As a rule, financial organizations host most of their infrastructure in the corporate data center. More than two-thirds of infrastructure spending is provided for work equipment and on-site maintenance; 21% is spent on hosted and shared offerings – that is, third-party data centers where facilities are shared with other customers, but the actual IT resources are provided individually to each customer. The remaining 10% will be spent on public cloud services. However, there are huge differences in the distribution of expenditure. For example, several companies have their entire IT on-site, while others work exclusively with a public cloud platform – such as fintech company Auka, which runs 100% on Google’s cloud platform.

Within the next three years, a significant change in the average expenditure distribution is expected. Expenditure on
proprietary IT will be proportionally much lower, while spending on cloud and hosting will increase significantly.
Spend Distribution Between Different IT Provisioning Models in Finance:
The shift in spending distribution is not just because most businesses are gradually outsourcing more applications and workloads, but behind them are more profound changes in the infrastructure approach.

Organizations do not simply outsource the IT environment to external data centers or to the cloud, but adopt a blended strategy that takes advantage of each delivery model to deliver the optimal mix of internal IT, hosting, and cloud in a hybrid IT environment.

Financial companies in the trend

Financial companies are changing the way they use and combine the different infrastructure options. In the next three years, 60% will redistribute their spending between internal IT, hosting, and public cloud, moving away from their own facilities to hosting and the cloud:
• One-third of organizations will increase relative spending on hosted infrastructure, and one-third will increase cloud spending.
• One out of two organizations will reduce relative spending on in-house infrastructure, while 1 in 10 companies will increase internal capacity and increase relative spending on their own facilities.
The two most important trends are the shift towards the cloud and an increased use of several models simultaneously:
• The proportion of organizations using the cloud will increase from 43% to 53%.
• The proportion of those who rely solely on local infrastructure will shrink from 34% to 29%, while the proportion of users from all three models will increase from 39% to 43%.
• The proportion using hosted services will remain at about two-thirds, but the proportion that combines hosting with the cloud will increase from 43% to 49%.
Efficiency and flexibility increase Qoud acceptance despite security concerns
The trend towards cloud and hosting is driven by the demand for more operational efficiency and flexibility. In most cases, both factors go hand in hand: Organizations are changing their provisioning and sourcing mix to bolster business through greater flexibility while remaining cost-effective.

When choosing between models for individual applications and workloads, organizations must balance the cost and complexity of migration with security and availability requirements as well as flexibility and scalability.
Security, privacy and reliability inhibit cloud adoption

The key concerns about the cloud are security, privacy and reliability. However, these concerns are not limited to the use of external multi-tenant infrastructures, but also arise from new work processes and data flows enabled by the cloud services.
For example, the cloud often serves as a means to provide mobile access to a system, and it is the mobile access (including the transport and storage of data in mobile networks and devices) that represents the actual security challenge.

Customer proximity and security promote the willingness to spend on colocation services

To mitigate risks, companies – especially in the financial sector – refrain from using standard Internet connections to cloud services. 95% of financial organizations use a direct cloud connection provided by either a network or data center operator or cloud providers.
Another way to mitigate risk while taking better advantage of the cloud is to use third-party colocation data centers. These datacenters typically provide direct cloud connections to most cloud-preferred businesses. By leveraging multiple data center sites and cloud services, applications are brought closer to customers, ensuring high performance, avoiding latency issues at the edge of the network, and improving the customer experience. Third-party data centers are also used to run workloads and applications that can not be migrated to the public cloud for legacy or compliance reasons in a hybrid environment.

Services as a pioneer for the digital transformation

The reason why banks and insurance companies are increasingly using cloud and data center services is the call to digital transformation that can be heard everywhere, with the aim of increasing the efficiency of business and IT processes, and thus helping customers in one to stay relevant to ever faster changing worlds.

Weighting of digital enterprise transformation by financial organizations

The majority of companies understand the need for digitization and most are also realizing the urgency to become a digital enterprise.

Nearly all decision-makers think it’s important to become a digital company, while two-thirds see it as a critical or very important process that needs to be done within two years. While digital transformation is all about business transformation – such as developing new business models and services or changing business processes – the transformation of the IT infrastructure is the key to successful digital transformation. It is of utmost importance that the IT infrastructure is flexible, high performance is guaranteed and can be integrated into existing IT structures, which is only feasible with a hybrid cloud environment.