Credit unions need their head in the clouds
Cloud computing is the wave of the future for all things data related. Amazon started it with EC2 and S3. Microsoft is in it. Salesforce is doing it too. Credit unions are just starting to realize the benefits of virtualization and as more CU’s struggle with income generation, expense control, and capital expenditures, virtualization is going to take off. But why use your members’ capital to acquire VMWare or Citrix servers, additional bandwidth, etc when you can “outsource” the hardware and infrastructure to providers that are much more efficient at it than the CU could ever be and do it cheaper?
Credit unions love to have control of their infrastructure and data, many IT departments love new projects and new technologies. And they are pretty much required to. Just look at the NCUA’s guide for doing third-party due diligence. They don’t make it very easy to use new technology or unproven (read: new and innovative) vendors or products. Cloud computing is where we’re moving but how can credit unions make that jump while satisfying the NCUA’s security and vendor requirements?
There is no way for a credit union to delve into any “bleeding edge” technology or revolutionary infrastructure. Sound financial institutions are not built upon such things. There is a reason why core systems are a mainframe type of machine running HP-UX or AIX, either in-house or at the vendor’s HQ – because the hardware, software, and methodology have been time tested for decades.
Want to “cloud compute” your member’s data and delivery services? Have the host database hosted over in Phoenix, AZ and the delivery platform hosted in Bellevue, WA, and your email hosted out in Asburn, VA, all connected via inexpensive SSL VPN tunnels? What if your ISP gets DDOS’d? What if power is lost because of an ice storm in Washington? You’re assuming instant failover for all critical services with near-100% uptime. Now THAT gets expensive. Where are the reliability stats on this approach going back the past 10 years? What’s that, this approach is almost brand new? Then forget it!
The difference between companies that do stuff like “cloud computing” and financial institutions is the irreparable damage a credit unions face if services are out for more than a few hours.
The NCUA is only concerned with keeping its insurance fund secure. They really don’t care about credit union expenses. Hence, the separation of duties almost to the point where two different people type in one command – one starts it, the other finishes it, and they both submit DNA samples and co-sign a process acceptance form, which their VP then reviews, signs, and sends to the board; and then a 3rd party comes in, at the CU’s dime, to check all of those logs. Why would they let an entity spread itself across the nation in the name of cost savings? Increased pressure from the NCUA to double-check every transaction, log every session, and review every keystroke will ultimately cause all the small credit unions to fold.
Is $50 million Alabama United Electricians Credit Union about to jump into “cloud computing”? I doubt it. If you want to jump into these exciting new times, then leave the CU industry.
I only understood about 1/3 of the original post and the last two paragraphs of the comment by Another CU Employee.
But I do know this. Banking is going to change. Period.
I think there’s an amazing opportunity for credit unions to be that change – BUT we have to take chances to do that. No more R & D (rip-off and duplicate). SOMEBODY has to be a pioneer for a change.
The banking industry is in a crisis-stall pattern right now that could last years. What an opportunity for us to “leap frog” over them!!
What if you ISP get DDOS’d? (I have no idea what that means but it does beg an answer). What’s the worst thing that could happen?
Lol! Ya’all are crackin’ me up. Cloud Computing, Software as a Service, Hosted Apps…it’s all good…in moderation. So far, this conversation has focused on the extremes but, like most things, the answer is found somewhere in the middle. I don’t think there’s anything wrong with throwin’ some apps in the cloud as some part of your overall strategy but it’s unlikely that everything in your shop is well suited to that approach. I’ve said this before and I’ll say it again: Integration is the key. How much integration you need with other systems is largely going to dictate which model you implement.
Good stuff, Robbie!
Sorry but I can’t agree with Another CU Employee. If CUs are not willing to prudently and pragmatically attempt to use technologies to develop better services, cut expenses and continue to change banking then they should be willing to suffer the tyranny of outside sources delivering to them high priced 40% solutions.
IT is your second highest expense but most don’t seem to be responsible for understanding the scope and realm of this area. There are some valuable strategies to have involved in IT usage. If you don’t want to attempt to even begin to understand the possibilities then you will become irrelevant.
@AnotherCUEmp at some point, the cost savings from moving off of HP, AIX, and ASA400′s becomes so great that a CU would be foolish not to move. Cloud computing is just one example of where a CU may be able to save alot of IT expense. Cloud computing is still a baby and arguably not secure enough for most CU’s to be happy with. My larger question I guess is how can cloud computing be made more secure so CU can take advantage of the cost savings? And while no network can have 100% uptime, cloud computing enables you to spread your technology resources across numerous data centers. That way if the ISP for our WA gets attacked, we have our file servers, email servers, whatever running at other sites as well.
This is a great conversation. Thank you so much for sharing these thougths. Here are some of the questions I have. . .
What is the payout for the financial institutions (credit unions or banks) who effectively use new technologies to engage new members/customers?
What do our members want? Is it convenience? Is it safety? Is it the satisfaction of knowing their money is with a CU instead of an “evil bank”?
Can credit unions harness the powers of “bleeding edge” technologies safely?
What will happen to credit unions that refuse to push the envelope when it comes to technology?
Which credit unions are leading the way in these areas of technology? How did those credit unions begin leading the way?
Andy Greenberg / Forbes:
Deflating The Cloud — A new report argues that cloud computing could cost more than twice as much as a traditional IT setup. — “The cloud” has come to represent the bright future of computing, a world where processing and storage become as ubiquitous, cheap and accessible as electricity.
http://www.forbes.com/2009/04/15/cloud-computing-enterprise-technology-cio-network-cloud-computing.html
I just came across this blog and would like to share some credit union, cloud computing success. DocuVantage has assisted credit unions to implement cloud based electronic document and content management platforms that improve they way they organize their information and manage their documents for secure access, collaboration and compliance. This has allowed them to more quickly access and process information from a central location with improved customer response times simply because the customers’ statements were easier to locate from a secure location online.
One comment here argued that cloud computing could cost more than twice as much as traditional IT setup. However, by doing research to find the right vendor you can find a subscription based document and records management system that is affordable, can scale to meet your needs and grow with your business so you can only purchase what you need when you need it. There are also savings realized in the reduction of paper, printing, faxing, copying and storage space. Watch this webinar to learn more at http://www.docuvantage.com/c/industry/creditunion.php