I am writing in response to the recent opinion piece “Convince me that Cloud Computing is a Solution” in the hope that I might convert the skeptical author of that column.
I fully agree with one part of his/her premise: When you move poorly designed software to the Cloud, you get poorly designed, Cloud-based software. (In marketing, the corollary is that nothing kills a bad product faster than good advertising.) He is correct in asserting that the Cloud is just a tool for delivering services more efficiently. If those services are poorly conceived, badly designed, or implemented improperly, the customer will find out quickly and move on. The graveyard of terminated multi-million-dollar IT projects of any sort, not just Cloud, is wide and thick with bodies.
But even the author has to concede that there are at least some tangible advantages to moving to the Cloud, and the ones he enumerates in the article are far from trivial – one source of code, WAN accessibility, and geographical diversification for data centers. Those he omits seal the case.
In this category I would include the modularity of many Cloud solutions to enable fine-tune adjustment of business rules and other changes with minimal business disruption and rapid distribution to all users. That just isn’t going to happen with IT-based mainframe or client-server systems.
Today’s highly fluid regulatory environment favors flexible, Cloud-based systems: The need to develop and maintain rules-based compliance engines requiring constant monitoring and updating by multiple parties; the constant pressure to drive down transaction costs in a slimmed down menu of loan products; and the increasing sophistication and number of fraudsters from both internal and external sources. All these play directly to the strength of the cloud. Institutions that ignore today’s realities are already suffering the consequences with regulatory actions rising and the number of mortgage fraud cases rising more than 800% from 2008 to 2009.
And with the eventual return of the secondary markets, those banks that can provide the transaction and data transparency and tracking ability inherent in the best Cloud-based lending solutions will be well equipped to sprint out of the starting blocks.
The Cloud greatly reduces the friction and time lag in the distribution of innovation – whether the innovation comes from IT or the business owner. In the Cloud, the innovator is one step from deployment. In non-Cloud models, the distribution mechanisms are slow and cumbersome. Moreover, by deploying cloud technology, institutions avail themselves of operational expertise tailored to a specific solution set whereas in-house IT departments must be expert across many operating systems. Because the expertise is focused, issue resolution and prevention for a particular solution are more efficient and timely. And optimizations run faster as well.
So yes, Cloud is a delivery model. But it is also an enabling technology. The nature of Cloud computing enables the development of software that could not exist outside of the Cloud, and that aligns more precisely with an organization’s strategies and business objectives.
Clearly, Cloud-based technology will not spring fully formed on the lending industry, like Athena from the head of Zeus. But as a delivery model, upon which robust mortgage technology solutions are already available, it has gained converts amongst the top tier, and is gaining ground with aggressive mid-tier lenders. It will take some time to evolve and be accepted across the industry. But the wisdom of migrating to the Cloud is being confirmed many times over, as the early adopters build on their competitive advantage in time to market, cleaner loans, improved data transparency, and in higher productivity.