Urban myths in clouds.

I’m going to keep this short, mainly because I’m not an expert by any stretch of the imagination. So discount this as a layman’s viewpoint as needed.

The most common, almost Pavlovian, stock response I hear from (both IT and senior management) financial services firms with respect to why they don’t see cloud computing as relevant to their high-level business strategy (ie ok around the edges but really just an IT cost/benefit thing..) is:

Of course you know, our business is different, it needs to be secure. The hardware needs to be sitting under my desk.

Ok, fine I made the last bit up, but you know they’re thinking as much. So without digressing into a debate as to just how secure most financial services IT is, the question I always respond with is this: does your organization know how to run a more secure data centre than Amazon or Google (or any other present or future specialist cloud infrastructure supplier)??? Really think about it. Do you make your own hardware? Perhaps you can make banking microchips better than Intel… (From Appirio’s CIO Guide to On-demand: )

On-premise does not equal secure: the biggest driver towards private clouds has been fear, uncertainty, and doubt about security. For many, it just feels more secure to have your data in a data center that you control. But is it? Unless your company spends more money and energy thinking about security than Amazon, Google, and Salesforce, the answer is probably “no.”

And there are technologies – like VPN-Cubed from our portfolio company CohesiveFT – that allow you to run secure applications and data in the cloud from behind your own firewall:

VPN-Cubed® is the first commercial solution that enables customer control in a cloud, across multiple clouds, and between private infrastructure and the clouds.

VPN-Cubed provides an overlay network that allows YOU control of addressing, topology, protocols, and encrypted communications for YOUR devices deployed to virtual infrastructure or cloud computing centers. When using public clouds your corporate assets are going into 3rd party controlled infrastructure. Enterprise checks and balances require you to exhibit control over your computing infrastructure. VPN-Cubed gives you flexibility with control in 3rd party environments.

The other myth to dispell is that no one is suggesting migrating any or all infrastructure to a cloud environment overnight, or even as soon as possible. The decision whether or not to move existing infrastructure to a cloud (private or public) and when is indeed probably more of a ‘routine’ (but big) question for IT (although management should be interested in the answer.) The point I’m trying to make, the point that is relevant for the executive committee is:

How does the nature of my business – what products and services I provide to my customers and how – potentially change because of this new technological substrate?

This is the question that should animate the weekend executive strategy retreat. In order to answer that question, you need to have some understanding of the technology but not how it works so much as what it can do. I don’t need to know how the microchip works in a digital camera to think about how I can use that camera. The question management should be brainstorming is:

If we were to start with a blank page, with the technology that exists today (and will likely exist in the next 5-10 years) how would you best build a company to serve our customers, present and future? What does FaaS (Finance as a Service) look like?

This isn’t going to happen overnight so the suggestion is not to ‘throw the cards up in the air’ and panic. And incumbents have many advantages on their side (customer inertia being the most valuable). But it will happen. And quickly in the geological timescale of large organizations so they need to start moving, start mapping out this future. And – here is a shameless plug for Nauiokas Park – one facet of that should be placing a lot of small bets on emerging, disruptive start-ups that have the luxury of moving more quickly, experimenting more radically, with faster evolutionary cycles. (Like a genomics company experimenting using fruit-flies and mice first to isolate winning adaptations.) While at the same time preparing their supertankers for a significant change in direction.

Maybe we should offer to moderate these strategic retreats. Do you think we would get any takers? If you work in a financial services company, ask your CEO and let us know.

Update:
If you are looking for a good (albeit long) explanation of what VPN-Cubed does and why it really is a “game-changer” read this post from Mark Masterson who sums it up as follows:

So, let’s sum up. Enterprise cloud computing is a type of cloud computing that is suited to the specific requirements of existing companies, and allows them to leverage resources in the Cloud to provide economical ways of adding capacity to their existing environments. First, their existing data centre (or some portion of it) is virtualised. Once this is accomplished, capacity from external cloud providers can be added (and dropped) dynamically, using technologies like VPN-Cubed, allowing enterprises to use the cloud to elastically (and transparently) scale out to the cloud. And because all network traffic is securely encrypted, enterprises can effectively make use of public, cloud infrastructure as if it was part of their internal datacentre — entirely behind the (virtual) firewall. Moreover, the same technology can be leveraged to allow the use of multiple, disparate cloud providers, effectively solving the ‘eggs in one basket’ problem. Different cloud providers can be leveraged to allow for failover redundancy, load balancing, even the leveraging of different providers on a dynamic basis, using metrics such as SLA compliance, or changes in cost. And an enterprise might want to do this not because it will reduce costs, or allow a switch from capital to operating expenditures (although both of those things might be true or not, depending on the context), but because it will increase their overall agility.

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