ASB bank is one of the major financial service providers and has millions of customers. It is very proud of its commitment to be innovative and continue focus on ensuring the banking experience is easy for its customers. ASB bank is operating in a sound New Zealand financial and banking industry. It has well established information technology infrastructure that enables the bank to offer customers reliable, secure, and fast services. However, just like other banks, ASB's IT system is facing a challenge that is to stay competitive and expand its business while keep the IT cost in a relative low level. Cloud computing may be the answer for the challenge. Cloud computing is 'a model of computing where firms and individuals obtain computing power and software applications over the Internet, rather than purchasing their own hardware and software' (Laudon & Laudon 2010, p.196). Amazon Elastic Compute 2, Google App Engine, and AppExchange by Salesfore.com are the most successful stories on cloud computing model. Cloud computing can create a number of benefits for business including elasticity, immediacy, accessibility, mobility, reliability, and efficiency. Although the effort and cost of migrating to cloud computing could be significant, in a long run, it will be beneficial for ASB. Thus, the recommendation for ASB bank regarding its IT challenge is to shifting the IT infrastructure to cloud computing.
TABLE OF CONTENTS
LETTER OF TRANSMITTAL
EXECUTIVE SUMMARY
INTRODUCTION
New Zealand Banking Industry
ASB Bank and ASB Group
IT INFRASTRUCTURE: ISUES AND CHALLENGES
The IT Infrastructure Ecosystem
ASB Bank's IT Infrastructure
IT Infrastructure Challenge of ASB Bank
CLOUD COMPUTING AND ITS BUSINESS BENEFITS AND COSTS
Cloud Computing and its Developing Trends
Cloud Computing Solutions
Cloud Computing Benefits
Cloud Computing Cost
RECOMMENDATION OF CLOUD COMPUTING
CONCLUSIONS
REFERENCES
APPENDIX
Journal
INTRODUCTION
The objective of this report is to provide information to the CEO of ASB Bank about the bank's information (IT) infrastructure, discuss cloud computing and its business benefits and costs, and recommend on the possibility of adoption. Firstly, in this section, a brief background description of ASB Bank and ASB Group will be present. It includes the overall banking industry in New Zealand and ASB bank's products and services, company's vision and mission, and business strategy.
New Zealand Banking Industry
The Reserve Bank of New Zealand is the government department that regulates monetary circulation and credit, manages the public debt, and establishes policy and regulations. In New Zealand, the banking and financial services industry consists with main commercial bank and small number of non-bank financial firms and savings companies. Because Australian groups control the major banks in New Zealand, the New Zealand financial sector is heavily influenced by Australian financial industry. The banking and monetary system in New Zealand is well established and regulated. According to a Reserve Bank report in 2004 (Matthews 2004), the banking system has some strengths in all related data with excellent profitability, small amount of impaired assets, similar level of capital to that in other developed countries, and a high level of diversification across asset portfolios. Overall, all the banks and their parent groups have showed a sound financial condition. In an article from the International Monetary Fund, Tumbarello (2010) states that despite some vulnerability, banks in both sides of Tasman have been resilient to the economic crisis.
ASB Bank and ASB Group
ASB Group is one of the major financial and insurance providers of New Zealand and ASB Bank Limited is one of the New Zealand's foremost commercial banks with the aim to be "one step ahead" in both its products and services. ASB began its operation as Auckland Saving Bank in 1847 and became a fully commercial bank under the name, ASB Bank, in 1987. In addition, ASB Securities Limited, ASB Group Investment Limited, BankDirect, and Sovereign are also part of ASB Group. The Commonwealth Bank is the parent company of ASB Group and the most recognised brand in the Australian banking industry (ASB Bank 2011a). Its website is www.asb.co.nz.
ASB Bank has a vision of being world class for customers, colleagues and communities (ASB Bank, 2011b). ASB Bank offers a wide range of financial products and services including accounts, home loans, personal loans, overdraft facilities, credit cards, and investment services. These products and services can be divided into three categories, personal banking, business banking, and rural banking. Furthermore, it also provides insurance and securities services through Sovereign and ASB Securities. ASB's electronic payment system allows customers to transfer funds via mobile phone or the internet (ASB Bank, 2011a).
ASB Bank has sound reputation in both quality services and commitment on community. Soon after the Christchurch earthquake in February this year, ASB has announced a $250 million investment plan to backing business and people badly affected by the quake (Jones 2011). Small to medium business customers who have been considerably affected by the disaster can access a NZ$100 million fund with an interest-free loan for the first year and discount interest rate for the following two years. Personal customers of ASB Bank can get a six-month repayment holiday and discount interest rate for their quake damaged houses.
'One Step Ahead' was ASB Bank's slogan of its advertising commercials. Recently, ASB Bank changed this slogan to 'Creating Futures'. The success of ASB is credited to its innovation and persistent improve and focus on making sure the banking experience is easy for its customers. "Save the Change" is a programme that ASB launched to encourage its customers to save. Customers can round up their electronic transactions to the nearest multiple of $1, $2, $5, or $10. Although this idea is not new, it is the first time that it has been introduce to New Zealanders (NZ Herald Online 2010). In late 2010, ASB Bank again showed it is the leader in New Zealand banking industry and keeping up with world trends by being the first bank in the world to run a customer advice service that discusses account detail on Facebook, a popular social media website. "Virtual Branch" is part of the marketing makeover for ASB Bank that includes new prints and television commercials. Although the service has been criticised for privacy and security reasons, customers can choose from images of eight ASB staff and discuss issues in real time (Drinnan 2010).
IT INFRASTRUCTURE: ISUES AND CHALLENGES
In this section, I will describe ASB Bank's IT infrastructure according to 'The IT Infrastructure Ecosystem' (Laudon and Laudon 2010, p. 203) and identify the issues and challenges that ASB faces in the management of its IT infrastructure.
The IT Infrastructure Ecosystem
According to Laudon and Laudon (2010), the IT Infrastructure Ecosystem includes internet platforms, computer hardware, operating system, enterprise software, networking system, consultants and system integrators, and data management and storage.
Information technology has proven to be vital for banking and financial service industry. Advance technology can offer competitive advantages to financial service firms. For example, some of the technologies may create entry barriers, improve efficiency and productivity, and generate profit (Fitzsimmons & Fitzsimmons 1997 in Al-Hawari, Hartley & Ward, 2005). Technology development is thought to be one of the major factors that influence the banking industry development (Al-Hawari, Hartley & Ward 2005). Banks have to keep up with the future trends to be competitive and productive. In order to maintain the competiveness, banks reduce costs and add value for their customers by using technology to deliver their services (Al-Hawari, Hartley & Ward 2005). In banking industry, customers tend to use different methods to access their bank in a complementary way, such as internet banking, telephone banking, ATM, and traditional approach (Al-Hawari, Hartley & Ward 2005).
ASB Bank's IT Infrastructure
ASB Bank aims to be innovative with information technology because it believes that having the best technology and equipment is vital for its employees to reach their best. ASB's Branch Banking systems are among the top around the world. Employees came from other banks are frequently appreciated about the systems that ASB has (asb.co.nz 2011). In order to maintain its market position, ASB constantly improves its online products and services. In addition, the bank wants to simplify and improve collaboration and communication internally and within the ASB Group to become more prevalent. Therefore, the Bank has well established IT infrastructure and policy.
Since ASB Bank is a customer orientated financial service provider, it is critical to maintain its customers' data and communication. Thus, ASB Bank wanted to increase the resilience and availability of its email system and it proactively switched to the Microsoft Exchange Server 2010 from the 2003 Enterprise Edition in 2009 (Microsoft Case Studies 2010). The 2003 version provided a sound level of availability; however, if the email system has a fault, it might take half an hour or more to restore the service. It believed that the 2010 version would help it meet its goals for improving availability and efficiency. ASB bank can now automatically recover its email system by using a group of servers that continuously replicate to update the database. The system also simplifies and improves regulatory compliance by employing built-in archiving and discovery capabilities (Microsoft Case Studies 2010). With greater communications capabilities that Exchange Server 2010 provided, the bank also believes its staff can be more efficient and productive.
Apart from upgrading its computing hardware and software applications, ASB has used external consulting and system integration service for a number of projects and tasks. ASB Bank has teamed up with RSA Security, one of the most trustworthy companies for online security, to improve internet banking security with RSA two-factor authentication system (RSA 2003). The RSA system sends a unique, random, and one-time code to the register mobile phone when someone tries to transfer money that above a certain limit from the account. In order to complete the process, the customers just needs to enter the code to validate their identity. The partnership enables ASB Bank to have extra security system for its customers who use internet banking regularly. The partnership also means that ASB customers' do not need to pay for anything to be able use this service. Integration of RSA's technology reduces the deployment costs and provides services to millions of ASB customers without adding extra staff and administrators.
IT Infrastructure Challenge of ASB Bank
For many industries, for example, banking and financial service industries, information technology gives competitive advantages as it is not only the customers want more convenient and secure way to manage their accounts and investments but also the banks reply on it for effective and productive operation. The challenge for ASB Bank as well as many other financial firms is to maintain and improve their IT ability while reducing IT overhead. Because the technology is developing so fast, the turnover of IT hardware and software is very rapid and the cost of upgrade will be substantial. However, the technology is vital for the business and cannot be replaced. Therefore, many businesses would like to reduce the IT budget while maintain the capacity and capability.
CLOUD COMPUTING AND ITS BUSINESS BENEFITS AND COSTS
Cloud computing and its applications is the latest evolution and hottest topic in the information technology world. This model of computing relies on the massive computing centres that have a network compose with large amount of cheap servers just like ordinary home PCs. Here, an overview about the cloud computing and its current trends is provided. I will also describe cloud computing solutions that would be applicable and discuss the benefits and costs of cloud computing to ASB Bank.
Cloud Computing and its Developing Trends
The U.S. National Institute of Standards and Technology defined cloud computing is 'a model for enabling ubiquitous, convenient, on-demand network access to a shared pool of configurable computing resources (e.g., networks, servers, storage, applications, and services) that can be rapidly provisioned and released with minimal management effort or service provider interaction' (Mell and Grance 2011). Cloud computing is currently the ultimate IT infrastructure built on many years of research in virtualisation, grid computing, distributed computing, utility computing, networking, and web and applicatioin services (Vouk 2008).
Laudon & Laudon (2010, p.196) refers 'cloud computing as a model of computing where firms and individuals obtain computing power and software applications over the Internet, rather than purchasing their own hardware and software.' It the result of a number of technology advances such as reliable and high speed networks, virtualisation capabilities, open source software, large infrastructures established by global corporations, and adoption of open Web 2.0 standards (Department of Finance and Deregulation 2011). Cloud system has five characters (Mell and Grance 2011):
On demand self-service
Broad network access
Resource pooling
Rapid elasticity
Measured Service
Three service types can be found in cloud computing service: cloud Software as a Service (SaaS), cloud Platform as a Service (PaaS), and cloud Infrastructure as a Service (IaaS) (Mell and Grance 2011). SaaS refers to the ability of users to use the provider's software on a cloud system from various devices, rather than purchasing, installing, and operating the software themselves. PaaS provides a platform on which users can create and execute applications with programming languages and tools within the cloud system. Again, users do not worry about the underlying infrastructure. IaaS is to provide the users with processing, networks, storage, and other essential computing power which might be unable to obtain individually (Mell and Grance 2011, Department of Finance and Deregulation 2011)
Cloud Computing Solutions
There are many successful stories on cloud computing infrastructure. Amazon Elastic Compute Cloud (Amazon EC2), Salesforce.com AppExchange, and Google App Engine are the most recognised solutions. Amazon EC2 is a cloud service allows web base developers to obtain and configure computing power easier. It can reduce the time needed to obtain and start up server instances and users can rapidly scale capacity according to the change of computing requirements. Similar to other on demand cloud service, Amazon EC2 lets users to pay for the capacity they really use (Amazon Web Services 2011).
AppExchange is recognised as a market pioneer for cloud computing service that offers an open, community-based model to distributing, developing, and acquiring applications (Salesforce.com 2005). Developers can list their applications on AppExchange and gain access to many salesforce.com clients. It also offers wide-ranging tools and supports that enable developers to show the advances of their software and distribute it to future customers. Using AppExchange, developers have a powerful and innovative way to bring the on-demand benefits to the business (Salesforce.com 2005).
Google App Engine allows people to run their web applications on Google's infrastructure with minimum care. After uploading the application onto App Engine, it is ready to work for the business. In addition, Google App Engine has Java, Python, and Go runtime environment that support applications written in a number of programmes, such as Java, Python, and Go. These environments are developed to make sure that the applications can run quickly, smoothly, and securely on the system. Similarly, people only have to pay for what they use with App Engine. There are no upfront costs and recurring fees (Google code 2011).
Cloud Computing Benefits
Cloud computing is the new trend of information technology. It must have some sort of benefit for businesses and institutes. The possibility of cost cutting is very promising; in the meantime, cloud computing could be best for businesses to streamline processes and increase innovation (ISACA 2009). Organisation can focus on their core business and process activities that were too expensive before, instead of worries about scalability. More reliable backup, satisfied customers, increase scalability, and even higher margins are likely achieved with cloud computing (ISACA 2009).
The most important business benefits delivered by cloud computing includes:
Elasticity - Cloud computing service is described as converting capital expense to operational expense or pay-as-you-go. It provides substantial IT capacity with little or no initial capital investment and reduces resources waste (Armbrust et al. 2009, ISACA 2009). Thus, cloud computing allows businesses have more flexibility, more cost control, and less risk. However, firms do need to compare the costs of using cloud computing against the costs of owning a server.
Immediacy - The power and speed of cloud computing server enables to speed up large IT projects and reduce the time needed to get new applications to function. In many occasions, IT applications can take months to be up and running smoothly. With cloud computing, people can avoid delay. Applications can be basically access via Internet. This also has a positive impact on reducing costs and operational issues caused by the time delay (ISACA 2009).
Accessibility - Cloud computing enables high speed access, large storage, and complex applications. Because cloud computing provides have multiple paths, system overload and services delay are unlikely. However, businesses should have provisions in case the service failure (ISACA 2009).
Mobility - Instead of having to sit in their office, customers of cloud computing service can access services and information anywhere in the world. Wireless devices that connected to cloud computing allow users to access applications.
Reliability - Applications used in cloud computing generally need fewer versions and less frequent upgrades. In addition, there will be fewer unrelated applications and software, which normally loaded into a standard PC. All the applications and software are typically managed by cloud providers. Organisations have problems with applications is basically they often crash with other software. Cloud computing can let users to integrate different types of applications. The more reliable system, the more productivity and efficient operation.
Efficiency - All the points that mentioned above have something to do with cost containment and efficiency. The flexibility, reliability, accessibility, and capacity that cloud computing offers not only create business opportunities, but also facilitate the smooth and efficient running of the operation. Furthermore, shifting information management towards cloud computing enables businesses focus on innovation and their core business.
Cloud Computing Cost
It seems like so far cloud computing offers a great opportunity for companies to improve their business in a number of ways. However, is it really that good if take into account the cost associate with adopting cloud computing service? A study by Kondo et al (2009) found that if using cloud computing instead of volunteer computing (VC) system, the pay-per-use cost would be less than VC by an order of magnitude. Apart from costs for on demand service, the cost of transferring exiting IT system to cloud computing should include the costs of migrating data from current system to cloud and future data transfer cost. Although migration only needs to be done once, it could take substantial effort and be time consuming (Armbrust 2009).
RECOMMENDATION OF CLOUD COMPUTING
The competitive forces model for IT infrastructure (Laudon & Laudon 2010) includes:
Market demand for your firm's services.
Your firm's business strategy.
Your firm's information technology (IT) strategy, infrastructure, and cost.
Information technology assessment.
Competitor firm services.
Competitor firm IT infrastructure investments.
The IT challenge that ASB Bank facing is to reduce the IT expenditure yet maintains and contributes its competitiveness among other banks. To overcome this challenge, I recommend ASB Bank should shift gradually its IT infrastructure and service to cloud computing. There are several reasons for this recommendation. Firstly, the customers are likely to demand new products and services to make their banking easier, more secure, and less time consuming. The bank's vision for providing worldclass service to its customers and communities makes the IT infrastructure especially important. It will be reasonable to develop or acquire and run these new applications on the cloud that provides reliable and fast service. Secondly, cloud computing will be the inevitable trend for future business IT model. If ASB bank would like to maintain one step ahead of its competitors, getting in early is going to be good move. Cloud computing could reduce the overall IT cost in a long run. Lastly, the competition among banks will only get tougher as other banks catch up with technology and launch similar services. As we known, the first-mover usually has an advantage to gain market share.
CONCLUSIONS
ASB Bank is the leading financial service provider renowned for its innovation in products and service as well as technology. In order to maintain its market position and growth, introducing new and customer orientated products and services as well as reducing overhead are fundamental. Cloud computing model could contribute to successfully execute these strategies. Therefore, shifting the IT infrastructure to cloud computing system is recommended.
REFERENCES
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