As financial institutions move deeper into the digital age, their service delivery is ultimately dependant on how well they store, manage and use the vast amount of data they generate. The data centre, therefore, is part of the foundation on which banking services are built. Future Banking speaks to Daryl Brookes, head of IT service delivery, and head of data centre infrastructure and hosting David Bolt, of Nationwide Building Society, about the importance of data centres and how to ensure their optimal function.
Many of Europe's banks and building societies are among the vanguard of financial institutions developing cutting-edge digital services, and they have invested heavily in technology and processes to capture data, improve customer experience, reduce costs, and devise new services to make banking faster and more convenient for their customers. A big part of this investment goes into the data centres that ensure their most valuable asset is secure and readily available.
Mobile and online banking services are defined by how well a bank stores and manages its data, so ensuring data centres operate at maximum efficiency is high on the agenda not only for the IT team, but also for the people steering the business at a strategic level. There are many ways to approach a data centre strategy, including outsourcing to a third party, but a certain leading UK financial institution has decided to keep control in house and onshore.
"There are many IT service delivery challenges ahead of us, not least making sure we maintain service at levels that our 15 million members expect in the digital age. There are regulatory changes to consider,
new products to develop and new functionality to implement, so we have an aggressive change schedule. Ultimately, we have to implement resilient solutions that have a proper service wrapper," says Daryl Brookes, head of IT service delivery at Nationwide Building Society.
"We have to look at technology in terms of services, not just IT. Our digital strategy includes some market-leading solutions that we run out of our own data centres and monitor from our purpose built Enterprise Command Centre. We have co-located our monitoring staff there and they work 24/7 to ensure that we deal with customers' expectations in the 'always on' banking environment," he adds.
The emphasis on monitoring data flows and technology infrastructure is intended to put Nationwide on the front foot in dealing with incidents and designing new service offerings.
"We focus on incident prevention as well as incident management, so we monitor to spot problems with our infrastructure and applications. We avoid incidents by being proactive. There is a big risk to the business if the data centre fails and resilience is at the top of our agenda. The data centre is a strategic element of the business for the board, not just for us techies," explains Brookes.
"A lot of the work we do is looking at everything including legacy systems from a service line perspective, as well as a technology perspective. We monitor everything from applications and business processes right up the stack to customer experience," he adds.
Keep it in the family
In parts of the banking sector, there was a move away from data centres, but according to Brookes and Nationwide's head of data centre infrastructure and hosting, David Bolt, this has been reversed.
The advantages in terms of infrastructure management, cost control and security are many, particularly if the data centre is not in an offshore location.
"The trend for us - and the wider industry now - is to move IT into data centres and not necessarily have a physical server in any branches. Those servers are in the central core of the data centre to ensure consistent standards across our services by housing them in a fit-for-purpose facility. The UK is a good place to house data centres because there are fewer catastrophic events than in many other locations, though there is still the possibility of hardware or software failures as with any technology," says Bolt.
"The buildings are highly secure and resilient, and the data hall is the inner sanctum. It has tightly controlled human routes to it so that access is secure. Energy and power supplies are reliable in the UK, but we have our own diesel engines and fuel reserve as a backup, and we build in resilience by having more than we need," he adds.
Using a similar data centre topology to many other financial institutions, Nationwide has increased its resilience to any failure of the technology infrastructure by having a second site that mirrors the primary data centre. The secondary facility allows load balancing between the two sites.
Data integrity and data security are of the highest importance in financial services and are key concerns when banks consider outsourcing data infrastructure. With no external partners, Nationwide ensures that its own team has its hands on the tiller of data centre development, as it has a fundamental impact on its ability to deliver on its strategy.
"All of our property services team are Nationwide staff, or sourced to third parties, so that all decisions about processes and rigour are ours. We own the properties, we design them, we run them and we control their development. They are not outsourced. Governance is ours. We are very much involved in what is done and how it is done. We are our own sole customer in the data centre space," says Bolt.
"Financial institutions may often outsource data centres to save money, but outsourcing is not necessarily a lower-cost option when viewed in the round. With our data centre approach we have enough capacity for the foreseeable future. From an agility perspective, we have teams that deal with hardware implementation, and they can spin up new infrastructure and services quickly, so we are not impaired by keeping the data centre in house. I've seen both models in action and outsourcing can often mean delays while you wait for your slot to get infrastructure updated," adds Brookes.
A different take on data centres
The emphasis on security and control extends to Nationwide's use of the cloud. Many financial institutions are weighing up the pros and cons of using cloud-based applications or data infrastructure, but for Bolt and Brookes, the only viable solution now is to use the cloud purely internally to provide flexibility, rather than using the external cloud.
"Protection of data is paramount, so we have little appetite for risk. The cloud is becoming important but we always use only a private cloud run on our own data centre infrastructure. We do use some third-party services that reside in the cloud, but no customer data ever goes on them. We are very much a mutual organisation, owned by our members, so security and stability are very important to them," explains Brookes.
Global businesses on the scale of Amazon, Google or the largest entities in financial services may well need to consider a data centre strategy that includes offshoring, outsourcing and the use of applications based in an external cloud. For a financial institution like Nationwide, the onshore and in-house options bring many advantages.
"Using the private cloud, for example, gives us flexibility and agility. We also have a commitment to citizenship and sustainability, so we are always focusing on our carbon footprint. We have the control over our data centre to change the layout to optimise energy efficiency and we have the ability to run servers at higher temperatures, so we spend less on cooling," says Bolt.
A successful data centre strategy can deliver lower costs and better ROI, as well as the agility that is essential for financial institutions to respond to change quickly. Data centres are key to banking in the digital age, and in future the decision is likely to move away from whether a bank should use data centres to a consideration of the strategy for owning and operating them. As Nationwide has shown, there is more than one right answer.