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Data Centres for Banking

Banking: Managing the industry’s new emphasis on data

Date: 6th October 2016
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Steve Whatling, MD at Keysource, looks at the data challenges facing the financial sector and what lessons can be learnt from economic and political instability…

The financial sector has gone through phenomenal change over the past decade. If we go back 10 years to the mid 2000s, the banking sector was entirely different. It was all about growth, with some financial institutions putting together 25-year strategy plans confidently based on year-on-year growth.

The retail banking platforms were still relatively traditional with low adoption of electronic banking as many customers still visited the branch network to carry out transactions. The CIO/CTO was often not part of the senior team and the data centre was the responsibility of the real estate or property department.

Whilst banks have always been concerned with privacy and security issues at this time there was low confidence in the security of cloud provision so they retained total control of their operations. There was no real outsourcing model and, as a result, with the exception of one or two they decided to build and run their own data centres – and of course they could afford to! So they built huge facilities in anticipation of this predicted growth and invested heavily.

Ten years on things are very different. The industry’s promised growth predictions have proven to be incredibly flawed and recent years have seen the global system in crisis, with the UK government stepping in and rescuing some institutions.

At the same time we have seen a phenomenal uptake of electronic, online and mobile banking, which has created a greater emphasis on the importance of technology and data. It has also been used as an enabler to reduce headcount, creating much-needed savings.

As a result the CIO/CTO is now right at the heart of everything with the IT strategy fundamental to the business. The financial sector CIO/CTO has had to embrace outsourcing and consider cloud provision, but is now often responsible for the property and Facilities Management associated with IT too.

Looking forward it is unlikely that we will see any new data centres built in the UK for the financial sector for many years. The sector is quite simply overprovisioned after building huge, highly resilient Tier IV and secure facilities in the early to mid 2000s that even the increase in electronic banking is failing to fill. There has also been considerable consolidation in the sector which has further exacerbated the issue.

There are also some legacy facilities which are outdated and run inefficiently as unfortunately there hasn’t been enough investment available to upgrade in recent years.

Meeting todays IT demand

What we are seeing today is institutions looking at their data centre facilities and trying to optimise the asset wherever possible by seeing how they can be more suitable for their current requirements and potentially commercially viable. This might involve selling, upgrading or subletting.

There are a number of additional challenges facing the sector. A key area is how to keep aligning the business to its fast-moving and ever-changing environment. There is no doubt that electronic banking will continue to grow and more IT investment will be required to meet the needs of the influential Millennial Generation.

Whilst we will continue to see significant growth within the electronic banking area, the real opportunities are in the emerging countries in Asia and Africa. Their systems are often years behind and the industry in some countries is really in its infancy. They will benefit greatly from the lessons learned by the West and our experience and expertise.

This article originally appeared on The Stack on the 6th October 2016. Continue reading it here

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