and existing ASP security protocols a valuable weapon for Misys. By offering financial services via Microsoft's Windows Azure cloud platform, Misys is pushing cloud computing activities for processes that banks thus far have opted to keep in house.

"This demonstrates a serious move on the core of the financial system and account systems," says Rod Nelsestuen, senior research director, TowerGroup. "It's one of the last things to go [to the cloud]-core systems and applications."

While the market's still just taking shape, the appetite for flexible IT fees will lure converts, or at least speed an evolution in which more core applications are placed into a private cloud, with a public cloud coming later. "FIS believes cloud computing is part of a natural evolution away from allocation-based pricing toward transaction-based pricing," says John Gordon, evp of strategic product development for FIS, which is leveraging its long-standing financial services domain expertise as a differentiator as it builds cloud-based solutions throughout its products and services. "Most of our clients and prospects are risk-minded organizations and are more focused on innovations in core banking within an intranet cloud. However, we've found the market is reticent to open the core processing though an 'Internet cloud,'" says Gordon.

At Fiserv, Kevin McDearis, CTO for enterprise technology, says the firm is focused on developing virtualization in its data centers, which is phase one for moving to a cloud infrastructure. It's also exploring the feasibility of utilizing cloud-based hosting models for ancillary services such as payments.

For Misys, the appeal of the Azure platform is it enables high volume workloads, such as end-of-day processing, to be consumed "on demand." The Microsoft collaboration also gives Misys a head start-many financial institutions already run some support services in the cloud, such as Microsoft Exchange and Microsoft Office. "We believe we are going to see banks talking to us about running core business [applications] in the cloud," says Robin Crewe, CTO of Misys.

The two firms also believe the familiarity of Windows among programmers will help. "There are millions of developers who can build apps on .net, so there are millions of developers who can extend solutions like the one we're going to market with," says Joe Pagano, managing director for Microsoft's capital markets business.

Crewe is aware that security issues have thus far held back a large-scale embrace of cloud computing. But he's not concerned. "Those things [security concerns] are solvable," he says. Pagano says security and compliance for Azure-related deployments will be handled similar to the firm's ASP model-in which it demonstrates encryption, data transfer and storage methods for data transmission to clients.

"In regards to security, your records are stored wherever the Windows Azure servers are," says James Van Dyke, founder and CEO of Javelin Research.

This story originally appeared on Bank Technology News.

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