Nobody expected the extreme disruption, volatility and uncertainty resulting from the COVID-19 pandemic. With the sudden onset of lockdowns and business closures, not all companies were able to operate remotely for an unspecified amount of time—and in some cases had to rush laptop computers to employees to ensure operations could continue.
The public health crisis and lockdown of the past several months have reinforced the importance of operating in the cloud in a big way, especially for companies in the financial services industry. After all, the financial markets don’t stop for anybody, and financial advisors and traders need to be able to function remotely. And in these times, financial services professionals have often been required to do more on behalf of their clients and firms from home.
Operating in the cloud, however, is more complicated than many believe. There are different types of cloud infrastructures, with their own advantages and disadvantages based on an organization’s needs and goals.
What does it mean to be “cloud-native,” compared with “cloud-enabled” or “cloud-hosted?” When financial services companies understand the differences, they can choose the best option to help them serve clients effectively, grow their practices, protect their data and remain operational during—and after—the pandemic-related disruption.
Being Cloud-Native vs. Cloud-Enabled vs. Cloud-Hosted
The Cloud Native Computing Foundation’s definition of “cloud native computing,” effective in November 2015 and updated in December 2018, states: “Cloud native technologies empower organizations to build and run scalable applications in modern, dynamic environments such as public, private, and hybrid clouds. Containers, service meshes, microservices, immutable infrastructure, and declarative APIs exemplify this approach. These techniques enable loosely coupled systems that are resilient, manageable, and observable. Combined with robust automation, they allow engineers to make high-impact changes frequently and predictably with minimal toil.”
Cloud-native firms in financial services and other industries are better equipped to navigate the current extreme conditions because their applications are built from the ground up, on their own systems. Being able to access programs and data online at any time, as well as seamless and rapid scalability, are crucial benefits of being cloud-native, but another key advantage is that a financial firm’s data and information are dispersed across various data centers. When there is no single point of potential failure, operational and security risks are mitigated, and financial firms can stay online and record real-time account and data updates during fast-paced markets. Cloud-native companies can achieve peace of mind knowing that even if something goes wrong, they have multiple backup data centers to ensure they continue to operate.
Furthermore, cloud-native systems are often open-architecture in nature, which means that enhancements, integrations and additional tools or programs can be easily incorporated—without having to alter anything about the original system. These new features can be rolled out to customers and their end clients, and customized for their use, through application programming interfaces (APIs), which don’t require installation (but instead can be applied when customers log in through their desktops or mobile apps)—saving cloud-native firms significant time and money over the long term.
The systems and applications of cloud-hosted firms, on the other hand, are hosted on the cloud servers of third parties. While this type of arrangement enables mobile cloud-based operations, if anything happens to the third-party server, business can be significantly affected. Again, the lack of reliance on a single data center (which take companies from cloud-hosted to cloud-native) is key.
Similarly, cloud-enabled firms operate in the cloud, but rely on legacy applications and systems that were moved to the cloud. Since legacy solutions weren’t built for the cloud, they can’t scale quickly and seamlessly to accommodate sizable volume and growth, even if they now technically operate in the cloud. Furthermore, because cloud-enabled solutions weren’t built from the ground up on the cloud, they are typically hosted on the servers of third-party providers instead of free from the constraints of specific data centers.
Going Cloud-Native: The Way of the Future
The remote-working conditions forced on the financial services industry by the COVID-19 pandemic will drive an ongoing shift to the cloud. The capability to provide customers with a mobile, digital experience where they can check accounts and communicate with their financial advisors will be paramount going forward.
While operating fully in the cloud cannot resolve all challenges for any company or industry, doing so can significantly improve and stabilize operations during extreme conditions like what we are presently experiencing. To ensure they can handle volatile market conditions while continuing to service customers and grow their businesses, financial services firms can migrate to the cloud—and do so on cloud-native systems and applications that were built specifically for the cloud.
Prescott Nasser is chief technology officer of 280 CapMarkets, a technology company transforming fixed income by delivering pricing power, market clarity, and best execution support to level the playing field for independent financial advisors and institutions.