Cloud Computing: Helping Financial Institutions Improve

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Anthony Lipp – Global Strategy Leader, Banking & Financial Markets August 2010 Cloud Computing

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2 There are dramatic forces shaping the financial services industry Clients Rapidly evolving expectations for offerings, service unbiased advice, and convenience Regulation Radically increased oversight ushering in a new era of increased government intervention Trust Rebuilding trust and confidence across the system is critical to future growth and stability Capitalization Mature markets and emerging markets alike focus on rebuilding their capital reserves Competition Intensified competition with increased M&A, divestitures and entrance of non-bank service providers Economy Weak conditions impact investment decisions and reduce need for financial services

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The global financial system is highly complex with many stakeholders and requires new approaches to create value 1 – Rethinking the Financial Network, Andrew Haldane, Executive Director, Financial Stability, Bank of England 3 The global financial system is massively interconnected and interdependent An adaptive system which is a complex network – evolving organically The number of intersection points of the financial services networks across the 18 largest countries increased 14x in 20 years1 The system moves more than $74T around the world each day Digitization of the “real economy” has transformed availability of information and how decisions are made Anonymity and susceptibility make the system an attractive target for criminal elements The system intermediates the needs of billions of people in 190 countries — in thousands of languages. Policy makers Regulators Financial institutions Compliance Laws and rules Surveillance and monitoring Standards Soundness Stability Supervisors

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Intelligent Interconnected Instrumented Winners are enabling themselves by a new business infrastructure that is more instrumented, interconnected and intelligent Real-time capture and view of continuously streaming data of multiple types and from multiple sources enabling quicker insight and, therefore, faster time-to-market and higher margins Tracking and detecting the requirements of transaction messages in real-time, enabling automatic routing of payments through least-cost channels Advanced capture, tracking and control of digitized transactions and information Integrated capabilities Social networking and online collaboration Banks systems connecting to governments and regulators in new, smarter ways to identify risk concentrations and, thereby, improve insights around systemic risk issues and global inter-dependencies Engaging customers as co-developers through social networking and online collaboration to tailor products and services on demand Predictive client analytics Real-time alerts Enterprise view of data, automated modeling and predictive analytics to provide greater client and business insight. Real-time alerts of performance problems with insights into the source systems and applications as well as analysis of impact on business processes and service levels. 4

As the planet gets smarter the information explosion and rapid change create new challenges : 

Digital data is projected to grow tenfold from 2007 to 2011 As the planet gets smarter the information explosion and rapid change create new challenges Global Internet traffic volume expected by 2013 Number of devices will be connected to the Internet by 2011 Percentage of CIOs who expect to face substantial change over the next three years 3 55K PB/Mo 10x 1 trillion 83%

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It will reach a breaking point In distributed computing environments, up to 85 percent of computing capacity sits idle Percentage of executives who report a security breach and aren’t confident they can prevent future breaches 66 percent is spent on maintaining current IT infrastructures versus adding new capabilities Percentage of CIOs who want to improve the way they use and manage their data 66% 85% idle 78% 82% 6 Today’s IT infrastructure is under tremendous pressure and is finding it difficult to keep up…

There is a greater need for IT to help address business challenges : 

There is a greater need for IT to help address business challenges Reducing risk Breakthrough agility Higher quality services Doing more with less 7

There are three ways to acquire IT capabilities : 

There are three ways to acquire IT capabilities Cloud computing is a new delivery and consumption model or methodology spanning all 3 ways. 8 Pre-integrated systems and appliances Provided as services Software, hardware and services

What is different about cloud computing? : 

What is different about cloud computing? With cloud computing Without cloud computing Virtualized resources Automated service management Standardized services Location independent Rapid scalability Self-service Software Hardware Storage Networking Software Hardware Storage Networking Software Hardware Storage Networking 9 Service Management Service Management Service Management

There is a spectrum of deployment options for cloud computing : 

There is a spectrum of deployment options for cloud computing Private Public Hybrid IT capabilities are provided “as a service,” over an intranet, within the enterprise and behind the firewall Internal and external service delivery methods are integrated IT activities / functions are provided “as a service,” over the Internet Third-partyoperated Third-party hosted and operated Enterprise data center Enterprise data center Private cloud Hosted private cloud Managed private cloud Enterprise Shared cloud services A Enterprise B Public cloud services A Users B 10

Public and Private Clouds are preferred for different workloads : 

Public and Private Clouds are preferred for different workloads Source: IBM Market Insights, Cloud Computing Research, July 2009. n=1,090 Database and application-oriented workloads emerge as most appropriate Infrastructure workloads emerge as most appropriate 11

Cloud computing framework : 

Cloud computing framework Business planning / lifecycle management services Shared middleware services Infrastructure services Industry-specific services Integrated service management and security Cloud-based business solutions for industry-specific processes Virtualized and optimized systems storage and networking IT services that are integrated with cloud services Application infrastructure for delivering cloud services Business services delivered via the cloud Integrated capabilities for visibility, control, automation and security of cloud services Capabilities to define an enterprise architecture for business planning/alignment and tools for managing the lifecycle of cloud services Processservices Collaborationservices Analyticsservices Existing services and third-party services, partner ecosystems … 12

Ready-to-consume cloud services from IBM : 

Ready-to-consume cloud services from IBM 13

Businesses that implement cloud computing services from IBM are seeing significant results : 

Businesses that implement cloud computing services from IBM are seeing significant results Risk & Compliance 30,000 + employee bank deploying a private cloud from IBM to centralize management of desktops via an enterprise class data center rather than at the user stations. Gets greater remote flexibility without sacrificing control. Capitalizing on new efficiencies Reduced labor and infrastructure need to develop and deploy new services. Decreased new application deployment time from 10 weeks to less than 1 week. Accelerated business transformation. Smart Business Test Cloud Created a self-service, flexible and secure environment to develop, port, test and validate their software on standard systems and middleware. Improved time to market, higher quality and reduced costs. Time to Value Creates an ecosystem for 3rd Party developers. Reduces developer effort to deploy a work environment with seamless. Large Financial Services Provider in the United States 14 Large Financial ServicesProvider in Asia Large Financial Services Provider in South Africa Large Global Payments Provider

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15 Making cloud computing real New economics with new trade-offs Business flexibility results from IT flexibility Demanding greater speed, control, security and transparency New technology experiences with faster time to market Need solutions that work and are supported consistently.