Amazon Pitches Its Cloud Computing to Big Banks
February 23 2016 - 10:20AM
Dow Jones News
Amazon.com Inc. is pitching its cloud computing service to big
U.S. banks, hoping to break into one of the last major strongholds
of old-line technology companies.
The company's Amazon Web Services unit has been approaching
banks including Citigroup Inc. and J.P. Morgan Chase & Co.,
people familiar with the matter said. It is telling them they can
save money by renting its servers to perform high-demand tasks
instead of building up their own infrastructure, the people
said.
Winning business from companies with such high bars for security
and regulatory compliance is no sure thing for a company that built
its name selling computer services to smaller businesses and
consumer-focused companies like Netflix Inc.
But Amazon crossed into more serious uses in 2013, when the
Central Intelligence Agency selected it to run cloud services for
intelligence agencies. Now, it is trying to prove its chops in
financial services—an area long dominated by business technology
heavyweights like International Business Machines Corp. and
Microsoft Corp.
Amazon Web Services maintains giant clusters of servers that
customers access over the Internet—the cloud, in industry jargon.
Clients rent as much computing power or storage capacity as they
like, with the ability to dial it back when their demand drops off.
The Seattle-based company has said in conversations with banks that
the service is a good fit for tasks like supporting mobile-banking
apps, crunching risk scenarios and functioning in a disaster, these
people said.
The offering in theory could help banks shift their tech
spending to newer areas and away from maintaining so many data
centers. The hurdle is that Amazon's is a public cloud business,
open to anybody. Banks, which have relied on their own private
infrastructure to this point, would need to feel comfortable about
security and ease any concerns from regulators before moving
ahead.
J.P. Morgan is exploring using the public cloud in some uses to
trim expenses and for flexibility in storage space, said Matt
Zames, the bank's chief operating officer. For example, banks might
need extra computing power when credit-card use surges on Black
Friday that they can do without for the rest of the year.
Mr. Zames said the bank began examining its public cloud options
with an initial pilot last year.
The largest U.S. bank by assets thinks it could save hundreds of
millions of dollars if it moves toward the cloud, people familiar
with the matter said. J.P. Morgan has talked to Alphabet Inc.'s
Google in addition to Amazon, these people said.
Before fully moving forward, J.P. Morgan has a list of "key
controls" to be addressed, including controls on access,
encryption, and legal and compliance issues, Mr. Zames said.
One bank to say yes to Amazon is Capital One Financial Corp.,
which hopes to slash its data centers to three from eight as a
result, Rob Alexander, the bank's chief information officer, said
at a conference last year.
The bank is using Amazon for a range of processes, including its
mobile banking app. Mr. Alexander said Capital One doesn't want to
be in the business of "investing to build costly and complex
infrastructure."
The strategy is also key for Amazon as it strives to move beyond
being just an online retailer. Amazon Web Services holds much of
the market for public cloud services and is thought to be widening
its lead over competitors like Microsoft and Google by building
data centers around the world.
Amazon Web Services is Amazon's fastest-growing division and a
principal reason for many investors' confidence in the retailer's
long-term prospects. The company broke out Amazon Web Services'
results for the first time last year, when the unit's sales jumped
70% to $7.88 billion. Amazon's overall sales grew 20% to $107
billion.
Landing a big Wall Street bank would give Amazon extra
credibility around security and privacy safeguards.
Ranjit Bawa, who advises banks and other companies on cloud and
infrastructure for Deloitte Consulting, said that financial firms
have become more willing to consider the public cloud. But some
banks still have concerns about privacy and security, and even the
banks that are using the cloud are keeping their core banking
activities and data on their own platforms, Mr. Bawa said.
"Two years ago, we would have said people are still looking at
it very skeptically," Mr. Bawa said. Now, he said, "the cloud wars
are on."
Greg Bensinger contributed to this article
Write to Christina Rexrode at christina.rexrode@wsj.com and
Emily Glazer at emily.glazer@wsj.com
(END) Dow Jones Newswires
February 23, 2016 10:05 ET (15:05 GMT)
Copyright (c) 2016 Dow Jones & Company, Inc.
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