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Nephophobia in Financial Institutions

Nephophobia /ˌnefəˈfəʊbiə/n. fear of clouds


The implications of Cloud Computing look too risky for financial organizations. The more inevitable cloud becomes, the more fearful banks become. Although some financial institutions have embraced certain aspects of cloud, it would be of value, for instance, for a multi national bank to treat this wariness as a phobia, which can then be overcome in a systematic way. In this article, a standard psychological approach to battle phobia is used to provide a fresh perspective on cloud adoption in the finance sector.

Things we do not understand are usually terrifying because we just do not seem to quite figure out what they are capable of doing to us. This fear is the primary reason why organizations tend to maintain a better-safe-than-sorry attitude when it comes to Cloud Computing.

Banks are generally IT – enthusiasts, however. Gartner1 predicts the banking and securities sector will spend $84 billion on IT by 2016, making this sector the biggest IT buyer of any vertical (insurance is 4th). Financial services CIOs they fully appreciate the advantages that information technology has to offer. Cloud computing, however, is not like any technological disruption they have seen since the internet itself arrived, and that demands caution. 

Although the notion of being hesitant towards the application of, at least, public cloud in the financial sector could actually prove to be a wise choice, that hesitation had better be based on the actual circumstances under which a bank is operating coupled with a solid understanding of cloud. In other words, if you are a bank CIO and you opt to deploy ‘baby-step cloud' just because public cloud offerings seem like a risky proposition to you, chances are you are not fully exploiting what cloud has to offer because of your phobia'!

Here are the steps a nephophobic financial institution needs to take when it comes to Cloud Computing:

  1. Identify your fear of cloud
  2. Analyze your fear of clouds
  3. Take control of your cloud fear
  4. Change the way you think about cloud
  5. Revisit your clouds

Identify your fear of cloud

Marie Curie once said: "nothing in life is to be feared, it is only to be understood".

Imagine that you could change your studio apartment to a gigantic mansion in a matter of seconds/minutes (elasticity), or that you could have a 'License to Grill' class barbecue set for an afternoon and get rid of it in the evening (provisioning/de-provisioning). What if you could pay for just the time you used it (pay-as-you-go)? Think about it, we all have this small room, a second bathroom or a little terrace that we seldom use, yet we are paying/have already paid for them. It would be nice to pay for what we need when we need it. Would it not?

Cloud Computing makes it possible to think of a house as actually an open space, completely empty. A couch and TV set appear when you need them to, as does a fridge with cold drinks inside and even a bed. Now we are already talking about a bed that observes your behaviour, and based on the data it receives on a daily basis predicts that you will be needing a king-size bed as opposed to the queen-size you currently use because in a month you are getting married and will be paying more for bed provisioning.

However, some feel like they do not have the privacy or security they need. You know that uncomfortable feeling you have in a hotel room where you feel like you're being watched? You have no idea who your neighbors are (your data is sitting next to someone else's in the same physical server). Some stranger could be living in what used to be your bathroom because it's cheaper!

To identify the fear, a bank needs to seek answers to the following questions:

  1. Are the existing cloud models mature enough to comply with regulatory regimes? Can I be properly audited? Where is my data sitting at any given time?
  2. What if it is not secure enough? Banking-class secure enough? Isn’t cloud an open invitation to cyber criminals?
  3. How different is cloud from other outsourcing initiatives we are already engaged with? Should we follow the same approaches here, e.g. extensive analyses, risk assessment, SLA discussions, etc.? Simply put, how much headache are we talking about?
  4. Am I in control?

The answers to some of these questions are very subjective and require a thorough understanding of a bank’s architecture and business processes. The result of this exercise, however, can be a step towards a rewarding cloud journey.

Analyze your fear of clouds

The next step would be to analyze this fear. A history of IT outsourcing failures could well be triggering your anxiety.

Was your last IT outsourcing decision regarded as a responsibility outsourcing? Have you recently convinced your CFO to approve a budget to build a data center? Have you just recovered from a security breach? Are you currently experiencing a lock-in effect from a vendor? Are you emotionally locked-in? That is, have you recently fought for and implemented an IT project in your organization, and migrating to the cloud would mean you will have to admit the previous project was not a good idea?

There are many variables that could be 'clouding' your cloud judgment. It helps to be conscious about those roots to have a clear picture of what it is that causing concern.

A part of a thorough analysis is to link the cloud to your desired outcome. There are ways in which Cloud Computing can contribute to regulatory compliance or security. Think about leveraging cloud technologies to have a flexible architecture able to easily implement Basel III, for example, or how cloud is contributing to the feasibility of brand new identity management practices.

These types of analyses can help prepare an organization for the next step: taking control.

Take control of your cloud fear

A One way to break free of a fear is to confront it head-on. This is a phase where a cloud solution is deployed, making management more comfortable with the phenomenon. Choosing a financial-sector-friendly cloud service provider for a not mission-critical part of your business could contribute to the sense of control. This, however, should be seen as a stage of a broader cloud implementation roadmap.

Every day that goes by without using the cloud means another day of IT staff costs, asset depreciation, licensing fees, data center operation costs, traditional system development, testing and implementation costs, unnecessary training, etc.which could otherwise be spent on advanced analytics or innovation.

Change the way you think about cloud

I do not know of a financial institution or any other institution for that matter that cannot benefit from Cloud Computing one way or the other.

First, one needs to migrate their mind-set to the cloud before migrating their IT function.

The process starts with a change in perception. Although not every C-level executive is an instant convert after the previous steps, at least the opportunity exists for the phobia to turn into a 'philia'. This is time to start looking at Cloud Computing not as an individual technology but an IT consumption/delivery model. It is easier to see what public sovereign clouds' (where the cloud service provider is committed to keeping the data within regulated geographic zones) have to offer now. The impact of Cloud Computing on innovation, cost reduction and time-to-market is so immense that many market entry barriers are basically disappearing.

Let's put it this way: the game might be the same but the rules have changed! Your multi-million dollar IT infrastructure might not be as big an advantage as it used to be. The key now is to leverage the new technology to create innovative products, acquire new critical mass and serve your existing customers better.

Deutsche Bank Research suggests that banks in Europe spend two-thirds of their IT budget on running the bank and one-third on changing the bank2. Changing how you think about cloud help understand what roles cloud is capable of playing to potentially reverse this ratio. It would probably be a good idea to focus on evolving into a 'smarter' bank.

Revisit your clouds

It is easy to get excited about the cloud, deploy a solution and forget about it. Cloud solutions can quickly turn into 'cloud legacy systems if not regularly re-evaluated. There has to be constant monitoring not only in terms of how your providers are doing their job but also what new offerings are out there that are potentially game-changers to your core business.

Also, cloud drives innovation. The more innovative a bank gets, the more products are developed and therefore need to be properly marketed, delivered and maintained. A CIO needs to stay up-to-date on price wars, new offerings, new cloud specialties, etc. The last thing a bank needs to see is an obscure cloud solution producing massive bills.


The internet era is highly analogous to the cloud era. I believe that the Microsofts, Yahoos and Apples of the cloud are yet to come. Who would have thought that an online bookstore would become a cloud giant3? Or that the New York Stock Exchange would become a cloud provider? It is of great importance to wrap our heads around the speed at which cloud computing is evolving.

But remember, the cloud era moves at speed. While you were reading this article some geeks sitting in a coffee shop launched a start-up capable of competing with multi-national corporations, while hundreds of providers cut their prices for the 10th time and Amazon probably released a new feature! No time for phobias; it is already late.

  1. Gartner, Forecast: Enterprise IT Spending for the Banking and Securities Market, Worldwide, 2010-2016 4Q Update , 16 January 2013,
  2. Heike Mai, Banking and Technology Snapshot – Digital economy and structural change, December 20, 2012

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omid mahboubi


Omid Mahboubi: Director - Business Development, Asia Cloud Computing Association Podcast Host
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About the Asia Cloud Computing Association

The Association, launched in November 2010, is a forum for hardware and software developers, carriers, enterprise users, policy makers, and researchers. We drive the adoption of cloud computing in Asia by addressing regional issues of regulation and policy, security infrastructure and awareness As the only forum focused on cloud computing issues in Asia, The Association is a place for collaboration and innovation for all stakeholders with an interest in Asia's cloud market.