Using the Cloud to Your Advantage

BNY Mellon | Pershing’s technology leaders discuss cloud computing’s impact on our industry and offer advice to firms making the jump.

No doubt by this point you’ve heard of cloud computing. From high-powered data for businesses to personal photos and emails for individual users, it seems that everything these days is stored “in the cloud.” Perhaps no industry has more to gain from cloud computing than financial services. Financial institutions, from banks to investment firms, generate petabytes of data each year, including transaction records, customer information, and market data. Effectively managing this data is crucial for operational success and regulatory compliance.

 “With concerns over security and regulatory issues, financial firms were somewhat late to adopt to the cloud trend,” said Michael Lewis, BNY Mellon | Pershing’s chief information officer. “But, over the last couple of years the regulators have become much more cloud-savvy, and as a result we see that adoption across the industry has grown significantly.”

By 2023, about 98% of financial services organizations were using some form of cloud computing, a sharp rise from 91% in 2020, according to a report by the not-for-profit Cloud Security Alliance.

Dan Adler, chief technology officer for Pershing X, pointed out that large companies also needed time to develop stronger cross-functional collaboration to manage the transition to the cloud. “Companies built in silos can have a hard time coordinating such a complex project, lining up resources across multiple departments, and aligning priorities,” Adler said. “However, I believe this journey encourages teams to work more fluidly across silos, and to consider the entire value chain.”

Top Drivers of Cloud Adoption

“From our perspective, the number one driver of adoption is to drive efficiency,” Lewis said. He explained that companies that run their own data centers have significant fixed costs from operating, updating and maintaining these centers. “Moving to the cloud transforms this fixed cost into a variable cost, because the company only pays the cloud provider for what it uses. The cost rises and falls based on volume. And the savings are significant.”

A second driver, according to Lewis and Adler, is to manage regulatory compliance and security more confidently. In the early days of cloud services, many business leaders were skeptical that outside providers could provide that levels of security and process precision that were achievable with owned infrastructure and onsite teams. But, today, the scale and resources of these providers allows them to maintain leading edge compliance and security systems, which few firms can match internally.

Lewis also highlighted a third driver, involving the cloud’s asymmetrical impact on the success of newer market entrants. Fintech companies, he said, are building nearly all their applications to be native in the cloud. “They don’t have to maintain any of their own infrastructure, and provide service to clients solely through the cloud,” Lewis said. “Consequently, the operating costs of those companies is significantly lower than that of traditional financial services companies.”

Embracing the Cloud

Based on their experience with technology innovators at BNY Mellon and Pershing X, and at client companies, Lewis and Adler offered these suggestions for taking advantage of cloud capabilities:

1.  Discuss and Embrace a Clear Strategy – A business’ adoption of cloud services is a journey, not a project. Business leaders must collaborate, gain clarity on their goals and expectations, and develop a multi-tiered strategy to lead the way. In our case, we committed to a hybrid approach.

2.  Cloud-Native Development Is Ideal – If you’re creating a new solution, it’s generally best to build it for the cloud from the start. This approach may not be practical in all instances, but it is ideal in that the solution can be optimized to glean the greatest benefits from cloud technology.

3.  Adapt Legacy Code for Cloud Before Migrating – If you have legacy code that you want to move to the cloud, it’s generally best to modernize the code while the application is still hosted on your servers. You can adapt, test and refine the code more easily onsite.

4.  Lift-and-Shift Only if Necessary – It’s possible to take your existing code, move it to the cloud, and then modernize it. But this lift-and-shift strategy, while viable, is unlikely to deliver significant benefits until you make those additional investments to modernize the stack.

5.  Optimize Benefits of Elasticity – The cloud offers unique advantages for spinning services up or down dynamically, based on need. This built-in elasticity ensures that users get the resources they need, and you don’t pay for capacity that’s not being fully utilized.

6.  One Cloud or Many? – For your first foray into cloud services, it’s advisable to use a single provider to ease the transition and minimize complexity. However, think about how, down the road, you could divide your workloads to run them on multiple cloud services. Each of the top-three providers has certain strengths, so it ultimately may be beneficial to run, for example, data on one provider’s platform and applications on another’s.

We hope our cloud evolution was helpful as you consider your own cloud journey. To find out more about Pershing products and platforms, contact your relationship manager