Regulatory Environment Hinders Cloud Adoption

At Monday's Waters USA event, many of the industry's top CTOs and CIOs couldn't avoid the topic of the cloud. It seems, however, that regulations have thrown up roadblocks on the path to cloud adoption. By Anthony Malakian

"There's so much hype around cloud. Every vendor that comes into our office just says, ‘Cloud!' If they sell you a flashlight, it's a cloud flashlight," says Christopher Perretta, the CIO of State Street, who gave the keynote address at the Waters USA conference in New York this week.

UBS group CTO Andy Brown says he views private clouds as a "big opportunity" because of the cost-cutting efficiencies they provide and the lack of space that they take up. Hybrid approaches to cloud computing are also popular in the industry right now, he says. And the vendor community is better utilizing private and public clouds.

"If you look at the vendors in the space, what you're starting to see is that you can do both: You can get the best of cloud economics inside your firewall and outside your firewall and keep all of your data behind your firewall," Brown says. "The industry already has a massive set of capabilities that they've built in the public cloud that can be easily leveraged to private clouds. It's not just about computing. In fact, computing is probably the least interesting of all the things you can do. Data analytics is interesting, apps are very interesting, and business-processing services is even more interesting. So when you think about sourcing, the idea that you can source that out as a cloud offering is equally attractive."

But hindering the maximization of cloud’s capabilities are the regulators, says Peter Ahrens, CTO of JPMorgan Chase. While the technical capabilities have improved and the processes are smoother, Ahrens says the various regulatory bodies around the globe have created an environment that is not always conducive to tapping into the cloud.

"We're at an interesting point right now where the technical capabilities that we have—whether it's virtualizing production or building internal clouds—are not completely aligned with some of what the regulators expect. ... We've got dozens of regulators, all with slightly different views with respect to what we're permitted to do and what we're not permitted to do," Ahrens says.

Yet, Ahrens says he has faith that there will be more standardization on the regulatory front that will change this current environment.

"Ten years from now, you've got to believe that everything is going to be done in the cloud, or at least the majority of workloads will be managed in ways that are different from the ways they were managed 10 years ago," he says.

Scott Condron, CTO of BlackRock, meanwhile, says there are certain pieces of information that will—for the foreseeable future—remain off the cloud, such as personally identifiable information (PII).

"State Street won’t put all of BlackRock's separate accounts onto the cloud," Condron says. "Nobody's taking their PII and sticking it up in platform technology anytime soon. To the extent that all of us are talking about private clouds or grids—whatever you name you want to give it—I think that some of those technologies and some of the provisioning techniques are absolutely valuable. But the idea that this highly regulated, secure, PII-laden, and even in some sense proprietary-laden, industry is going to drop everything on a cloud ... it's just not going to happen."

The Bottom Line
• Cloud is reality. Now the industry is looking at which new areas of the capital markets it will seep into.
• The hybrid model—a blend of public and private cloud—is emerging as the popular choice.
• Confidential client information is still far from being placed anywhere near a public cloud.