More small- to mid-size banks embrace cloud computing

Lately, there has been considerable buzz around cloud computing. In August, IT research firm Gartner, placed it at the top of their emerging technology hype-cycle, along with the claim that "the levels of hype around cloud computing in the IT industry are deafening, with every vendor expounding its cloud strategy and variations." As cloud services become more and more affordable and efficient, it's likely that the trend toward the cloud will only accelerate. 

Yet the hype seems to have been lost on the financial services industry. According to an article in Computer Weekly, a survey conducted by The Financial Services Club, a financial services think-tank, found that 37.9 percent of firms in the retail banking sector said they are not even considering cloud computing, along with 24 percent in the investment sector. The reasons for this are somewhat varied: Regulation and compliance, security, and even a widespread misunderstanding of what the term "cloud computing" actually entails. A Wall Street & Technology survey found that 12 percent of capital market executives believed the term is basically just a marketing gimmick.

Smaller firms, however, have been more willing to take advantage of the technology, according to Vineet Jain, CEO of cloud-storage server Egnyte. The trend toward adoption has been "particularly pronounced in smaller companies," he said, due to the technology's cost-effectiveness and ready accessibility.

The barriers toward both large and small companies adopting the technology have been "more of a psychological issue than a technical issue," according to Jain. "Beefing up security has been the biggest area," he said, adding that security tends to be the greatest deterrent for companies considering third-party servers, even among SMBs. Troy Henley, IT director at Insight Bank, a community bank in Columbus, Ohio, said he was only ready to sign on when he felt comfortable with the level of security the bank's cloud computing vendor could provide.

Though the cloud has been somewhat demonized by the possibility of compliance-related conflict, Henley cited Insight's need to maintain lines of communication with its board as one of the reasons for switching to a cloud server. The bank had originally used a custom-built application for the myriad of exchanges with board members inside and outside the community, but investors demanded an overhaul after the server ran into problems with some basic tasks. Rather than start over, Henley decided to pursue a third-party provider.

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