Top 5 must-haves when choosing an ideal Financial Services Colocation Partner | Telehouse

Top 5 must-haves when choosing an ideal Financial Services Colocation Partner

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Mar 04, 2019
NO MATTER WHERE COMPANIES ARE ON THEIR DIGITAL JOURNEY, THE RIGHT DATA CENTRE REMAINS CENTRAL TO SUCCESSFUL, TIMELY TRANSFORMATION.
 
 
2019 looks set to be a pivotal year for financial services. The year when institutions review their digital transformation progress and realign plans in the light of evolving market conditions and knowledge gained. Most importantly, it’s likely to be the year when digital transformation moves beyond standalone projects and becomes a truly holistic endeavour.
 
Shakespeare describes another such turning point in Julius Caesar, when Brutus urges an immediate attack rather than giving the enemy time to regroup: “There is a tide in the affairs of men / Which, taken at the flood, leads on to fortune.”
 
For financial services, this year is the digital transformation opportunity high tide; no one can afford to be left stranded on the shore

It’s a fact: the financial services industry is investing heavily in digital transformation. Many early initiatives focused on delighting customers and keeping up with competition from the usual suspects as well as arrivistes. Retail banks concentrated on mobile apps and online customer interfaces. Investment banking worked on reducing transaction times in trading exchanges. Insurance providers started developing virtual assistants using sentiment analysis to give people personalised advice.
 
Everyone knows time is of the essence. There’s an irresistible demand for ever-more-flexible services from millennials and generation Z. A recent Visa Europe annual payments study found that 92 per cent of millennials – people aged 18 to 34 – expect to be mobile money users by 2020. And while millennials are leading the charge, other demographic groups are close behind. According to the same Visa report, 77 per cent of Europeans were already using their phones to bank and make everyday payments in September 2017. Clearly, nothing on earth is going to stop this particular juggernaut.
 
Faced with relentless customer expectation pressures and the unstoppable attraction of technological advances, the need to digitise is well understood. As are the benefits. Companies need to get ahead, to retain existing customers and attract new ones, to cut costs and become super-efficient. And, ultimately, to be reborn as supremely innovative and agile digital businesses.
 

Holistic change is the necessary next step

Because this transformation extends far beyond digital products and services.
 
In most cases, except for online start-ups like Starling and elephant, the greatest challenges of digital transformation only reveal themselves part-way through the journey. And for many financial services companies, that means now.
 
A report entitled ‘Digital transformation in financial services’, conducted by MIT Sloan Management Review and Deloitte Digital, concludes that the industry “… has not fully explored what it means to be digital, from the inside out.” Many firms have yet to recognise the differences inherent in digital business and have leveraged digital technologies without rewiring their business, operating and customer models to make them digital too. Failure to do this soon, and comprehensively, will almost certainly jeopardise the success of digital implementations to date and could have catastrophic effects on future progress.
 
Many factors come into play to enable this rewiring, but the crux of the matter is culture change. The Deloitte report lists four “digital DNA” attributes that will help companies navigate digital disruption: agility, collaboration based on a flexible mix of physical and virtual teams, distributed instead of hierarchical organisational structures, and a bold risk appetite.
 
Acquiring digital DNA will enable financial services companies to be constantly on the alert and to change course on a pin to catch the prevailing winds of change. This involves doing many things differently, such as adopting fluid working practices, being able to move resources fast to wherever they’re needed, and testing pilot products at the earliest viable stage so that problems can be identified and quickly rectified.
 
In an environment where no company can rest on its laurels, continuous innovation and learning must become second-nature. Employees must ceaselessly challenge the status quo: can something be done differently and, if so, how? Similarly, while still exploring the potential of technologies like AI and blockchain, companies with truly digital DNA will already be identifying the next ones coming down the line.
 
With the market moving forward at such a rate, digital initiatives need regular monitoring to ensure they are still worthwhile. To this end, BBVA has created a Single Development Agenda[1], a portfolio of all the bank’s major investment projects, which C-suite executives assess every quarter to determine which projects need to be fast-tracked or otherwise reprioritised. It’s hard to see how any company will be able to hold its course in future without similar systems in place.
 

Balancing the demands of old and new

Bringing about such widespread cultural change will be every bit as demanding as the technology and process transformation that is already underway. The real challenge for the next two to three years, will be for financial services companies to manage all these elements at once. And, of course, to bring them together. The Deloitte report cautions decision-makers against trying to change everything at once and recommends introducing digital DNA attributes incrementally. It also advises against treating legacy and digital as two different models: “Instead, leaders should focus on adopting key digital processes that flow back into the legacy business.”
 
PwC points out, in its overview of ‘Digital transformation in financial services’, that the industry must also help its human workforce co-exist with digital counterparts such as virtual assistants. Describing the rapidly evolving workplace, PwC says: “This transition may not always be smooth, but we expect to see firms paying more attention to how humans and digital labour can work alongside each other more effectively.”
 

When compliance and innovation collide

So, the next stage of digital transformation is likely to impact on financial services organisations as a whole, taking in their business, operational and customer models. It’s a logical extension of a process that was always about enabling companies to do things differently.
 
As usual, technology will play a central role. One that is also poised to change. Perhaps the most noteworthy trend is a significant shift to the public cloud. Cloud computing platforms have become part of mainstream IT in the financial services industry, as elsewhere, and are a major force for transformation. Nevertheless, most organisations have held back from moving workloads to the public cloud, a degree of caution easily explained by the ever-present issue of regulatory compliance.
 
More firms in financial services than any other sector cite compliance/regulation (31 per cent compared with 19 per cent respectively) as inhibitors of cloud adoption, in a report by 451 Research published in January 2019[2]. However, the same report reveals that financial service firms expect public cloud IaaS and PaaS to serve as the primary environment for 28 per cent of production applications in two years, up from just nine per cent today.
 
In addition, about 60 per cent of financial services businesses expect their IT environments to be multi-cloud in the next two years, using a blend of on-premise and externally hosted cloud infrastructure (IaaS). They believe this approach solves the conundrum posed by competing needs for compliance, performance and cost optimisation.
 
Another cloud attribute of particular value to financial services is that it provides a platform for leveraging technologies like AI and blockchain. The above-mentioned report by 451 Research shows that the financial sector ranks AI and blockchain as higher IT priorities for 2019 than other sectors: 36 per cent of financial companies compared with 29 per cent of others for AI and machine learning, and 24 per cent compared with 12 per cent respectively for blockchain.
 
The jury is still out on the value of blockchain. The latest Telehouse blog on the subject offers an objective view of the likely direction of this much-vaunted but scarcely-implemented technology - Read here. Whatever the implications of blockchain for financial services, it has one thing in common with other technologies like AI and all the trends discussed in this article: the huge demands they make on an organisation’s data centre capacity, processing power and connectivity.
 
Demands that can’t realistically be fully met by in-house facilities.
 

Finding the optimal financial services IT environment

That’s why, whatever stage financial institutions have reached in their digital journey, colocation will almost certainly be included in their IT strategy for the next two to three years.  Colocation delivers new-found speed to market, virtually off the shelf. Done right, with the right partner, it can even serve as an invisible USP, especially to organisations without online start-ups’ built-in manoeuvrability.
 
Because the financial sector remains a prime target for hackers, and because of its regulatory obligations, companies have to take extreme care when choosing a colocation partner. Telehouse has compiled a checklist of the top five criteria to look for: compliance, security, density, speed, and availability (see below).
 
As Europe’s first carrier-neutral colocation provider, Telehouse also goes far beyond those five essentials in the shape of connectivity that supports business transformation, growth and faster returns on digital investments. Its Docklands campus gives access to thousands of cloud service providers and more than 750 carriers, mobile providers, ISPs and major Internet exchanges in key financial centres. Not forgetting the company’s 47 data centres worldwide, and an Internet optimisation service that reaches anywhere on the planet in less than 300ms.
 
For companies seeking to catch the high tide of digital transformation, there has never been a better time to adopt colocation. And there is no colocation partner better suited to meeting the aspirations of financial services firms than Telehouse.
 
To complete the quotation from Shakespeare: “On such a full sea are we now afloat / And we must take the current when it serves / Or lose our ventures.”
 
Absolutely.
 
 

Top 5 Criteria for Selecting a Financial Services Colocation Partner

Done right, colocation is the ideal environment for financial services. With the right partner, it provides near-perfect conditions for taking digital projects over the finish line. So, what should the industry look for when selecting a colocation partner? Below are five must-haves for every type of financial organisation.
 
  1. Compliance: All financial services providers need a highly compliant environment in which to store their data. As well as the payment card industry data security standard, PCI-DSS v3, additional accreditations are essential to ensure compliance with current data protection regulations such as GDPR. Look for a partner which, like Telehouse, fulfils the full raft of international operating standards for the management of information security, business continuity, energy, quality, the environment, and occupational health and safety.
 
  1. Security: Attacks can come from anywhere, so the physical safety of an organisation’s infrastructure is just as important as online protection. Ensure that any potential partner has multi-layer security provision, including fire detection and suppression systems. One example of best practice is the London Docklands campus of Telehouse. This is guarded 24/7 by trained professionals, drawing on electronic access management, proximity access control systems and CCTV.
 
As host for many leading DDoS mitigation providers’ scrubbing centres, Telehouse has become a centre of excellence for data cleansing and threat removal.
 
  1. Density: Sheer capacity, in terms of the size of a facility and its available power, is one of the principal reasons for adopting colocation. Financial service companies need to be sure of a fail-safe power supply and ample room to grow.
 
Telehouse delivers on both counts. It is one of the only companies in the UK to own and operate an onsite private electrical substation, with two 132kV power lines directly connected to the National Grid. The Telehouse London Docklands campus contains four data centres, the most advanced and recent of which opened in 2016. Together they form Europe’s best-connected colocation facility, with links to more than 530 carriers, ISPs and ASPs.
 
  1. Speed: Proximity to the City of London is particularly important for trading, where shaving milliseconds off the length of a transaction could be worth millions. Short distances between a company’s offices and its colocation facility are invaluable in other ways too, for example, by delivering faster results from real-time big data analysis. With its main campus at London Docklands and a data centre in the City itself, Telehouse couldn’t be closer to the financial heartlands.
 
  1. Availability: It’s easy to think of availability – and its unruly cousin, downtime – as IT concerns, only relevant inside the data centre. But the opposite is true, of course. Availability means customers being able to access any digital banking, insurance or wealth management services at any time, from anywhere, without experiencing unplanned breaks or slow response times. It’s essential to look for a colocation partner which, like Telehouse, offers superior 2N+1 levels of redundancy and guarantees 99.999% uptime in its SLAs.

To talk to a Telehouse expoert, call 020 7512 0550 or email webenquiries@uk.telehouse.net
 
[1] Taken from ‘The new bridge-builders: CFOs and finance reshaping the digital business’, a report produced in 2018 by The Economist Intelligence Unit for Oracle.
[2] ‘Multi-Cloud Fundamental to Financial Services Transformation’, a report produced by 451 Research and commissioned by Canonical.
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