Success with Hybrid Cloud: How the Financial Services Industry Benefits

In this post I’ll examine how enterprises in the Financial Services industry (and the service providers working with them) are successfully leveraging Hybrid Clouds.

As a quick refresher on this series, my goal with each of these posts has been to take a close look at the definition of a Hybrid Cloud, explain our perspective on why a Hybrid environment is so valuable, and a provide a piece-by-piece look at the solutions and tools that constitute a Hybrid Cloud. With all of these ideas in mind, this series has already covered how to plan, build, deploy, operate, and save money with a Hybrid Cloud. Prior to this, we’ve looked at the retail and oil/gas industries.

The financial services industry is a fast paced, dynamic industry that is constantly pushing the use cases of information technology. This technology is used to develop new financial instruments based on business intelligence, with the goal of increasing the range (and types) of financial products in use. Finding and successfully using innovative new technology is a core principle of financial services companies – and this pursuit of top-tier technology includes the use of the cloud, especially the Hybrid Cloud model.

In general, the financial services industry is aligned around distinct business profiles:

• Capital markets
  
• Banking
  
• Insurance
  

Each of these profiles feature very specific regulatory requirements and information management needs. These differences lead to vastly different application/infrastructure architectures, but each of them need flexibility, scale, and seamless connectivity. Financial services consumers have demanding expectations when it comes to their financial information and transaction support on any device 24/7/365. This demand has driven new technology requirements on all existing systems. This is where the Hybrid Cloud design point offers Financial Services companies important new capabilities in two critical areas:

• Hybrid Infrastructure
  
• Hybrid Application Architecture & Services
  

Hybrid Infrastructure

Dynamic Computing: Extending datacenter capacity for delivering high computational workloads

To meet the growing global demand for financial applications, the need to extend the services of full-scale datacenters to new locations is critical. The cloud makes the need for such a large capital outlay unnecessary. In addition to data and infrastructure support, a Hybrid Cloud is a valuable source of on-demand capacity (and capability) for applications. Because data, traffic, and computing needs can spike suddenly in this industry, the ability to provision and de-provision capacity is a must for the dynamic nature of the financial services industry. This enterprise level of scale and flexibility is a critical piece of this industry’s infrastructure scenarios.

The most important financial services scenarios focus on that extension of infrastructure, specifically:

• Retaining control over the network topology and configuration
  
• Managing public cloud capacity in the same way you would your on-premises infrastructure
  

Windows Azure offers important capabilities that support this extension by enabling a Hybrid Cloud scenario that allows the public cloud to dramatically expand the power and scope of an existing customer datacenter. Windows Azure Virtual Network enables you to create a logically isolated section in Windows Azure and securely connect it to your on-prem datacenter Virtual Network. This makes it easy for you to take advantage of Windows Azure’s scalable, on-demand infrastructure while providing connectivity to data and applications on-prem (including systems running on Windows Server, mainframes and UNIX).

A great example of this technology in action is a company called RiskMetrics. They have used a Hybrid Cloud to extend their datacenter to for dynamically scale during high-compute scenarios, such as risk computations and complex risk modeling.

RiskMetrics delivers risk management services to the world’s leading asset managers, banks, and institutions to help them measure and model complex financial instruments. The business runs its own data center but, to accommodate spiky increased demand for its services during specific periods of time, the company needed to expand its technical infrastructure. Rather than buy more servers and expand its data center, RiskMetrics took advantage of the Windows Azure platform to handle the surplus loads.

Another service offered by RiskMetrics is a set of complex algorithms known as “Monte Carlo” simulations. In terms of the computational resources needed to run these simulations, they are very expensive. This expense presented an ideal application for the cloud. Now RiskMetrics can consume vast amounts of computing for short periods of time and only pay for what they need. By combining the capacity of its own data center with the potentially limitless capacity of Windows Azure, RiskMetrics is able to satisfy the fixed demand on its own infrastructure and seamlessly spill over high peak loads onto Windows Azure.

Because the Windows Azure platform is highly compatible with RiskMetric’s existing applications (Visual Studio and .NET), the company is also able to develop applications locally and deploy them to Windows Azure very quickly. The solution is called RiskBurst – which it describes as “bursts of processing onto the cloud from our risk infrastructure.” Eventually, RiskMetrics expects to provision 30,000 Windows Azure instances per day.

You can read more about the work RiskMetrics is doing here.

Hybrid Application Architectures and Services

Many applications in financial services companies are legacy apps that have been in use for many years serving existing services demands. These apps often cannot support the growing need for additional capabilities that can accommodate mobile application support, business intelligence, and other new service capabilities. These needs dramatically emphasize the need for a Hybrid environment. For example, many existing LOB applications can be extended with rich services provided by the public cloud without the need to rewrite an entire application at significant expense. A Hybrid Cloud allows application architects the flexibility to not only leverage public cloud application services but also decide what parts of an application are best suited to reside in the existing datacenter vs. in the public cloud.

The financial services company Aviva is one example of an organization leveraging Windows Azure application services to extend existing application functionality. Aviva (a leading provider of financial services worldwide) wanted to help customers save money by basing auto insurance quotes on the behavior of individual drivers instead of statistics. To do this, Aviva needed to collect telematics data from moving vehicles. As you might expect, deploying the necessary on-prem infrastructure to do this was costly and complex. Aviva’s solution was to implement a Hybrid cloud with Windows Azure. This solution uses smartphones to collect telematics data and this data is stored in the cloud using Windows SQL Azure database. This data can then integrate with the on-prem quote system as well as social media providers.

This dynamic system enabled Aviva to quickly bring an innovative solution to market. It has already been a big benefit to Aviva customers, helping them save up to 20% on their insurance costs, and the company can reach customers through the devices they use everyday.

You can read more about the work Aviva is doing here.

The scale, power, and flexibility of the Hybrid Cloud provides financial services companies with significant benefits, particularly the ability to extend existing infrastructure without incurring a large capital outlay for capacity while retaining other data/apps on-prem as appropriate or mandatory (via regulatory guidelines). Additionally, Financial Services applications can take advantage of (and consume new) cloud services without the need to rewrite applications. All of this allows financial services companies to meet the ever-growing consumer demand for the services that are just a device away.