Financial firms must consider the inherent risks of single-cloud concentration when adopting, implementing, and maintaining a cloud solution.
The financial services industry continues to gain a lot from cloud technology. Major benefits include improved business procedures, increased productivity, and simplified software development. These advantages have even influenced the development of many cloud-native applications and solutions, which aim to maintain stable business continuity while streamlining cybersecurity’s complexity.
The strategy has changed from a “cloud-first” approach to a “value-driven” one, while the focus on cloud transformation remains unchanged. Many business leaders now view the cloud as the primary KPI and have started to examine cloud strategy from a wider perspective measuring the business value, risks, and impact rather than just focusing on the “number of applications” migrated.
Diversification is crucial, though, as it is with all cutting-edge technologies, and fintech firms must think carefully about the inherent risks of single-cloud concentration when adopting, implementing, and maintaining a cloud solution.
Fintech providers can establish a multi-cloud strategy that reduces the risk of cloud concentration to implement cloud solutions successfully.
The Risk from Cloud Concentration
The most important step in a fintech company managing cloud concentration risk is thoroughly understanding what this type of risk entails. Cloud concentration risks arise when a company only uses one cloud service or service provider. While working with a single provider can present challenges, the risk is higher when a company’s cloud capabilities stay within a single service.
When an enterprise depends too much on one service or provider, operations could be affected if that provider encounters downtime or other technical issues. The risk increases if a company operates in several domestic or foreign regions because it may not provide support within each regulatory constraint.
Along with the risk of cloud concentration, this can also lead to the issue of vendor lock-in, in which a company becomes overly reliant on one cloud vendor and cannot switch vendors or introduce new services without incurring significant costs.
This process makes it essential to give the cloud strategy careful thought and ensure the organization has a backup plan to maintain the business if its primary cloud service or provider fails.
How does cloud concentration affect a multi-cloud strategy?
Utilizing multiple cloud solutions is obvious if over-reliance on a single cloud service or provider is the primary issue causing cloud concentration risk. Multi-cloud is a method of using the cloud that distributes the cloud requirements across several different solutions. These remedies don’t all have to be in effect at once.
Instead, organizations can think of some services or providers as fallbacks if the primary provider falters. A multi-cloud strategy helps reduce and mitigate the risk of concentrating a company’s operations within a single cloud environment, much like a well-diversified portfolio.
Additionally, IT teams can work with one or multiple providers depending on the business risk appetite and the extent of the cloud needs. Utilizing various cloud services from a single provider may be more cost effective for some businesses and make maintaining a well-synchronized cloud environment easier.
Working with multiple providers, however, will help teams develop a more diverse cloud strategy that will increase the digital infrastructure’s flexibility and resilience, which is the best practice for ensuring consistent business continuity.
How to Implement a Multi-Cloud Strategy as A Financial Services Organization
One of the major benefits of a multi-cloud strategy is the flexibility it gives the business, enabling firms to select the best deployment strategy for the unique requirements. Using a different cloud environment for each business application team move to the cloud is the most typical use case for a multi-cloud strategy.
There are nonetheless other worthwhile approaches to investigate. For instance, a company could cooperate with one or more cloud service providers to build a parallel cloud environment. A company would effectively have two backgrounds to switch to in case of an outage. This is because these environments share the same data and resources but are housed on different systems.
Making identical yet separate environments for each region teams work in is another application for a parallel cloud environment. By employing a similar multi-cloud strategy, CFOs can ensure that the other regions they operate in continue to have access to a functional cloud environment, even if one region’s cloud server goes down.
As a result, rather than trying to complete the same task for each area organizations work in, the team can concentrate solely on getting a single region’s cloud environment back up and running.
Additionally, each of these distinct cloud environments can be customized for the regions they serve, making it simpler to comply with the wide range of compliance requirements found in various jurisdictions worldwide.
Why a multi-cloud strategy is essential for increasing business resilience
Traditional digital infrastructures rely on physical hardware to support a business’s digital services. As a result, for businesses to maintain geographic redundancy, they had to maintain multiple distinct computer networks and backup data centers.
This redundancy ensured that a company’s digital assets were safe from natural disasters or other emergencies where one data center might be seriously damaged or destroyed. As the infrastructure is entirely digital and based in a virtual environment, cloud computing offers an immediate solution to this risk.
However, as already discussed, the geographic risk is swapped out for the cloud concentration risk.
With a multi-cloud strategy, a business has the best chance of achieving the same redundancy as it would with physical infrastructure, all while taking advantage of the many advantages cloud computing offers. With the help of multiple clouds, a company can easily deal with downtime and cloud outages while still giving customers top-notch services and products.
Important Lessons for managing cloud concentration risk
The more cloud services available, the better for developing a resilient and adaptable cloud strategy. Of course, finding and implementing the best multi-cloud solutions is the initial challenge. There is a two-pronged strategy to reduce the risk of cloud concentration:
First, FS companies must develop a balanced, diversified strategy for implementing a multi-cloud solution. To prevent both cloud concentration and vendor lock-in, businesses should put equal emphasis on implementation and ensuring clarity on the use of multiple clouds organization-wide.
To address the need for digital redundancy, a company must modify its risk mitigation strategy, which is the second important aspect for reducing cloud concentration risk. Cloud solutions have much less chance of physical disruption. Instead, FS companies must consider how those risks manifest in the digital sphere.
Establishing a resilient cloud-based infrastructure strengthened by the redundancy of a multi-cloud approach can be made much easier by working with an experienced cloud solution vendor with a successful implementation of multi-cloud solutions.
When selecting an ideal technology partner for the company’s unique requirements, reducing the risk of cloud concentration can be significantly lower. The chosen vendor can ensure that the cloud-based solutions are fully optimized and that the business can more easily connect with a wider range of cloud vendors.
The final piece of the multi-cloud puzzle for maximizing value, effectiveness, and security is finding the ideal technology partner.