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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 NecessaryIt’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.


Cloud Formations: Where It All Began

More than 50 years ago, large businesses and government agencies began operating massive mainframe computers that allowed select users to access their data and certain applications remotely. In the 1990s, the internet revolution spawned platforms that gave companies and consumers remote access to wide range of information and, over time, increasingly sophisticated services and applications. But it wasn’t until 2006, when Amazon launched its Elastic Compute Cloud (EC2) service to monetize excess server capacity, that “cloud computing” began to come into its own. The cloud concept was cemented in the public consciousness when Microsoft Azure, Google Cloud Platform and others began competing to provide large businesses with an alternative to owning, operating and upgrading their own data centers. These three cloud infrastructure service providers continue to dominate, controlling about two-thirds of the market as of early 2024 according to data from Synergy Research Group.



BNY Mellon in the Cloud

Like many financial services companies, BNY Mellon owns and operates its own data centers. The bank has deployed certain of its solutions to the cloud, taking advantage of Software-as-a-Service (SaaS) packages. By leveraging SaaS, the bank pays software subscription fees, but avoids the cost of maintaining the software or hosting it on its own servers.

Recently, however, several teams within BNY Mellon have sought to build solutions to be “cloud-native”– able to operate at full efficiency in the cloud as well as in traditional data centers. These teams are embracing native cloud solutions because they tend to offer higher availability (data transfer speed) and greater security, while also being less costly and complex to develop and deploy.

BNY Mellon is supporting these cloud-native efforts through a centralized, firm-wide approach that emphasizes good governance and best-practices. The security and data privacy of capabilities in the cloud are hardened as well as, or even better than, the physical data centers. The bank also has established a highly secure, isolated instance in the cloud that lets teams build and refine their native solutions across various stages before fully deploying them to their user base.

This staged approach has been used to create Pershing X’s Wove wealth management advisory platform, which was envisioned from day one to be cloud-native. The Pershing X cloud migration was executed in three steps: first, the internal quality assurance (QA) environment was migrated to allow for rigorous testing and validation; second, the external acceptance testing (XAT) environment was migrated, to test connectivity, security and performance, and to allow some of our external clients to test the environment before it goes live; and, third, the production environment was fully migrated, and on-premises datacenter access was  shut down. Now that Wove is fully deployed in cloud, the Pershing X team will reengineer more of its services to take advantage of cloud-native capabilities and efficiencies. Next, the team will focus on migrating its core Pershing custody and clearing stack to the cloud as well.



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

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