As agility becomes ever more critical for success, managed hosting offers a highly effective way to cut costs, improve competitiveness and better exploit market opportunities, by enabling firms to achieve more with fewer resources.
Given the potential competitive advantage that is at stake, even the inherently cautious financial services sector is overcoming its reticence to join the crowd in migrating to managed hosting.
However, the emerging digital risks that come with the increased speed, variety and volume of data involved, mean that in selecting the most appropriate managed hosting partner, financial services firms must take care, or they risk finding their business and brand irrevocably damaged. The first step is to understand four specific risk areas: security, compliance, reputation and performance.
The recent financial crisis changed the nature of the financial services sector. Not only has it imposed new demands from consumers and regulators, but it has diminished resources and shrunk margins. As a result, more and more companies looking to reduce their IT spend, both on hardware and expertise, have turned to outsourced managed hosting.
By moving IT from a capital to an operating expense in this way, the cost savings can be considerable. The Commonwealth Bank of Australia, for example, reportedly reduced expenditure on maintenance and infrastructure from 75% of total outgoings to just 25%.
Using a managed hosting service has other advantages too, not only enabling financial services firms to respond faster to new opportunities thanks to their enhanced and easily scalable IT capabilities, but also releasing in-house staff to focus on more strategic tasks, such as improving systems and applications, that help grow the business.
Other significant benefits of using hosted data centres include improved cyber security, reduction of physical risk, such as fire and flood, seamless back-up and faster recovery.
Given these drivers, the financial services sector, along with other professional services, is increasingly recognising that maintaining and managing data securely isn’t dependent on physical on-site storage. The result has been a surge in the use of managed hosting services, with forecast annual expenditure set to exceed $55 billion in 2018, nearly double the $28 billion of 2014, in contrast with infrastructure-only spending, which is expected to grow at just 15 percent over the same period.
With such a growth in demand, the number of managed hosting service providers entering the marketplace has already grown significantly, with a forecast compound annual growth rate (CARG) of 16.2% in provider numbers over the next five years.
However, not all these newcomers will have the functional capabilities or the necessary skills to consistently provide the services they claim to offer, or the financial robustness to survive long-term.