What exactly is hybrid cloud: A stepping stone, a sanctuary for regulated industries or a rampart for old tech vendors?

Epoch-making technology change occurs only occasionally, but when it does there is often a transition phase in which hybrid solutions emerge.

[easy-tweet tweet=”Hybrid cloud can be seen as an intermediate step on the path to full public utility cloud, says @BillMew”]

Hybrid cloud: A stepping stone to public cloud

In a recent Harvard Business Review article entitled “The Prius Approach,” Nathan Furr and Daniel Snow explained how hybrid technologies help companies survive disruption and shape the future. For example when Edison’s light bulb threatened their future, incumbent gas lighting firms borrowed the filament technology from the electric bulb to form a hybrid technology the gas-powered lightbulb, which improved their own efficiency fivefold. This succeeded not only in starving Edison of profits for 12 years (and nearly bankrupting him), but it bought them enough time to prepare a profitable exit into the adjacent heating business. Experts in disruptive innovation point to that kind of move to bolster a doomed technology as the last gasp of a dying industry.

In the same way hybrid electric cars, like the Toyota Prius, will allow auto manufacturers time to develop new skills and capabilities to prepare for the era of all electric cars. And depending on your perspective, hybrid cloud can be seen as an intermediate step on the path to full public utility cloud.

For many industries there is evidence that the transition to full public cloud is accelerating and there are commentators (such as @DavidLinthicum) claiming that the era of private and hybrid cloud is already ending. Such are the economies of scale and efficiency improvements with cloud that the advantages of public cloud are obvious and undeniable – advantages that cannot be sufficiently replicated in private cloud deployments.

Old tech vendors see hybrid as a way of retaining some control while defending and extending the life of their legacy platforms

Hybrid cloud: A rampart for old tech vendors

While many of the old tech vendors are doing their best to expand their cloud business, this is coming at a cost – with supposedly new cloud business more often than not involving cannibalising higher margin business with existing clients, rather than being net new client wins. However, with many enterprise workloads likely to remain on-premises for some time to come, old tech vendors see hybrid as a way of retaining some control while defending and extending the life of their legacy platforms. They hope that hybrid will buy them enough time to catch up and bring new capabilities to the cloud.

Hybrid cloud: A sanctuary for regulated industries

The whole argument for hybrid cloud is that no matter how compelling the public cloud services are, some workloads will need to be hosted in private clouds for the following reasons:

  1. The need for technical control over one’s compute environment – especially where legacy platforms or architectures would prohibit a move to the cloud.
  2. Reasons of proximity – some data intensive applications or latency sensitive workloads benefit from having compute power near data sources or big data stores.
  3. Reasons of protection, risk aversion, compliance and regulation – the need for multiple redundant facilities in each local market as well as regulatory accreditation.

While innovative new tools and technologies (such as containers) are already enabling firms to overcome the technical challenges, the main bastion for private cloud in terms of latency, security and regulation remains the financial services sector. Will banks ever adopt public cloud?

Well, public cloud providers, such as Amazon Web Services (AWS), are already working closely with financial regulators to ensure their services are in line with the security requirements. AWS has achieved widely respected certifications such as PCI DSS Level 1, ISO 27001 and ISO 9001, and banks across the world are not only embracing cloud, but are even adopting public cloud.

In the Netherlands banking regulator, De Nederlandsche Bank (DNB), is in favour of public cloud, and Dutch retail bank Robeco Direct is already using Ohpen’s ‘bank in the cloud’ software running on AWS.

So what’s stopping everyone moving to public cloud?

One old expression still holds true: “Why do people rob banks? Because that’s where the money is!”

The fact that the banks remain the main target for hackers and cybercriminals of all kinds means that a heightened level of security is essential. Some time ago banks were described as simply technology companies with a banking licence, because everything they did was already digitised. It might be more accurate to describe them as security companies, because everything they do is based on trust, if their security is compromised and trust is lost, a bank is out of business.

This is not to argue that private environments always have lower latency and higher security then public ones, but whatever level of regulatory certification AWS, Azure and Google obtain, the banks are going to want to be hyper secure.

[easy-tweet tweet=”Whatever level of regulatory certification vendors obtain, the banks are going to want to be hyper secure.”]

After all, while AWS beat all the competition (IBM included) to win the CIA’s business, the CIA doesn’t use the main AWS cloud facilities. Instead it uses an especially secure private cloud provided by Amazon. Should the banks settle for anything less?

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