Clouds With Industry-Specific Compliance Built In

The arguments for industry-specific cloud computing are becoming more compelling.

Take the pay-as-you-go cost advantages and expand-as-you-need flexibility the cloud affords, and add layers of industry-specific processing, security, and compliance. Indeed, ever since a couple of high-profile industry-specific cloud providers emerged in 2011, such as the NYSE Technologies' Capital Markets Community Platform and SITA's ATI Cloud for the air-transport industry, industry-specific clouds –also known as community clouds–have continued to proliferate.

But it has been quieter than was the case with the initial pulse of public cloud uptake few years ago, said David Linthicum, an independent cloud consultant and InfoWorld blogger. He suspects there's a reason for that. “At the end of the day, we're building what are in essence enterprise applications, just in a way that can be consumed over the Internet, and I think people are realizing it's no big whoop.”

So they're not tabloid fodder. But community cloud offerings do offer things a public cloud can't, not least of which is to handle tough industry-specific security and compliance requirements. As Mark Wright, NYSE Technologies' vice president of product management put it, “We take great pride in being a very un-public cloud.” Community clouds like that of NYSE Technologies come with assurances that cloud-stored data will remain safely in a specific country, region, or even data center. They are housed either in private clouds—server farms owned and controlled by the entity offering the community cloud service—or they provide secure gateways into the clouds of hired-gun providers. And they are often tailored to satisfy specific, existing business needs.

Nasdaq OMX's FinQloud, launched late last year, is one example. FinQloud's main pitch is dealing with SEC 17a-4 record retention rules. Rather than securities broker-dealers having to store seven years of transaction data, they can send it off to FinQloud. Customers enter through a secure NASDAQ gateway, and NASDAQ servers hold the encryption keys. But the data itself resides on the Amazon Web Services cloud. NASDAQ officials say the service saves clients 80 percent in data-storage costs.

Compliance issues have pushed financial industry-specific cloud far from the fingers of the public Web, says Alex Tabb, a partner with capital markets research and advisory firm Tabb Group.

“They are for all intents and purposes segregated from the rest of society—no one in capital markets is going to put this kind of important, very strategic, confidential information anywhere near where people can get access to it,” Tabb says. Compliance issues, he adds, remain a top concern among financial players looking at any sort of cloud solution.

NYSE Technologies' Community Platform resides entirely in the secure confines of NYSE data centers, in which clients have been comfortable for decades. Once inside, investment banks can crank out regulatory reports, hedge funds can test and validate strategies, and financial firms of all sizes can test custom applications.

Wright says customers are looking for a range of services. Some seek straight infrastructure as a service (Iaas) on which to set up their own private clouds. Others make use of software bundles NYSE has developed to quickly build out, say, a new trading solution. Others focus on disaster recovery, or communications compliance, or SEC 17a-4 record storage, he says. Client firms may still be wary of a wholesale outsourcing of their servers, Wright says, but for things like record retention, “Can you unload that for me?” is a common refrain.

The list of financial industry cloud players is growing—Bloomberg Vault and Thomson Reuters Elektron being among the notable entrants. Linthicum says he's consulting with several financial firms developing community cloud services. Part of the challenge for community cloud shoppers, Tabb says, is figuring out which service best aligns with their goals. Smaller firms are paying close attention to community clouds, he says, seeing them “as a way of getting away from the very expensive infrastructure they need —they can just go to the cloud and pay based on what they use.”

“What makes the cloud attractive is that it's more a utility model. It has the potential to bring costs down dramatically.”

—Brian Bodor,

Partner,

Pillsbury Winthrop Shaw Pittman

But bigger players are just as interested, Wright says. “There's a trend toward bigger shops and more aggressive moves,” he says. “Clients have known for years that they need to rethink their cost structure. They need to consider managed services more broadly. What can they push out of their shop to save money? They can't do it all themselves.”

The Nasdaq OMX model of picking a specific battle represents a common community cloud theme, says Mike West, vice president at distinguished analyst at Saugatuck Technology.

He cites the example of Pixar's RenderMan On Demand cloud offering. Rendering digital animation is processing intensive, the costs of high-end servers contrasting with the “feast or famine” nature of filmmaking. IGT Cloud is another example of cloud-based software as a service (SaaS). It gives casino operators cloud-based access to hundreds of games in IGT's game library.

“Here's a model that I think makes a lot of sense for a lot of industries,” says West.

Community clouds could make themselves attractive in other ways. There could be community cloud platforms that help retailers develop PCI- and financial-regulation-compliant systems, including shared databases for things like fraud detection, West says.

So where else are these community clouds? The financial industry is the hotbed, Linthicum says, but healthcare players are also increasingly interested. “Manufacturing doesn't have the money. Retail doesn't have the money,” he says. “I think healthcare really doesn't have the money, but they have to do it to survive.”

Easing the Transition

Transitioning to the cloud can be tough for these institutions, though. While cloud-based options like CareCloud  and Optum Health Care Cloud exist, an institution may be running a major electronic health record like Meditech or Epic in-house in addition to multiple tangential systems and data warehouses.

THE CLOUD IN A NUTSHELL

Industry-specific, a.k.a. community clouds, can involve levels 1-4, and sometimes, as is the case with NYSE Technologies, all four. Sagautuck Technology explains the different levels below.

Level

What Is It?

What Is In It?

Level 4

Cloud Business Service and Operations

Cloud Strategy, Business Process Outsourcing, Managed Services, Systems Integration

Level 3

Cloud Business Solutions

Software-as-a-Service (SaaS), hosted offerings, vertically purposed solutions

Level 2

Cloud Platforms & Hubs

Platform-as-a-Service (PaaS), other platforms, e.g., Analytics, Mobility, Social Networking, Integration, Security

Level 1

Cloud Infrastructure

Infrastructure-as-a-Service (IaaS), e.g., Computer/Storage,

and Private Clouds

Level 0

Cloud Technologies

Basic Hardware, Software, Middleware Networking

Source

Saugatuck Technology.

“That's kind of the untold story in the cloud world,” Linthicum says. “Most are pushing back on the cloud not because it's too risky or because of compliance issues, but they don't have the money.”

Community clouds are also a hot topic among governments, particularly now that one of the biggest compliance-related issues has been removed from the equation, says Brian Bodor, a partner with law firm Pillsbury Winthrop Shaw Pittman in Washington D.C. 

Amazon's GovCloud and others have found ways to ensure that government data stays in the United States, Bodor says. In Amazon's case, the offering also meets federal encryption requirements and complies with U.S. International Traffic in Arms Regulation (ITAR) requirements. That's good news for governments and agencies facing budget shortfalls and for whom capital investment is often trickier to budget than operating expenses, he adds.

“What makes the cloud attractive is that it's more a utility model,” Bodor says. “It has the potential to bring costs down dramatically.”