Previous posts in this blog have commented on the financial services industry as increasingly undergoing a gradual makeover if not outright transformation – both from a business and IT perspective. This is being witnessed across the spectrum that makes up this crucial vertical – Retail & Consumer Banking, Stock Exchanges, Wealth Management/ Private Banking & Cards etc.
The regulatory deluge (Basel III, Dodd Frank, CAT Reporting, AML & KYC etc) and the increasing sophistication of cybersecurity threats have completely changed the landscape that IT finds itself in – compared to even five years ago.
Brett King writes in his inimitable style about the age of the hyper-connected consumer i.e younger segments of the population who expect to be able to bank from anywhere, be it from a mobile device or via the Internet from their personal computers instead of just walking into a physical branch.
Further multiple Fintechs (like WealthFront, Kabbage, Square, LendingClub, Mint.com, Cyptocurrency based startups etc) are leading the way in pioneering a better customer experience. For an established institution that has huge early mover advantage, the ability to compete with innovative players by using fresh technology approaches is critical to engage customers.
All of these imperatives place a lot of pressure on Enterprise FS IT to move from an antiquated command and control model to being able to deliver on demand services with the speed of an Amazon Web Services.
These new services are composed of Applications that encompass paradigms ranging from Smart Middleware, Big Data, Realtime Analytics, Data Science, DevOps and Mobility. The common business thread to deploying all of these applications is to be able to react quickly and expeditiously to customer expectations and requirements.
Enter the Software Defined Datacenter (SDDC). Various definitions exist for this term but I wager that it means – “a highly automated & self-healing datacenter infrastructure that can quickly deliver on demand services to millions of end users, internal developers without imposing significant headcount requirements on the enterprise“.
Let’s parse this below.
The SDDC encompasses SDC (Software Defined Compute) , SDS (Software Defined Storage), SDN (Software Defined Networking), Software Defined Applications and Cloud Management Platforms (CMP) into one logical construct as can be seen from the below picture.
The core of the software defined approach are APIs. APIs control the lifecycle of resources (request, approval, provisioning,orchestration & billing) as well as the applications deployed on them. The SDDC implies commodity hardware (x86) & a cloud based approach to architecting the datacenter.
The ten fundamental technology differentiators of the SDDC –
1. Highly elastic – scale up or scale down the gamut of infrastructure (compute – VM/Baremetal/Containers, storage – SAN/NAS/DAS, network – switches/routers/Firewalls etc) in near real time
2. Highly Automated – Given the scale & multi-tenancy requirements, automation at all levels of the stack (development, deployment, monitoring and maintenance)
3. Low Cost – Oddly enough, the SDDC operates at a lower CapEx and OpEx compared to the traditional datacenter due to reliance on open source technology & high degree of automation. Further workload consolidation only helps increase hardware utilization.
4. Standardization – The SDDC enforces standardization and homogenization of deployment runtimes, application stacks and development methodologies based on lines of business requirements. This solves a significant IT challenge that has hobbled innovation at large financial institutions.
5. Microservice based applications – Applications developed for a SDDC enabled infrastructure are developed as small, nimble processes that communicate via APIs and over infrastructure like service mediation components (e.g Apache Camel). This offers huge operational and development advantages over legacy applications. While one does not expect Core Banking applications to move over to a microservice model anytime soon, customer facing applications that need responsive digital UIs will need definitely consider such approaches.
6. ‘Kind-of-Cloud’ Agnostic – The SDDC does not enforce the concept of private cloud, or rather it encompasses a range of deployment options – public, private and hybrid.
7. DevOps friendly – The SDDC enforces not just standardization and homogenization of deployment runtimes, application stacks and development methodologies but also enables a culture of continuous collaboration among developers, operations teams and business stakeholders i.e cross departmental innovation. The SDDC is a natural container for workloads that are experimental in nature and can be updated/rolled-back/rolled forward incrementally based on changing business requirements. The SDDC enables rapid deployment capabilities across the stack leading to faster time to market of business capabilities.
8. Data, Data & Data – The heart of any successful technology implementation is Data. This includes customer data, transaction data, reference data, risk data, compliance data etc etc. The SDDC provides a variety of tools that enable applications to process data in a batch, interactive, low latency manner depending on what the business requirements are.
9. Security – The SDDC shall provide robust perimeter defense as well as application level security with a strong focus on a Defense In Depth strategy. Further data at rest and in motion shall be
10. Governance – The SDDC enforces strong governance requirements for capabilities ranging from ITSM requirements – workload orchestration, business policy enabled deployment, autosizing of workloads to change management, provisioning, billing, chargeback & application deployments.
So how is doing SDDC at the moment? Most major banks have initiatives in place to gradually evolve their infrastructures to an SDI paradigm. Bank of America (for one) have been vocal about their approach in using two stacks, one Open Source & OpenStack based and the other a proprietary stack[1].
To sum up the core benefit of the SDDC approach, it brings a large enterprise closer to web scale architectures and practices.
The business dividends of the latter include –
1. Digital Transformation – Every large Bank is under growing pressure to transform lines of business or their entire enterprise into a digital operation. I define digital in this context as being able to – “adapt high levels of automation while enabling the business to support multiple channels by which products and services can be delivered to customers. ”
Further the culture of digital encourages constant innovation and agility resulting high levels of customer & employee satisfaction.”
2. Smart Data & Analytics – Techniques that ensure that the right data is in the hands of the right employee at the right time so that contextual services can be offered in real time to customers. This has the effect of optimizing existing workflows while also enabling the creation of new business models.
3. Cost Savings – Oddly enough, the move to web-scale only reduces business and IT costs. You not only end up doing more with less employees due to higher levels of automation but also are able to constantly cut costs due to adopting technologies like Cloud Computing which enable one to cut CapEx and OpEx. Almost all webscale IT is dominated by open source technologies & APIs, which are much more cost effective than proprietaty platforms.
4. A Culture of Collaboration – The most vibrant enterprises that have implemented web-scale practices not only offer “IT/Business As A Service” but also have instituted strong cultures of symbiotic relationships between customers (both current & prospective), employees , partners and developers etc.
5. Building for the Future – The core idea behind implementing web-scale architecture and data management practices is “Be disruptive in your business or be disrupted by competition”. Web-scale practices enable the building of business platforms around which ecosystems can be created and then sustained based on increasing revenue.
To quote wikipedia, a widespread transition to the SDDC will take years:
Enterprise IT will have to become truly business focused, automatically placing application workloads where they can be best processed. We anticipate that it will take about a decade until the SDDC becomes a reality. However, each step of the journey will lead to efficiency gains and make the IT organization more and more service oriented.
The virtuous loop encouraged by constant customer data & feedback enables business applications (and platforms) to behave like agile & growing organisms – SDDC based architectures offer them the agility to get there.
References –
1.http://blogs.wsj.com/cio/2015/06/26/bank-of-america-adding-workloads-to-software-defined-infrastructure/