The National Australia Bank is all in on public cloud. NAB will move at least 35 per cent of its IT workloads to a public cloud within the next two years. The shift will improve the bank’s innovation and agility, and better prepare it for open banking, according to NAB executive general manager and CIO, Yuri Misnik.

Following a keynote presentation at AWS Re:Invent — Amazon Web Services’ annual user conference — Misnik spoke with Which-50 about why NAB has eschewed the hybrid cloud approach its three main competitors have opted for.

According to Misnik, public cloud keeps NAB lean with less of a reliance on traditional IT vendors and their notorious long term contracts, allowing more focus on innovation and customer experience — where banking customers are won.

The digital infrastructure offered by major public cloud providers, namely AWS, Microsoft, Alibaba and Google, has now surpassed what large enterprises can develop on their own, Misnik said. Offering it as a service also helps keep banks agile, a traditional struggle because of legacy systems and a reliance on vendors.

“[With public cloud] you don’t get yourself locked in to long term multi-million dollar contracts to a particular software. And if it doesn’t work you just stop using it,” Misnik told Which-50.

Things not working is something Misnik expects will happen as NAB innovates but ultimately the best solution — what delivers business value and customer experience — will be developed with a public cloud strategy.

What is wrong with Hybrid cloud?

The other big banks have signalled they are taking a hybrid approach to cloud — mixing on premise data centres and private clouds with public. But, Misnik says, that approach can stifle innovation and flexibility.

“In hybrid you have to invest in data centres, meaning you have to buy all this hardware, you have to manage all the operating systems or rely on someone to manage the operating systems for you, you have to maintain this fleet — update, patch etcetera.”

A hybrid approach also requires enterprises to create “symmetry” with the management stack, cloud services and applications on the public and private cloud, Misnik says.

“It will just kill you. Managing applications will kill you.”

NAB executive general manager and CIO, Yuri Misnik.

Misnik also argues a hybrid approach restricts access to the innovative technologies public cloud providers offer. For example, in the last year Amazon Web Services, one of NAB’s long term public cloud partners, has released cloud services for machine learning and blockchain, including managed services.

Misnik says with the providers doing the heavy lifting on digital infrastructure that scales and emerging technologies allows the bank’s developers to focus on developing applications and services for its customers — where NAB believes it can differentiate.

The security offered by public cloud providers has now reached levels enterprises struggle to achieve on their own, Misnik said.

Even if NAB wanted to manage digital infrastructure themselves, the already shallow local talent pool is being drained by the public cloud giants.

“All the really, really smart guys who know how to build infrastructure well, they all are much more attracted to work for these big mega providers — Amazon, Microsoft, Google.

“That means I won’t be able to attract the best talent and I won’t be able to have the best service.”

NAB’s Open Banking Preparation

NAB is also bracing for open banking, set to launch in mid-2019. While the new regime —where banking customers are more easily able to port their data to other banks and third party service providers — was not a key driver for the switch to public cloud, it was a factor and Misnik argues it will put NAB in a better position to respond.

Open banking is all about public APIs, Misnik says, and when the regime is in full effect banks will lose some control over data and which apps are using it but also gain access to new data from other banks. It puts an emphasis on scalability and elasticity, according to Misnik, as demand will become unpredictable.

“For example if suddenly there is a cool application launched by a fintech which allows you to manage your money well and every customer downloads it and starts using the APIs you don’t want to provision a set of servers to cater for this unexpected or might never happen workload.

“So you want infrastructure to scale up, scale out and scale back. So the elasticity of the public cloud massively helps.”

The scenario works for NAB ingesting the new data that will become available in open banking, Misnik said.

NAB will move at least 35 per cent of its applications to a public cloud by 2020 but Misnik insists that is a “low bar”.

“I think we will do much more and will go much more aggressively. But we will do it in a controlled way with our regulator, consulting APRA, and make sure we are doing it responsibly.”

The bank has tapped AWS for much of its public cloud strategy but will also partner with Microsoft’s Azure cloud. Choosing between the providers comes down to pragmatism, Misnik said.

“We will find the cloud provider which best suits particular workloads…. As we are moving we will look at each workload and pick the best provider. We want them to compete.”

According to Misnik, NAB is also in the midst of a culture change to become technology driven. Again open banking is not the impetus but a technology driven culture with a focus on developing solutions in an iterative way will help.

A more iterative approach from regulators is needed

The ACCC, which is tasked with developing the rules and an accreditation scheme for open banking, has set a timeline that will deliver the regime in three stages, beginning with data on credit and debit card, deposit and transaction accounts becoming available by July 2019.

NAB welcomes open banking but the approach so far has been “too broad” and confusion remains over what will be required from banks, Misnik said.

“I think our biggest challenge is that the regulation and the government description of what open banking will need to deliver by July is still changing. It is still in flux,” Misnik said.

The NAB CIO said he would rather see an iterative approach to open banking’s introduction similar to how technology is now developed.

“You build an MVP first and then quickly iterate add capabilities. That would help us validate technology solutions, validate the business model and the trust model. It will help us educate customers and then we can iterate.”

The iterative approach with a limited initial scope would also improve security, according to Misnik, who said the broad three stage approach creates more risk for customers.

“Our much preferred approach would be to limit the first iteration to something simpler, roll it out and then quickly iterate as we go ahead.”

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