Cloud computing is touted as the way to deliver software in the future, but the financial services sector, which spends the most on IT, is not so sure.
Cloud computing promises to change the way technology is delivered to businesses and to reduce costs. It offers the ability to deliver software to the user through the internet with no need for the technology to be installed on a company's computers.
It sounds Utopian. No need to buy and maintain software, support provided by expert suppliers, and pay-as-you-use options available.
But the financial services sector needs convincing if it is to part with its cash, according to a survey of professionals in the sector.
The research, carried out by financial services think-tank The Financial Services Club, revealed that in the retail banking sector 37.9% of organisations said they are not considering cloud computing. In the investment sector 24% are not considering it.
None of the 230 organisations said their company had completed a cloud computing project. Given the fact that finance firms are looking to cut their IT costs amid a severe business downturn, this seems surprising
The survey report said that business users within financial services companies do not understand the benefits of cloud computing
Chris Skinner, chairman at the Financial Services Club, says the survey revealed that there is a lack of clarity about the definition of cloud computing. The business applications, needs, benefits and fit of cloud computing should be described to business people more clearly, it says.
Another reason for finance firms' reluctance is that cloud computing is being driven by suppliers and not market demand. Financial services companies are reluctant to hand over control of their applications to third parties.
"The reason why people aren't going out to cloud computing, apart from economic reasons, is that we get sold-at a lot by consultancies and vendors," says one survey respondent. "Cloud computing is now being driven hard by a variety of vendors and some suspect it is so they can get better control of their licensing and licence access."
"If you move to cloud computing and it breaks, what do you do? If the cloud computing goes down, your business cannot operate, so then what do you do? At least, if systems are managed internally, you can still run."
Mike Hampson, director at Bishopsgate Financial Consulting and formerly head of transactional banking at ABM AMRO, says many banks are cautious about cloud computing because of regulatory fears.
"There are regulatory concerns about where data will be stored," he says.
The term 'cloud computing' is over-used by suppliers, which causes confusion and scepticism, he says. But he sees no reason why finance firms should not put some applications in the cloud. "There are certain things that are not that important or unique that can be delivered through cloud computing services."
If cloud computing is to fulfill the potential it promises, financial services firms will have to embrace it. The caution being demonstrated by the industry over the take-up of cloud services is a message to other sectors. Suppliers should also benefit by learning how to get the cloud computing message across clearer.