Cloud technology has received a fair amount of negative press in recent weeks, sparking further debate about the technology. However, conversation about the cloud is often convoluted and confusing. Treasury Today explains why corporates might look to use the cloud, what choices they have, and the advantages and disadvantages of each.
The mainstream media has been awash with reports in recent weeks about cloud technology, the most high profile of these being the hacking of numerous celebrities’ iCloud accounts. This intrusion into private lives – and private data – has reignited the debate surrounding the ‘cloud’ both for individuals and businesses alike.
In the corporate sphere, cloud technology has been a topic of conversation for some time and more and more companies are looking to implement cloud solutions going forward. The technology has also begun to gain traction among corporate treasury functions. In the Treasury Today 2013 European Corporate Treasury Benchmarking Study, 22% of respondents said they used cloud technology with a further 17% indicated planned usage in 12 to 18 months. So while the numbers are not yet indicating mass take-up it does show that cloud technology is becoming increasingly important.
Those treasurers who have already moved to the cloud are no doubt well-versed in the nuances of the technology. For those that aren’t, the topic can be a technical quagmire. So what is it all about?
Defining the cloud
Taking a step back, it is firstly important to define the ‘cloud’. Not least since the meaning is somewhat open to interpretation – and the term is often used to describe any technology which is held off-premises. Paul Bramwell, Senior Vice President – Treasury Solutions at SunGard, provides a concise definition saying that “using the cloud means that a corporation has outsourced their data and systems to a third party who provides access to the server containing this – either through the internet or a singular dedicated channel.”
By embracing cloud technology, there are a number of broad benefits which corporates are able to attain. “In using such a solution, organisations are able to reduce the costs of owning the IT infrastructure on their own premises,” says Andy Leuthe, Senior Director Product Marketing, Kyriba. “It also allows companies to do something different from a business perspective, such as seamlessly connecting to other offices, outside partners, banks and suppliers.”
Furthermore, from a treasury point of view, moving to the cloud can offer benefits including leveraging the cloud vendor’s expertise and reducing the reliance on the in-house IT team.
Broadly speaking, corporates looking to use cloud technology have three choices in regarding to how the solution will be delivered. The first is a private cloud – which is considered to be the most secure delivery method. A private cloud in essence becomes a part of a corporate’s infrastructure and can only be accessed and leveraged by the company whose data it contains. As such, this solution offers the highest levels of flexibility and control allowing changes to be made freely and securely. Earlier this year, Australian airline Qantas moved their treasury system to private cloud hosting. This move has allowed Qantas’ treasury team to reduce the operational risk and resource-drain of hosting their services internally, while maintaining the desired level of control and flexibility over the solution. A private cloud also gives secure, real-time access to data, something which is of growing importance for a number of treasury departments.
A private cloud can also offer corporates the ‘easiest’ route to moving into the cloud. “I have worked with a number of clients who have developed legacy systems over many years and that have a complex infrastructure portfolio,” says Graeme Swan, Partner – Technology and Security Risk Services, EY. “It is a big shift to move this into the cloud environment. Unpicking thousands of treasury feeds and placing them into a public cloud could take years. But a private cloud can be built to fit, making the process quite a bit easier.”
The disadvantage of the private cloud is its cost, and this is also the key benefit of a public cloud solution. “By its nature, a public cloud offers economies of scale, but because of this you have to sacrifice the flexibility and live with the fact that any changes made will affect other users,” says SunGard’s Bramwell.
Sitting in-between these two solutions is the hybrid cloud, something which was often disregarded at the inception of cloud computing. “A hybrid cloud is where a corporate would have an annexed and customised solution but there may be certain elements of this which are shared: internet connectivity and hardware rack space for example,” says Bramwell. This gives many of the benefits offered by the private cloud, but also leverages the economies of scale offered by the public cloud.
This solution is customisable and offers corporations the ability to select which areas it wants to be hosted privately and which areas can be hosted publicly. A corporate can therefore control costs whilst also ensuring that the security, flexibility and control are optimal. “Hybrid clouds are a big growth area due to this flexibility. Many of our clients, even the largest ones, are looking to use this solution,” adds Bramwell.
On the horizon
As more and more corporates begin using cloud technology, what further developments can we expect? “The revolution is not going to be in the technology,” says EY’s Swan, “as it is already ahead of what corporates are comfortable doing. It needs to come from the CFO and the treasury’s appetite to leverage cloud technology to it full ability – it’s a human revolution that is needed.”
“Analytics will be vital going forward,” says Kyriba’s Leuthe. “Corporates, thanks to the cloud, are collecting greater volumes of data than ever before. The challenge will be to analyse this data and apply it to the business in an optimal way.” Similarly to Sawn, Leuthe believes that people need to catch up with the technology before it can progress further. “This is just the tip of the iceberg and I am sure that once humans catch up there will be more exciting develops.”
In the meantime, the focus of cloud providers is to ensure that their product is as accessible and useable for corporates as possible – and that the software being developed across the industry is optimised for the cloud. Also, as recent events have demonstrated, security is an ongoing bugbear for cloud providers as they seek to fortify the delivery method from ever sophisticated attacks. “Cloud providers are spending a lot of money on audits, certifications and new technology – all of which seek to offer higher levels of comfort and confidence to cloud users and future users,” says Bramwell. “While these are incremental, they are vital for the growth of the service going forward.”
Checklist: choosing the right cloud solution
What type of availability/isolation can the user expect within the cloud pre- and post-migration?
Where will the business data be located – and how easily can it be accessed?
How is the corporate‘s information protected from user abuse?
How is the security of this data managed – and by whom?
In what way, and to what extent, are activities within the cloud monitored and audited?
How will the cloud provider ensure that no one has tampered with its data?
How is the entire cloud platform protected from hacking threats?
What are the provider‘s disaster recovery capabilities?
What type of certification or assurances can the cloud provider show?