Cashing in on the Cloud Now

Contributed by NIIT Technologies
Written by Gautam Samanta, NIIT Technologies

The financial services industry is usually quick to embrace any competitive advantage offered by technology. However, it appears to have taken a wait-and-watch approach to cloud adoption so far. Apart from a few tentative forays in the front-office space in areas like CRM, which were not always integrated with the core systems of record, this approach continued right through the initial phases of the hype cycle of this disruptive technology. This isn’t surprising considering the risks involved, especially due to the fiduciary nature of the business that placed a considerable premium on client confidentially and data security. A lone security incident can cause irreparable damage to a firm’s business, for instance.

However, of late, there is a clear trend of financial services firms moving to the cloud in a big way. While the business case for the move has always been compelling, the technology and the practices needed time to mature before meeting the strict criteria set by financial institutions. In addition, this provided the time needed for regulators like the FCA in the UK and SEC and FINRA in the US to step in with a clear articulation on how the existing confidentiality and data protection laws would apply to the cloud.

FINRA, in particular, led the way by moving its data and workload to the cloud in 2014 and quickly realized its benefits on 24 Aug 2015 when it was able to seamlessly process over 75 billion records in stocks, bonds and options in a day i.e. more records than what Visa or MasterCard process in six months. All this, without any change to their applications, is a testament to the on-demand scalability that cloud provides.

Asset and Wealth management (AWM) firms stand to benefit greatly beyond just high scalability and lower cost from cloud adoption. With traditional business models under pressure and user expectations at an all-time high, especially in light of highly-anticipated millennial wealth transfer, asset and wealth managers have been considering innovative ways to retain and grow existing customers while attracting new ones. With legacy platforms posing the common hurdle, one of the fastest ways to upgrade the front-office and marketing channels is to collaborate with Fintechs that otherwise would compete for the same clientele. In fact, cloud is an enabler as the application environment is sufficiently upgraded to make integration easier. AWM platform providers themselves are beginning to offer cloud-based solutions, while reference data providers and client data aggregators are also ready to service such platforms. So, what’s the best way for an AWM firm to navigate its way into the cloud?

The first step in cloud adoption is the selection of the cloud provider. This can sound more complicated than it is because the AWM firm typically would want to retain its investments in the current technology stack. However, there may also be pressure from the internal IT team to reduce its technical debt by rationalizing or replacing the current applications as part of this exercise.

While some technical debt does need to be eliminated to be able to deploy applications to the cloud, e.g. implementing automation by utilizing tools from DevOps practice – that has an added benefit of reducing time-to-market for future enhancements. However, there are pros and cons to the extent of change taken up concurrent to the move to the cloud and the risks versus returns must be weighed carefully before arriving at a decision. Cloud brokers can help ease this process by not only negotiating the relationship with the providers, but also helping the consumers navigate through the technical, legal and licensing complexities involved in the decision-making.

Security, which is arguably a firm’s biggest concern is also the space where the greatest progress has been made. From fully encrypted communication between the firm and the cloud data center to data stored on disks encrypted using AES-2048 (more stringent than AES-256 recommended by regulators) to dedicated hardware security module services that provide secure cryptographic key storage, there is a solution for almost any security scenario a firm may face. Data is tightly coupled with identity management services where the encrypted data can only be unlocked by a given identity or service account. If the owner of the data is removed from the system, the data management component immediately deletes all related data from the disk, subject to the retention rules specified by the regulators. Many of these advances are not available even within the most advanced AWM firms’ own data centers.

Similarly, from a control perspective, cloud providers and cloud carriers comply with a whole host of global as well as regional compliance certifications such as ISO 27017, ISO 27018, CSA Star, Fed RAMP, FFIEC, ENISA IAF etc. providing consumers complete control over their cloud infrastructure. In addition, highly sophisticated and tightly-integrated Service Integration and Management (SIAM) tools are made available to cloud consumers. Role-based access is the norm and IT assets are all controlled via a common identity management system. Disaster recovery and data replication services come as built-in which would simply need to be configured, for ensuring six-sigma uptime.

The phenomenal advances in the variety of cloud services and providers along with a broad suite of technologies, migration methodologies and security advances should provide a firm footing for   AWM firms as they embark on moving to the cloud. In a competitive landscape with digital technologies providing the edge, AWM firms need to strive to survive; not moving to the cloud could end up being a higher risk than actually making the move now as part of an orchestrated strategy.


Gautam Samanta, EVP and Global Head of Financial Services at NIIT Technologies


About NIIT Technologies
NIIT Technologies is a leading global IT solutions organization, enabling its clients to achieve real world business impact through unparalleled domain expertise working at the intersection of emerging technologies.  The Company focuses on three key verticals: Banking and Financial services, Insurance, Travel and Transportation. This domain strength combined with leading-edge capabilities in Analytics, Cloudification, Cognitive automation, and Digitalization, helps clients innovate business, automate process and industrialize AI.

With over 9500 people serving clients across Americas, Europe, Asia, and Australia, NIIT Technologies fosters a culture that promotes innovation and constantly seeks to find new yet simple ways to add value for its clients.

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