Cloud computing is changing the game for both large and small businesses. For many, cloud computing has received a lot of buzz because of its ability to decrease the costs associated with administering an on-site system, meaning less investment in information technology and technical support. 

Spokane continues to diversify, and the tech industry is growing more prominent on this side of the state. But is the cloud too good to be true for financial institutions?

As with any complicated question, it depends—both on what systems are under consideration and what type of data will be processed, stored, or transmitted by the cloud service provider. 

Given all the banking regulations, data security is paramount. Banks must adhere to regulations in the Federal Financial Institutions Examination Council’s Outsourcing Technology Services Booklet, federal and industry protection regulations, and payment card data requirements under the Gramm-Leach-Bliley Act, to name a few. 

And yet, cloud computing could still be a solid choice for financial institutions seeking computing power and the ability to scale quickly as business grows while working with limited IT budgets. Simply put, cloud computing will play a key role in being able to process huge volumes of data. 

We are beginning to see this here in Washington state. Shoreline Business Solutions, one of the largest independent providers of ATM, debit, and credit cards for banks and credit unions nationwide, announced a cloud-based instant issuance platform to meet financial institutions’ needs. 

The cloud promises cheap, on-demand, and elastic processing power, disk storage and memory, and cuts down on energy. It has been said that cloud computing can cut small business energy costs by 90 percent. This makes for an increasingly popular incentive for businesses to adopt a cloud system. Additionally, by meshing the cloud, social and mobile financial services companies can become more closely connected to their customers.

There are a few things financial institutions will need to consider when looking at investing in the cloud, and the first is choosing the deployment model. They can select private clouds that belong to a single organization, public clouds through Amazon and Microsoft, and hybrid clouds that use a mix of public and private clouds. 

A second point to consider is the service model. Is it a software-as-a-service (SaaS) model allowing an organization to use the provider’s applications, which operate on the provider’s infrastructure? Another platform as a service allows an organization to deploy applications created onto a cloud infrastructure using the provider’s programming tools—a good choice if an organization develops its own applications. 

And lastly, infrastructure as a service (IaaS) allows an organization to run operating systems and applications on a cloud provider’s infrastructure. 

Regardless of the deployment and service models selected, there are a few questions that financial securities will likely be wrestling with to avoid issues in the future.  

•What data security regulations are needed before jumping into cloud computing? 

•Does data get replicated overseas? If so, where and how often? 

•How often should an organization refresh its server hardware? 

•What are the procedures for disposing of old equipment and hard drives? 

•What are the penalties for failing to meet the requirements of the service agreement? 

•Has an audit been performed on service providers controls related to the facilities? 

•What are the penalties for terminating an agreement early? 

These questions aren’t all-inclusive, but they’re a good starting point for financial institution executives to be thinking about when considering cloud computing possibilities. Cloud computing can be rewarding depending on current and future needs.

In recent months, there has been a shift in how companies are approaching the cloud. According to Stamford, Conn.-based IT researcher Gartner Inc., by 2016, poor return on equity will drive more than 60 percent of banks worldwide to process the majority of their transactions in the cloud. This is a big shift. To warm up to the idea, financial institutions can place development or test servers in the cloud, followed by email or document storage. Once comfortable with the cloud service providers engaged, then they can move ahead and consider hosting business applications in the cloud long term. 

The facts: Cloud computing is here to stay. While the shift may be too large for some, there is no denying the benefits of cloud computing. With compliance and regulations in mind, embracing the cloud means embracing the ability to achieve agility, speed and competitiveness for organizations of all sizes.  

Francis Tam is a partner in the Los Angeles office of Moss Adams LLP who provides IT audits and internal control guidance to public and private companies. He can be reached at francis.tam@mossadams.com.