Goldman Sachs considers building cloud service to sell to other finance firms

Internal memo reveals that bank could provide an Amazon Web Services-like cloud service to financial services companies

US bank Goldman Sachs is considering converting its cloud investments into a non-financial services product line by creating a cloud-based core technology platform that could be sold as a service to other financial services companies.

The bank is considering emulating Amazon Web Services (AWS) in how it sells access to its cloud platform and cloud-based tools, but with a platform focused on the financial services sector.

According to Yahoo Finance, an internal memo from Goldman Sachs’ co-CIO Marco Argenti – a former AWS employee – the bank could take lessons on how to monetise its cloud expertise.

“In the same way AWS was conceived, both as an internal product to streamline Amazon.com’s operations and as an external product to offer the same benefits to any company facing similar issues, our core technology services can be externalised to other financial institutions,” Argenti wrote in the memo seen by Yahoo Finance.

Argenti described a new type of cloud that is designed to meet the needs of businesses in the financial services sector. “As increasing customer requirements, regulations and scale put more pressure on companies to increase their technology investment in order to remain competitive, we believe there is an opportunity to externalise some of our services in the form of a financial cloud and turn engineering investments from costs into revenue streams,” he wrote.

Financial services companies are looking for cloud platforms to build products and services to help them compete in the face of a transformation in the sector brought on by digital technologies.

Goldman Sachs has used the cloud to launch new products, such as a digital challenger bank called Marcus, which offers savings accounts to consumers, whereas the bank is traditionally focused on institutional investors.

Read more about financial services in the cloud

  • The financial services community has gone from being one of the least likely sectors to adopt cloud to becoming one of its keenest users, as regulator attitudes to using the technology have become more accommodating.
  • Nationwide Building Society is in the throes of a cloud and DevOps-focused effort to re-platform its digital banking and mortgage services, its director of mobile and digital, James Smith, tells Computer Weekly.
  • Barclays Bank has revealed it is two years into a digital transformation project that will see it shut datacentres and go all-in on the Amazon Web Services (AWS) public cloud.
  • UK digital challenger bank Tandem migrated from its initial IT infrastructure to the AWS cloud over just one weekend in November without a hitch.

But not many financial services firms have IT resources anywhere near the scale of Goldman Sachs’. Software engineering is a huge part of the investment bank’s operations – it has 11,000 developers worldwide, making up a large chunk of its 35,000 workforce.

Joanne Hannaford, partner in Goldman Sachs’ engineering division, heads up technology in Europe. Speaking at the AWS event last year, Hannaford said that although Goldman Sachs, like its competitors, had been using cloud for a long time in terms of virtualisation and building private clouds, now it is building new businesses completely in the cloud.

The Marcus platform was implemented in the UK, end to end, in just 11 months, which Hannaford said would have been unthinkable in the past if the company had needed to provision its own hardware, which would have taken five months on its own.

Financial services companies are a huge customer base for AWS, but banks are only scraping the surface of how far they could go with public cloud services, so there is room for more suppliers.

But things are changing and AWS’s financial services chief, Scott Mullins, said cloud computing has come a long way in a short time – in this case, how banks can use the cloud to develop products.

At a recent event, Mullins said the National Australia Bank (NAB) has internal tools to help train 3,000 staff on how to use modern technology to create applications, and is using the cloud to support this. “At NAB, staff no longer need permission to build something in the cloud,” he said. “If you want to build something on AWS at NAB, you can do it immediately without asking.”

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