Category Archives: Cloud Computing
The cloud in cloud computing originated from the habit of drawing the internet as a fluffy cloud in network diagrams. No wonder the most popular meaning of cloud computing refers to running workloads over the internet remotely in a commercial providers data centerthe so-called public cloud model. AWS (Amazon Web Services), Salesforces CRM system, and Google Cloud Platform all exemplify this popular notion of cloud computing.
But theres another, more precise meaning of cloud computing: the virtualization and central management of data center resources as software-defined pools. This technical definition of cloud computing describes how public cloud service providers run their operations. The key advantage is agility: the ability to apply abstracted compute, storage, and network resources to workloads as needed and tap into an abundance of pre-built services.
From a customer perspective, the public cloud offers a way to gain new capabilities on demand without investing in new hardware or software. Instead, customers pay their cloud provider a subscription fee or pay for only the resources they use. Simply by filling in web forms, users can set up accounts and spin up virtual machines or provision new applications. More users or computing resources can be added on the flythe latter in real time as workloads demand those resources thanks to a feature known as auto-scaling.
The array of available cloud computing services is vast, but most fall into one of the following categories:
This type of public cloud computing delivers applications over the internet through the browser. The most popular SaaS applications for business can be found in Googles G Suite and Microsofts Office 365; among enterprise applications, Salesforce leads the pack. But virtually all enterprise applications, including ERP suites from Oracle and SAP, have adopted the SaaS model. Typically, SaaS applications offer extensive configuration options as well as development environments that enable customers to code their own modifications and additions.
At a basic level, IaaS public cloud providers offer storage and compute services on a pay-per-use basis. But the full array of services offered by all major public cloud providers is staggering: highly scalable databases, virtual private networks, big data analytics, developer tools, machine learning, application monitoring, and so on. Amazon Web Services was the first IaaS provider and remains the leader, followed by Microsoft Azure, Google Cloud Platform, and IBM Cloud.
PaaS provides sets of services and workflows that specifically target developers, who can use shared tools, processes, and APIs to accelerate the development, test, and deployment of applications. Salesforces Heroku and Force.com are popular public cloud PaaS offerings; Pivotals Cloud Foundry and Red Hats OpenShift can be deployed on premises or accessed through the major public clouds. For enterprises, PaaS can ensure that developers have ready access to resources, follow certain processes, and use only a specific array of services, while operators maintain the underlying infrastructure.
Note that a variety of PaaS tailored for developers of mobile applications generally goes by the name of MBaaS (mobile back end as a service), or sometimes just BaaS (back end as a service).
FaaS, the cloud instantiation of serverless computing, adds another layer of abstraction to PaaS, so that developers are completely insulated from everything in the stack below their code. Instead of futzing with virtual servers, containers, and application runtimes, they upload narrowly functional blocks of code, and set them to be triggered by a certain event (e.g. a form submission or uploaded file). All the major clouds offer FaaS on top of IaaS: AWS Lambda, Azure Functions, Google Cloud Functions, and IBM OpenWhisk. A special benefit of FaaS applications is that they consume no IaaS resources until an event occurs, reducing pay-per-use fees.
The private cloud downsizes the technologies used to run IaaS public clouds into software that can be deployed and operated in a customers data center. As with a public cloud, internal customers can provision their own virtual resources in order to build, test, and run applications, with metering to charge back departments for resource consumption. For administrators, the private cloud amounts to the ultimate in data center automation, minimizing manual provisioning and management. VMwares Software Defined Data Center stack is the most popular commercial private cloud software, while OpenStack is the open source leader.
A hybrid cloud is the integration of a private cloud with a public cloud. At its most developed, the hybrid cloud involves creating parallel environments in which applications can move easily between private and public clouds. In other instances, databases may stay in the customer data center and integrate with public cloud applicationsor virtualized data center workloads may be replicated to the cloud during times of peak demand. The types of integrations between private and public cloud vary widely, but they must be extensive to earn a hybrid clouddesignation.
Just as SaaS delivers applications to users over the internet, public APIs offer developers application functionality that can be accessed programmatically. For example, in building web applications, developers often tap into Google Maps API to provide driving directions; to integrate with social media, developers may call upon APIs maintained by Twitter, Facebook, or LinkedIn. Twilio has built a successful business dedicated to delivering telephony and messaging services via public APIs. Ultimately, any business can provision its own public APIs to enable customers to consume data or access application functionality.
Data integration is a key issue for any sizeable company, but particularly for those that adopt SaaS at scale. iPaaS providers typically offer prebuilt connectors for sharing data among popular SaaS applications and on-premises enterprise applications, though providers may focus more or less on B-to-B and ecommerce integrations, cloud integrations, or traditional SOA-style integrations. iPaaS offerings in the cloud from such providers as Dell Boomi, Informatica, MuleSoft, and SnapLogic also enable users to implement data mapping, transformations, and workflows as part of the integration-building process.
The most difficult security issue related to cloud computing is the management of user identity and its associated rights and permissions across private data centers and pubic cloud sites. IDaaS providers maintain cloud-based user profiles that authenticate users and enable access to resources or applications based on security policies, user groups, and individual privileges. The ability to integrate with various directory services (Active Directory, LDAP, etc.) and provide is essential. Okta is the clear leader in cloud-based IDaaS; CA, Centrify, IBM, Microsoft, Oracle, and Ping provide both on-premises and cloud solutions.
Collaboration solutions such as Slack, Microsoft Teams, and HipChat have become vital messaging platforms that enable groups to communicate and work together effectively. Basically, these solutions are relatively simple SaaS applications that support chat-style messaging along with file sharing and audio or video communication. Most offer APIs to facilitate integrations with other systems and enable third-party developers to create and share add-ins that augment functionality.
Key players in such industries as financial services, healthcare, retail, life sciences, and manufacturing provide PaaS clouds to enable customers to build vertical applications that tap into industry-specific, API-accessible services. Vertical clouds can dramatically reduce the time to market for vertical applications and accelerate domain-specific B-to-B integrations. Most vertical clouds are built with the intent of nurturing partner ecosystems.
The clouds main appeal is to reduce the time to market of applications that need to scale dynamically. Increasingly, however, developers are drawn to the cloud by the abundance of advanced new services that can be incorporated into applications, from machine learning to internet-of-things connectivity.
Although businesses sometimes migrate legacy applications to the cloud to reduce data center resource requirements, the real benefits accrue to new applications that take advantage of cloud services and cloud native attributes. The latter include microservices architecture, Linux containers to enhance application portability, and container management solutions such as Kubernetes that orchestrate container-based services. Cloud-native approaches and solutions can be part of either public or private clouds and help enable highly efficient devops-style workflows.
Objections to the public cloud generally begin with cloud security, although the major public clouds have proven themselves much less susceptible to attack than the average enterprise data center. Of greater concern is the integration of security policy and identity management between customers and public cloud providers. In addition, government regulation may forbid customers from allowing sensitive data off premises. Other concerns include the risk of outages and the long-term operational costs of public cloud services.
Yet cloud computing, public or private, has become the platform of choice for large applications, particularly customer-facing ones that need to change frequently or scale dynamically. More significantly, the major public clouds now lead the way in enterprise technology development, debuting new advances before they appear anywhere else. Workload by workload, enterprises are opting for the cloud, where an endless parade of exciting new technologies invite innovative use.
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What is cloud computing? Everything you need to know now …
Huawei and Microsoft executives sign an expanded cloud computing partnership. (Huawei Photo)
Huaweis bid to be a player in Chinas cloud computing scene got a little stronger Tuesday with the signing of a deal with Microsoft to host more of the software giants apps on its cloud.
Just five months into the making of Huaweis public cloud strategy, the two companies signed a deal that will see more of Microsofts enterprise technology software become available on Huaweis public cloud. Huawei launched its public cloud service in April with support for Windows Server and RDS (relational database service) for SQL Server, but customers running other Microsoft apps on-premises will now be able to take advantage of a cloud option for those apps through the new partnership.
Cloud computing in China is the domain of home-grown companies, with Alibaba as the countrys leading provider of cloud computing services. Baidu and Tencent are also going after cloud customers, while U.S. companies like Amazon Web Services and Microsoft operate their cloud services through a local subsidiary. The overall market is a little behind where the global cloud computing market is at the moment, but demand for cloud services in China is expected to surge over the next decade.
Microsoft and Huawei will cooperate on bringing new services to Huaweis customers, the two companies said in a statement. The announcement kicks off the Huawei Connect 2017 conference, which is being held in Shanghai.
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Huawei ups its bet on cloud computing with broader support for Microsoft apps – GeekWire
The Volkswagen Group, the worlds second largest car manufacturer, is planning to use open-source cloud-computing platforms in order to build a private cloud to host websites for its brands Audi, VW, and Porsche. The company is also looking at a comprehensive platform for innovative automotive technology. In fact, VW officials debated for a long time over how to leverage the technology. The Group employs over 600,000 employees globally and of them, there are 11,000 who are internal IT experts.
They first plan to build private cloud to span the thousands of physical nodes across multiple data centers in the USA, Europe, and Asia. The automotive giant then eventually plans to build public cloud in order to create a hybrid cloud. The automobile giant has evolved from a car manufacturer to a global mobility provider and realizes the need to move away from traditional application development processes to those which are agile and can sustain rapid development. For new mobility services, Volkswagen will collect data, analyze it, and store it to make better products for its customers. These are real cases of digital transformation. Volkswagen is in fact one of the many automotive companies that are leveraging transformational technologies for a digital future.
Massive expansion predicted for cloud services globally
Cloud computing is one of the most disruptive forces facing the industry. According to the Bain & Company research report The Changing Faces of the Cloud, globally, the cloud IT market revenue is projected to increase to $390 billion in 2020 from $180 billion, translating into a compound annual growth rate (CAGR) of around 17%. The scale of change is mind-boggling.
The overall global public cloud market will mature, and its growth rate will slightly slow down from 17.2% in 2016 to a 15.2% increase in 2020, says Sid Nag, research director at Gartner. While Brexit and other growth challenges exist, some segments such as financial SaaS applications and the PaaS user markets will still see strong growth through 2020. As buyers intensify and increase IaaS activity, they will be getting more for their investment: ongoing enhancement of performance, more memory, more storage for the same money (which will drive increases in consumptions) and increased automation in traditional IT outsourcing (ITO) delivery, added Nag.
Cloud computing is radically changing the face of the automobile industry
The change is not cosmetic but radical in all aspects and could be truly transformational as it will power and define business processes and supply chains. These are companies genuinely trying to change everything: from the way their structure is managed to the products they sell.
We live in a world where innovation is the only constant. The world is witnessing unprecedented change driven by digital revolution. Everything is changing from how organizations function to how people work. Digital transformation is the buzzword across industries and cloud-based tech is leading that digitalization of processes and supply chains, said Shashank Dixit, CEO, Deskera, a global cloud provider.
Automotive companies are leveraging modern Cloud-computing platforms for creating Cloud native Applications, Operating System, the Internet of Things (IoT), devising a comprehensive software development methodologyall of which have the potential to literally transform it into a global powerhouse. As the company strives to explore new markets, it is overhauling everything that defines the core of its business and moving towards being a software services company, away from its hallmark of being a leading automaker. The bold move will perhaps lay the blueprint of how automobile enterprises of the future will keep reinventing themselves.
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How The Automotive Industry Is Leveraging Cloud Computing – CXOToday.com
A board sports apparel retailer is taking steps to blend its physical and digital retail channels.
Billabong is leveraging the Aptos Singular Commerce platform to support omnichannel retailing across its global enterprise. The cloud-based solution will merge the retailers physical and digital retail channels, and create a single view of customers, inventory and orders, among other operations.
In addition to managing point-of-sale, the solution also supports customer relationship management (CRM), order management, merchandising and auditing functions. By integrating these functions, Billabong is positioned to deliver truly seamless customer experiences regardless where, when or how its customers shop, the company said.
Transitioning to a cloud-based platform also helps Billabong to consolidate its retail technology stack, and accelerate the implementation of new solutions goals that required a seasoned partner.
Aptos global presence, leading cloud-based technology, and professional services and implementation team were important considerations in our selection process, said Michael Yerkes, senior VP, global operations of Billabong International Limited.
Billabong operates 372 retail stores, as well as operates e-commerce sites for each of its key brands, Billabong, RVCA, Element, Von Zipper, Honolua Surf Company, Kustom, Palmers Surf and Xcel.
Sept. 5 Cloud computing lies behind many of todays most popular technologies, from streaming video and music to e-mail and chat services to storing and sharing family photos. Since 2015, theChameleontestbed has helped researchers push the potential of cloud computing even further, finding novel scientific applications and improving security and privacy.
A new grant from the National Science Foundation will extend Chameleons mission for another three years, allowing the project led by University of Chicago with partners at theTexas Advanced Computing Center(TACC), Renaissance Computing Institute (RENCI), and Northwestern University to enter its next phase of cloud computing innovation. Upgrades to hardware and services as well as new features will help scientists rigorously test new cloud computing platforms and networking protocols.
The $10 million renewal will be officially announced at the inauguralChameleon User Meeting, taking place September 13-14 at Argonne National Laboratory.
In phase one we built a testbed, but in phase two were going to transform this testbed into a scientific instrument, saidKate Keahey, Argonne computer scientist, Computation Institute fellow, and Chameleon project PI. Were going to extend the capabilities that allow users to keep a record of their experiments in Chameleon and provide new services that allow them to build more repeatable experiments.
The new features build upon the projects original philosophies of flexibility and transparency, which provided users with a large-scale, ~600-node cloud infrastructure with bare metal reconfiguration privileges. This unique level of access allows researchers to go beyond limited development on existing commercial or scientific clouds, offering a customizable platform to create and test entirely new cloud computing architectures.
In its first phase, this powerful resource supported advanced work in computer science areas such as cybersecurity, OS design and power management. With Chameleon, scientists could realisticallysimulate cyberattacksupon cloud computing systems to improve their defenses, train students tosearch high-resolution telescope imagesfor undiscovered exoplanets, and develop machine learning algorithms that automatically determinethe most energy-efficient task assignment schemesfor large data centers.
Many of these projects benefited from Chameleon features that allow them to extract detailed, precise data about system performance and status during usage. To further support the conduct of reproducible science, the Chameleon team will make it even easier for scientists to gather and use this information.
Everything in the testbed is a recorded event, but right now the information about those events is in various different places, Keahey said. Were going to make it very easy for users to have a record of everything that was happening on the testbed resources that they used, and well also provide services to replay those experiments.
Additional phase two landmarks include new hardware, including additional racks at UChicago and TACC, infusion of highly-contested resources such as GPUs, and Corsa network switches. The new Corsa switches enable experimentation with software-defined networking (SDN) within a Chameleon site as well as extending individual SDN experiments across the wide-area to include resources from either Chameleon site or even from other compatible testbeds, such as NSF GENI.
New hardware will be complemented by new capabilities allowing users to define entirely new classes of experiments. For the second phase, new team members from RENCI with significant expertise developing such capabilities will join the existing Chameleon team based at UChicago, TACC, and Northwestern University.
On the software side, the Chameleon team will package CHI (CHameleon Infrastructure), the software operating Chameleon, based primarily on the open-sourceOpenStackproject to which the University of Chicago team made substantial contributions. Packaging the Chameleon operational model will allow others to create their own experimental clouds easily.
Whether somebody wants to provide a Chameleon resource or create their own experimental testbed, CHI will make it very easy for them Keahey said. It is based on a widely used open source system that is increasingly popular in scientific data centers and thus easy to adopt. Ultimately, we would like to make testbeds for Computer Science research cost-effective to operate.
The project will also look to expand their community through outreach events, including workshops, online tutorials, and Septembers user meeting. In addition to training scientists in the use of Chameleon and gathering feedback for future improvements, these events will also be an opportunity for defining the future of cloud computing science, Keahey said.
We would like to go beyond simply providing resources, and give the community the opportunity to focus on experimental methodology in computer science: how to improve it, how to control it, and how to make experimental computer science less about logistics and more about the science.
Source: Computation Institute & The University of Chicago
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Cloud Computing Testbed Chameleon Renewed for Second Phase – HPCwire
Utilizing cloud computing technologies can allow organizations to reduce their information technology spending, whilst harnessing networking innovations to seamlessly offer efficient, accountable, and effective governance.New Delhi: The Software Alliance today will hold a conference, BSA Cloud Computing Roundtable: Successes and Policy Challenges, to promote understanding of global best practices around public and private partnerships and cloud service deployment.
The roundtable will bring together technical experts and representatives from the industry, trade associations, civil society, and academia with an aim to align business, technical, and policy discussions on cloud adoption and encourage the development of Indias digital infrastructure.
The first session of the roundtable focuses on sharing examples of cloud use by governments around the world and India with an aim to understand the merits and learnings from those respective examples, while the second session covers challenges and concerns in terms of cloud related policies from a forward-looking perspective.
Utilizing cloud computing technologies can allow organizations to reduce their information technology spending, whilst harnessing networking innovations to seamlessly offer efficient, accountable, and effective governance.
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BSA is committed to contributing to initiatives that advance cloud computing in India, said Jared Ragland, Senior Director, Policy APAC.
We hope this event will encourage a constructive dialog around implementing a transparent and predictable policy environment which is essential for businesses, consumers, and the public sector to leverage the full benefits of cloud computing and partake in the growing digital economy.
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The Software Alliance Advances Discussion on India’s Cloud Computing Policy – ETAuto.com
Alibaba’s Post-Earnings Update: Cloud, Mobile Users, Brand Rights PART 5 OF 16
In Alibabas (BABA) fiscal 1Q18 earnings, you can see that its Cloud Computing business only supplied 5.0% of the companys total revenues. Despite the tiny contribution to the companys top line, its Cloud Computing revenues grew 96% year-over-year, making it one of Alibabas fastest-growing businesses.
Alibaba identified the top priority in its Cloud Computing business as market expansion. The company is adding more cloud capacity and rolling out new cloud products and services to support themarket share expansionthat it seeks.
According to estimates by Synergy Research Group, Alibaba is subdued by Amazon (AMZN), Microsoft (MSFT), Alphabets (GOOGL) Google, and IBM (IBM) in terms of worldwide cloud computing market share.The chart above shows the rankings of various cloud providers by market share.
In the cloud computing industry, Alibaba has thrown its hat in the ring for a multi-billion-dollar prize. According to Gartner, the worldwide public cloud services market could grow 18% to reach $246.8 billion in 2017 before expanding to $383.4 billion by 2020. The market was worth ~$209.2 billion in 2016.
Cloud computing has the potential to transform Alibabas financial profile if the company can succeed in this sector. Alibabas overall revenues in fiscal 2017 totaled $23 billion, up 56%. Cloud revenues for that year reached $968 million, up 121%, and represented about 4.2% of the companys total revenues.
The global cloud services market is expected to grow from 18% annually to $246.8 billion this year, according toGartner’s latest estimates. Wikibon expects enterprise cloud spending to grow at a compound annual growth run rate of 16% between 2016 and 2026.
Those figures make the cloud computing market a lucrative one for tech investors, but it’s tough to narrow down the best buys in the industry. Today, I’ll focus on three “no brainer” stocks in that market, which will benefit from the growth of the cloud computing market over the next few years.
Source: Getty Images.
Amazon (NASDAQ:AMZN) is the 800-pound gorilla of cloud computing, since its AWS (Amazon Web Services) platform is the biggest cloud infrastructure service in the world. AWS stores data and hosts content for companies, and its tools enable developers to create and run cloud-based apps. It added over 400 new tools to AWS in the last quarter alone.
During thatquarter, AWS’ revenue rose 42% annually to $4.1 billion and accounted for 11% of Amazon’s top line. That gives the segment a run rate of $14.5 billion over the past four quarters. Wikibon expects AWS to generate $43 billion in annual revenues by fiscal 2022 — which would account for 8.2% of all cloud spending worldwide.
AWS’ operating profit rose 28% to $916 million last quarter, compared to just $628 million in operating income for the entire company. Therefore, the growth of the higher-margin AWS unit easily offsets bottom line declines at its North American and International marketplace businesses — which are using low-margin and loss-leading strategies to lock in customers. That virtuous cycle enables Amazon to continue dominating both the cloud computing and e-commerce markets.
Microsoft (NASDAQ:MSFT) rules the software-as-a-service market with consumer-facing products like Office 365, Dynamics CRM (customer relationship management), and Skype. Its cloud platform, Azure, is the second largest cloud infrastructure platform in the world after AWS. Microsoft reported that all these services generated a “commercial cloud” annualized run rate of$18.9 billion last quarter.
That puts Microsoft on track to exceed CEO Satya Nadella’s goal of hitting $20 billion in annual cloud revenues by the end of fiscal 2018. That figure would represent nearly a fifth of its projected revenue for the year, and reduce its overall dependence on traditional Windows licenses.
Microsoft missed the shift toward mobile operating systems, and itrecently killed off Windows Phone. But it’s clawing its way back in the mobile market with mobile versions of its flagship apps (Office, Outlook, OneDrive, and OneNote) for iOS and Android. By tethering its cloud-based ecosystem to those two operating systems, Microsoft can remain relevant in the “mobile-first, cloud-first” market which Nadella highlighted in hisfirst email to Microsoft employees.
Salesforce (NYSE:CRM) is thelargest provider of cloud-based CRM services in the world. These services help companies retain and organize relationships with customers. Salesforce controlled 18.1% of that market in 2016, according to IDC, while its closest rivals — Oracle and SAP– respectively controlled just 9.4% and 7.2%.
Salesforce is still firing on all cylinders. Its revenue rose 26% to $8.39 billion last year, and analysts anticipate 24% growth this year. Its non-GAAP earnings also jumped 35% last year, and Wall Street expects 30% growth this year. However, the bears often note that Salesforce isn’t consistently profitable on a GAAP basis. They also point out that Microsoft’s Dynamics is gaining ground in the CRM market with the support of Outlook, Skype, Azure, LinkedIn, and other applications.
Nonetheless, Salesforce remains the go-to vendor for CRM solutions, and new features like Einstein — which uses AI to crunch customer data into business predictions — should further widen its moat against the competition.
Amazon, Microsoft, and Salesforce are all smart ways to invest in the growing cloud computing market, but investors shouldn’t ignore the risks. Amazon and Salesforce’s valuations are high relative to their peers, so a market downturn could sink both stocks. Microsoft’s cloud growth is impressive, but those investments are also weighing down its bottom line growth.Investors should weigh these risks against the potential rewards to see if these cloud-oriented stocks are right for their portfolios.
Teresa Kersten is an employee of LinkedIn and is a member of The Motley Fool’s board of directors. LinkedIn is owned by Microsoft. Leo Sun owns shares of Amazon. The Motley Fool owns shares of and recommends Amazon and Gartner. The Motley Fool owns shares of Oracle. The Motley Fool recommends Salesforce.com. The Motley Fool has a disclosure policy.
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3 No-Brainer Stocks to Buy in Cloud Computing – Motley Fool
With cloud computing popularity on the ascent, Ben Chen has to think big. Chen is president of business development at a U.S. branch of China Unicom, a state-owned telecom and the second-largest wireless carrier in the worlds most populous country. I spoke to him at the Gartner Catalyst conference in San Diego earlier this month.
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Based in San Jose, Calif., Chens division helps U.S. companies moving to China get set up with telecommunications, connecting their facilities abroad with stateside headquarters. And it does the same for Chinese companies building outposts in the U.S.
With the steep and rapid increase in the number of cloud adopters, especially in the U.S., Chen wonders, how relevant will a traditional telecom remain to customers?
Maybe they will rely on more cloud services, because they have all their content on the cloud, and the cloud can be synchronized, so maybe they wont need real connectivity between China and their headquarters anymore, Chen said. So we have to think about what role we are going to play.
In China, China Unicom offers mobile and traditional voice and data services very similar to AT&T, Chen said. China Unicom, though, offers public cloud services, unlike AT&T and other U.S. telecoms, which have left the cloud market because they couldnt compete with the likes of Amazon and Microsoft.
But China Unicom also cant compete with the research-and-development power of providers like Alibaba Cloud, which are pouring money into innovative new technology and features, Chen said. Instead, it needs to find another way to take advantage of the current mass migration to the cloud.
China Unicoms big differentiator is its vast mobile infrastructure, supporting approximately 300 million mobile customers, Chen said. Many users of mobile devices in China have no landline telephones just handsets packed with mobile apps and reliant on connections to the internet and public cloud providers. Such a network can be leveraged in the face of accelerating cloud computing popularity, he said.
That can play a more important role, working with the cloud providers and the users, Chen said. This is our value now rather than the traditional phone service and the other services. We should leverage our value to create more value thorough mobile.
The internet of things (IoT) presents another market for growth, Chen said. China Unicom is working with technology vendors on smart homes, myriad smart devices, machines and vehicles; for example, it partnered with Cisco IoT division Jasper on a service to help automakers build connected cars.
Big data is a third area, Chen said. By collecting information on how its hundreds of millions of mobile customers use their devices, China Unicom can determine where service is concentrated and can put in a new cell tower, for example.
Of course, cloud adoption, especially in China, which lags a few years behind the U.S. in taking on new technology, Chen said, isnt 100%. So carriers like China Unicom that do traditional connecting with dedicated circuits arent feeling the heat of rising cloud computing popularity.
Maybe we have a few years. [Companies are] in migration not everyone has moved to cloud yet, Chen said. But we have to be ready.
To learn about what IT professionals at Gartner Catalyst said about cloud strategies at their organizations, read this SearchCIO report.
The attractions are obvious: in todays data-saturated world, cloud computing allows large institutions to rapidly expand their IT capacity, boost efficiency and slash infrastructure costs. The downside? New security threats, amplified by stricter rules on protecting customer data, and a dependence on third-party providers for potentially vitalservices.
It is with an eye on the downside that banks have been slow in adopting cloud computing, which involves on-demand access to a shared pool of computing resources, such as servers andapplications.
Earlier this year, the European Banking Authority (EBA) set out to change this in Europe, publishing draft recommendations for firms to enable them to reap the benefits of cloud computing, while ensuring that risks are appropriately identified and managed. The second objective is to harmonise, across the European Union, supervisors expectations of banks using the cloud. The EBA tells Risk.net it plans to publish final guidance in the fourth quarter of thisyear.
Cloud enthusiasts say such measures as well as ongoing work by cloud providers to meet banks unique needs are all steps in the rightdirection.
Luke Scanlon, Pinsent Masons
There is light at the end of the tunnel, and this [EBA] consultation will help a lot, says Luke Scanlon, who advises clients at law firm Pinsent Masons on newtechnologies.
The proverbial tunnel islong.
Take cyber security. On the one hand, cloud providers such as the leader of the pack, Amazon Web Services are likely to have security processes and technology that are at least as advanced as those of their banking clients, thanks to their technical expertise and economies of scale. On the other hand, providers can pass on a banks data or system management to yet another contractor, increasing security risks present in traditionaloutsourcing.
The EUs General Data Protection Regulation, coming into force next year, will up the ante on data security. The new rules require, among other things, that bank customers are able to request that their personal data held is deleted. One practical outcome, say lawyers, is that banks will have to clarify to cloud providers exactly how they should handle and categorise data to ensure it can be easily isolated and deleted ifrequired.
Of more concern are potentially punitive fines up to 4% of annual global turnover for firms found guilty of data breaches caused by neglect. The size of the potential fines is attracting a lot of attention from both clients and cloud service providers, says Peter George, partner at law firm Baker McKenzie, and responsible for the firms annual cloud computing survey. There will be contractual disagreements over where liabilitylies.
One way to spot and mitigate such outsourcing risks is to undertake regular audits of third-party providers, as banks in most EU countries are already required to do. The EBAs consultation now closed sets out similar guidance with a specific focus on cloud suppliers, and Scanlon at Pinsent Masons welcomes what he sees as a flexible approach to a difficulttask.
Cloud computing involves distributing data across any number of physical locations. Scanlon says that, given the largest cloud providers host services for thousands of banks, regular physical audits would be inefficient, costly and would create risks for other banking clients, related to the security of theirdata.
Rahul Prabhakar, in charge of regulatory compliance for financial services in Europe, Middle East and Africa at Amazon Web Services, puts it another way: A constant stream of people walking through our premises presents securityrisks.
Peter George, Baker McKenzie
The EBA recognises these challenges in its document and endorses alternative options where an outsourcing institution does not employ its own audit resources. These options are pooled audits, performed jointly with other banking clients, and third-party certifications or audits, provided they conform to widely recognised standards and meet the needs of the outsourcingbank.
This is a really positive step, Scanlonsays.
Prabhakar also welcomes the EBAs stance on audits but says the order of preference should be reversed. The EBA and other regulators should consider clearly stating that, one, logical [de-facto] access is more appropriate than physical access and, two, that third-party reports and certifications or pooled audits are more preferable than individualaudits.
Some regulators have been more prescriptive. Canadas Office of the Superintendent of Financial Institutions insists on being able to audit banks across their functions, says Robert Paolino, the former chief risk officer for Canada at Japanese bank MUFG. This effectively requires that data is stored within the country especially data considered as sensitive under Canadas PrivacyAct.
Oversight of cloud providers is even harder if they employ subcontractors. This may keep costs low but banking clients may not have a direct relationship with the provider of significant parts of the cloud service as a result. Its been a struggle to square that circle, says Jonathan Kirsop, partner at law firm Stephenson Harwood in London.
One solution has been for cloud providers to give notice that they are appointing a subcontractor and give clients the right to terminate that particular service. This does provide theoretical control over the supply chain, saysKirsop.
The EBAs draft advice on what it calls chain outsourcing says banks dont need to pre-approve every subcontractor, and providers can simply give clients notice of any subcontractor changes rather than require each change to be approved by all clients.
The EBA also proposes that the outsourcing institution should carefully delineate which activities can be subcontracted, and that any subcontractors fully comply with the obligations placed on the original cloud provider. The outsourcing agreement should also require the cloud provider to notify any changes to subcontracting arrangements in time for its clients to carry out a riskassessment.
A strategy for severing the relationship with a provider is another hurdle banks have to clear before cloud computing can properly take off in theindustry.
How do you extricate yourself from a cloud computing contract when youre dependent on the provider? asks George at BakerMcKenzie.
Guidance on outsourcing to the cloud released by the UKs Financial Conduct Authority (FCA) last year suggests that banks should ensure exit plans are documented, understood by appropriate staff and fully tested. It says banks should monitor concentration risk and consider how they would respond if a service provider were tofail.
Peter George, BakerMcKenzie
However, the details remain largely untested. No bank has ever exited from a significant public cloud technology arrangement, the BBA, a UK banking trade body, and Pinsent Masons wrote in a January discussion paper. The report focuses on the cloud model that is available to the general public, with Amazon Web Services the best-knownexample.
As a result, frictions arise as to the contractual terms between banks and cloud service providers and other third parties leveraging public cloud. There is added pressure as parties do not have the benefit of experience to call upon, the paper continues. The BBA is therefore calling on the FCA to work with the banking industry to produce a due diligence checklist for banks migrating from cloudcontracts.
The draft EBA guidance also acknowledges concentration risk inherent in cloud computing, not only from the point of view of individual institution but also at industry level where large suppliers of cloud services can become a single point of failure when many institutions rely onthem.
Among other recommendations, the EBA advises banks to develop key risk indicators to spot deterioration in the cloud service to unacceptable levels, and to prepare alternative solutions and plans for transitioning to them from the out-of-favour cloudprovider.
Not only will a smooth transition to another provider ensure the banks services are unaffected, but it will also spare the bank reputational damage from a failure by a thirdparty.
Neither the EBA nor the FCA guidance contains tips on negotiating contracts with cloud providers, which comes with its own unique challenges.
In traditional bespoke outsourcing, financial services clients tend to have a lot of bargaining power and are able to use their own master services agreements, says Kirsop at Stephenson Harwood. With a cloud service, its a one-to-many solution. Suppliers cant have lots of different terms or policies for different clients. Clients have to get comfortable with standard terms, with limited ability to negotiate around them. Thats the fundamentaldifference.
Finally, as with most banking activities in the post-financial crisis era, regulation can be a key determinant of the spread of innovativepractices.
The EBA wrote in its draft guidance that uncertainty among banks about how supervisors expect them to handle cloud computing poses a barrier to its adoption.
In Indonesia, banks are blocked outright from migrating to the cloud due to their regulators requirement that all critical services be hosted within the countrys borders. For banks, who could they find in Indonesia that could host those services? The big [cloud] providers dont want to set up data centres in Indonesia; its not viable for them right now, says Manish Chawda, partner at Singapore consulting firm Pragma, which specialises in cyber and technologyrisks.
Differences in rules between jurisdictions present another headache for banks.
Jonathan Scott-Lee, Standard Chartered
Standard Chartered, for example, has operations in 68 emerging markets. As the bank is ramping up its use of cloud computing, the answer is not as might be assumed to take a highest common denominator approach, says Jonathan Scott-Lee, the Singapore-based global head of compliance, data, technology, operations and outsourcing at StandardChartered.
For a start, a gold-plated cloud strategy would eliminate most if not all of the cost efficiencies of the cloud. Second, even the highest specifications can fall foul of some regulatory environments: China, for example, mandates specific regulatory standards on the commercial use ofencryption.
I advise our digital teams to develop technology as globally as possible but that is flexible enough to allow software to be deployed in local environments, Scott-Lee says. For example, a cloud-based system could be linked to a locally housed database for client information for jurisdictions where the regulator requires data on clients to be heldlocally.
However, the trend is now towards ironing out regulatory differences around cloud computing, as illustrated by the EBAinitiative.
Jeroen Prins, a London-based financial services technology risk expert at PwC, sums up: For key jurisdictions we believe that similar principles apply and it is now feasible for the larger banks to adopt cloud servicesglobally.
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Heads in the cloud: banks inch closer to cloud take-up – Risk.net (subscription)