Tech Transformations

Cloud computing and the community bank IT managers

By Kevin Paugh

Information technology at community banks is in the midst of one of the biggest changes in the last 20 years. In the middle of this transformational change is the bank IT manager, who is charged with making sure the bank’s technology works, is secure, is resilient and is prepared for the future.

One of the newest technologies that has seemingly changed the technology landscape in almost every industry is cloud computing. Let’s explore how cloud computing is changing community banking and the role of the IT manager.

In the past, IT, as it pertains to community banking, was pretty straightforward. Your bank acquired the necessary hardware and software that met your strategic objectives. As time progressed, your bank added more servers, desktops, networking, security, applications and IT staff to satisfy the growing needs of your institution while keeping up with the latest and most sophisticated technology to meet regulatory requirements and anticipated growth. Most community banks probably bought a little more hardware and capacity than they needed to handle peak and unanticipated surges in demand.

In the early to mid-2000s things began to shift. IT outsourcing started to be viewed as a viable alternative to adding additional hardware and increasing IT staff. At the same time, businesses wanted to reduce costs by buying computing power rather than computers or infrastructure. Outsourced cloud computing entered the technology landscape, a business-model game changer.

Because of that, IT managers probably have a number of questions about how outsourced cloud computing will affect you and your bank. What will happen to staff? What will my responsibilities be in the changed environment? How do I prepare myself and my bank for this outsourced cloud computing shift?

With such questions swirling, let’s break down some answers into what cloud computing means to you and your community bank—what stays the same and what changes?

  • Stays the same:
    • Local assets
      • Network infrastructure—location, management, purchasing
      • End user devices—desktops, laptops, mobile devices—location, management, purchasing
    • Security and compliance
      • Local assets, policies and procedures
      • Access controls, amount of visibility into end-user behaviors
      • Reporting oversight
  • Changes and impact:
    • Application infrastructure owned by a trusted, secure third party
      • Access to specialists with expert-level knowledge and skills
      • Reduced costs resulting from fewer capital investments and staffing requirements, less overhead
      • On-demand access to the latest technology
      • Higher level of service as defined in service level agreements
      • Predictable expenses from flat fees and subscription-based pricing models
      • Faster project launches due to increased focus and accessibility of technology needed to bring project online
      • Software upgrades, new software additions/enhancements and hardware refreshes, appropriate protection and reporting all included
      • Administrative access and control by designated bank employees to add, delete or modify users and specific access to applications
    • IT business continuity and disaster recovery
      • Critical IT elements hosted offsite with significant redundancy and backup datacenter
      • Data back-up, recovery and transfers—migrated 100 percent into the cloud
      • Remote access to all applications from anywhere and any device
    • Security and compliance of servers and applications
      • Centralized data storage with strict access controls increases information security
      • Compliance and audit documentation provided by cloud provider through their independent auditing firm can be added directly to your vendor due diligence and compliance documentation
      • Vastly simplified by hosted cloud provider
      • Increased access controls to prevent user viewing and/or downloading of specific confidential or non-public information
    • Enhanced support and management of your systems
      • Help desk—24/7 remote via phone or Web
      • Infrastructure management and monitoring—provided 24/7
      • Patching and updates
  • Gets added to the IT management responsibility
    • IT strategy and direction—frees up IT manager to focus on the strategic objectives of the bank, ensuring the IT strategy is aligned

As a community bank IT manager, now you’re probably asking, “What happens to me and my IT Team?”

Basically, as an IT manager, you’ll have more time to spend on IT management, security, policies and procedures, and IT strategies to fulfill objectives. You will still have access to all your community bank’s applications and controls on those applications as desired. What’s changed is that those applications and controls are no longer in the next room but in your cloud provider’s hosted location. What changes drastically is that cloud outsourcing virtually eliminates the more tedious tasks like managing server hardware, upgrades and installation so that you can focus on the higher level objectives of your community bank. You can now shift your attention to more thoroughly understanding analytics and data, leveraging technology to become more profitable, and determining how to integrate technology into your client experience to make it easier for bank customers to do business with you.

How about my bank’s IT team? Depending on the size of the team, there may be an opportunity to rededicate staff in new directions. They may become more involved in helping users or maintaining databases, building and monitoring social media programs, building marketing programs leveraging technology to drive more business, improving compliance and risk management initiatives, and the like.

Given the many benefits of outsourced cloud computing, why are some IT managers reluctant to embrace the cloud? According to a recent article in Vertical Cloud, here are some common concerns and answers:

  • Concern: I will have no control on the critical business applications, like I do now.
  • Answer: You will still be the key player on designing user procedures and determining change requests. You will still be the one who decides user requirements and outputs technical requirements to your cloud provider.
  • Concern: I will have no control on the security issues.
  • Answer: Any serious cloud provider must be in a position to a) provide you with a solid security plan and b) adapt and adopt any special security guidelines that you might have. Let’s face it: Chances are that an outsourced cloud provider focused on the security requirement of dozens of banks is more secure than everything you’ve built internally before.
  • Concern: My role will be downgraded.
  • Answer: Your role is still important. In fact, you now have the opportunity to move to the next level: You can become a valuable player in the community bank business design and operation, instead of holding yourself back with trivial technical issues. Because you already know all (or most) business functions of your community bank, you could be critical in the leadership of the bank’s strategic direction, especially as it relates to leveraging technology to meet those strategic objectives. Everybody, and most of all you, will have a better chance of focusing on the business objectives.
  • Objection: My staff will be decreased.
  • Answer: It is possible that this might happen, but not probable. Some roles might not be required in your department organization, but chances are that you will still require some local IT support and chances are, there may be some freed up cycles where your IT person(s) could add a lot more value to the organization if they weren’t dealing with the traditional IT duties which consume a lot of time but add little value to your institution.

The cloud is coming. Will you as an IT manager be ready? Do your research. More importantly, bring the idea of a cloud to your community bank’s senior management and directors. Help them evaluate the pros and cons. The very essence of cloud computing will allow your community bank and IT team to focus on its core banking functions and responsibilities.

The best use of cloud computing should take away a large number of IT problems, allowing IT managers to be even more relevant and effective technology leaders at the nation’s community banks.

Kevin Paugh (kpaugh@compushare.com) is the strategic alliance manager for Compushare Inc. in Santa Ana, Calif., a cloud service provider of the ICBA Strategic Technology Solutions program.