How regulators learn to stop worrying and love the cloud

Regulatory concern for FI's use of the public cloud centers on the issue of data protection.  The deep apprehension of using public cloud storage stems from the innate fear that the data guardian no longer seems to be its sole bearer.  Naysayers proclaim that nefarious characters and dubious, negligent practice surely abound in the public cloud.  I would urge that these assertions merit moderation.  Data protection is fundamental to the design of public cloud offerings.  This is opposite to most FI's cost-efficient method of achieving business needs on the basis of meeting the minimum regulatory requirements.  This elementary comparison between the cloud-based and the data center model yields three key advantages of the former:

The most common model used

The most common model used by FI's today is the primary and secondary data center as shown in the following diagram.  The primary data center is where all of the computing occurs and data is stored.  Access to the primary data center is secure either through a private link or an encrypted protocol.

However things get messy afterwards that.  The available computing power at the primary data center is inelastic.  The data stored in that data center has access controls, nevertheless it is not encrypted.  The link connecting data between the primary and secondary data centers is most likely unencrypted.  The secondary data center is normally smaller and capable of supporting only a portion of the systems at the primary data center.  Additionally, most FI's backups are incomplete or patchy in the best case.  Other weaknesses inherent in this model are capacity planning, disaster recovery planning and disaster recovery testing. 

The impact is that FI's protection of customer data is limited and most FIs are unprepared for a disaster event.  To the extent that utilities make significant use of innovation and do a much better job in protecting customer data and disaster preparedness than FIs.  We should expect the same from FIs.

The public cloud-based model is intended to address scalability, encryption, disaster recovery, and backups as a service and it achieves this economically through scale.  Access to the public cloud is encrypted.  Data stored in the cloud is encrypted.  Data links between data centers are encrypted.  Computing and data capacity scales on demand.