IDC: FSI awaits greater clarity on cloud regulations
By Asia Cloud Forum editors 08-May-2012
Asia-Pacific financial services institutions are still taking a measured approach to cloud computing, as the industry awaits further clarity on cloud computing regulations and better articulation of business benefits by IT vendors. The findings were revealed in a report by IDC Financial Insights, "Perspective: A slow ascent toward the cloud for Asia/Pacific financial services" (May 2012), which examined the cloud computing adoption plans of banks and insurers across major markets in Asia/Pacific.
Michael Araneta, associate consulting and research director for IDC Asia/Pacific said, "The financial services industry, typically an early adopter of technology, has been uncharacteristically slow to take on cloud. There is still no wide-scale adoption of the technology, despite considerable resources allocated by vendors to ensure that their offerings scale up and become more mature."
The report, which is based on a series of surveys undertaken by IDC Financial Insights, revealed that not more than 45% of financial institutions across key markets in Asia Pacific (namely Singapore, Malaysia, China, India, Australia, and New Zealand) have adopted some form of cloud computing services. Furthermore, the preference of the industry is for the more manageable private cloud implementations, and usually for non-mission-critical areas such as IT management, server capacity, and storage.
Regulation appears to be a major hurdle for widespread adoption of cloud computing in the industry. "Our regulators have been very vocal about their concerns regarding anything cloud, and the stringent guidelines that they have set for financial institutions to abide by have to some extent, negated the supposed advantages of lower cost, and ease and speed of deployment of the technology," Araneta said.
Greater clarity on regulations needed
For cloud to gain momentum there needs to be greater clarity on regulations concerning cloud computing, which is not the case at present; the survey found that 62.5% of the respondents either stated that regulations have become less clear, or that there has been no change to their understanding of what is or is not allowed by regulators.
However, it is not all doom and gloom. The industry expects developments in regulatory policies to take place in the next two years and this will facilitate the uptake of cloud; 51.7% of the respondents expect that regulations will either "slightly more open" or "significantly more open" to cloud computing in the next two years (see figure 1 below).
Figure 1. Expectations of regulatory openness to cloud computing
Question: Do you expect regulation to allow more/ be more open to cloud computing in the next two years?
(Source: IDC Financial Insights, 2012)
"Cloud is an IT issue"
The report also cited that 66.1% of the respondents see cloud computing primarily as an IT issue, without much consideration of the business-related benefits such as the ability to regionalize more quickly, deploy capabilities more efficiently, or lower cost-to-serve numbers.
"Ultimately, for cloud computing to gain traction, IT units within financial institutions have to go beyond talking about the technical breakthroughs of cloud computing, towards what it really means in changing the way banks and insurers run their business," said Sui-Jon Ho, market analyst for IDC Financial Insights Asia/Pacific.
In this regard, an organization must also be able to define robust metrics to measure the performance gain from cloud deployments and allow internal users to manage their objectives. "Such propositions must be conveyed in a non-technical language that the various stakeholder groups can understand. Most importantly, all internal users must be made aware of organizational pain points that can and cannot be addressed by the cloud," Ho added.