23 October 2016
According to an IDG study, companies that implemented an enterprise-wide cloud strategy were able to reap 60 percent more cost-savings than others.
According to an IDG study, companies that implemented an enterprise-wide cloud strategy were able to reap 60 percent more cost-savings than others.

How businesses and investors can ride the cloud computing boom

Cloud computing is now seen essential for businesses to improve their cost-efficiency and scalability. But there is a debate going on as to which functions should be transitioned to the cloud, and what it means for the companies in terms of data security and other aspects.  

To provide some insights on the issue, EJ Insight presents the views of Krupal Raval, senior vice president (finance) at Digital Realty, a data center operator which has a wide range of clients including financial services firms, manufacturing enterprises and IT services entities.

Q. Can you tell us how cloud computing is driving innovation in the finance industry?

A: Cloud computing offers characteristics that can support the exchange of information and provide the infrastructure needed for financial services firms looking to implement technologies. Especially in the finance industry, due to the nature of the data hosted in the data center, it is imperative to ensure that their business-critical IT infrastructure remains up and running 24/7. Any interruption in connectivity for financial institutions’ critical systems could be catastrophic to the business and its customers.

Financial services firms can achieve business agility and rapid elasticity with cloud, as it allows the business to scale up or down their operations in real time to cope with business demands. As the economic conditions in the finance industry can be volatile, adopting cloud allows the business to match rapid changes in economic growth and sudden spikes in customer demand. With ubiquitous network access provided by cloud computing, businesses can match the multi-channel experience that financial technologies require, such as an ability to access banking systems from any user location or device.

The rise of fintech companies in the region is driven by cloud computing as it allows them to focus on creating applications and services without the infrastructure worry. Cloud computing has paved the way for digital disruption within the finance industry and for firms to gain a competitive advantage.

Q: Why is Hong Kong lagging behind in the adoption of cloud technology?

A: One of the greater contributing factors to the slower pace of cloud adoption in Hong Kong is due to the size of its finance industry, which is possibly the most risk-adverse. The finance industry deals with some of the most personal and sensitive forms of customer information compared to other industries and a single breach can be catastrophic to personal and business users. This could explain why the sector’s growth is sluggish in Hong Kong compared to other financial hubs such as New York and London, due to concerns such as cloud security and regulations.

Q: How is the situation in other regions such like South East Asia, Australia and India?

A: CIOs from nearby regions such as Southeast Asia as well as Australia and India ranked cloud computing as a higher priority, according to a recent Gartner survey, as compared to Hong Kong. This could be due to Hong Kong’s concerns about cloud security and the lack of availability of cloud services. While the other regions have seen investments from global cloud providers, demand in Hong Kong is lower, thus affecting the speed of the cloud network in the country.

Countries in Southeast Asia such as Singapore, Malaysia and the Philippines are seeing a greater readiness for cloud computing. According to the same Gartner study, Malaysia has one of the best cybersecurity measures in place, an indication that businesses are better poised to adopt digital technology. In Singapore, factors such as its regulatory environment, high quality of broadband and protection of intellectual property makes it a preferred destination for cloud businesses and data centers. Australia also has an efficient and low-risk market for data centers and cloud services due to its economic stability, freedom of information within the country and cybersecurity framework.

Q: Are there other roadblocks that hinder cloud adoption?

A: As cloud adoption continues to grow in APAC, another challenge that businesses may be faced with is regulatory framework. Governments may not have the legal and policy framework in place which can allow international data transfers and address issues such as cybersecurity and privacy concerns. Within organizations, some non-IT roadblocks may stand in the way of cloud adoption. These include considerations such as selecting vendors, the lack of skilled labour and time to implement cloud technologies and budget.

Q: If I am not in Fintech, do I have to care about cloud technology at all?

A: Cloud is not just for the new fintech companies. It is also about how traditional financial institutions can undergo digital transformation to compete today. It is important for them to understand the different cloud strategies so that they can make the right investment for their digital journey.

Cloud technology is becoming integral to businesses with the global hybrid cloud market expected to grow from US$33.28 billion to US$91.74 billion by 2021, based on a MarketsandMarkets report. In Hong Kong alone, there is a huge potential for cloud. According to IDC, the amount of money spent on cloud services in Hong Kong will reach nearly US$700 million by 2017.

The applications for cloud technology are endless. Companies born of the cloud such as Uber and AirBnb are examples of companies which have leveraged the cloud to disrupt the transportation and hospitality industry respectively. Logistics companies such as UPS and FedEx have also used cloud computing to support their tracking and logistics capabilities.

Q: How can SMEs harness the power of cloud?

A: Cloud provides businesses with unparalleled flexibility, ROI and scalability – traits which are even more vital for smaller businesses. Hybrid cloud technology is greatly valued by SMEs because it offers enterprise class IT capabilities at a much lower cost. Seeing that speed and cost is of the essence for SMEs, a hybrid cloud model can help them avoid large upfront costs but still enjoy the benefit of immediate scalability. This is especially crucial for SMEs if they need to handle an unexpectedly large order.

Q: For investors who want to participate in the cloud boom, what companies or sectors should they look at?

A: There are many sectors that are obviously benefiting from the cloud boom, but there are two that are directly benefiting the most. First are the data center providers. And then there are the cloud service providers, which are growing in significant scale. An example would include our largest global client IBM.

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EJ Insight writer

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