Can you imagine a day when even mission-critical services such as core processing routinely run on “the cloud”? That day is coming, say some information technology (IT) experts and vendors.

In the near future, the cloud will operate almost in real time and on-demand like a utility, similar to electric utilities where you get billed only for what you use, according to CUNA’s 2011-2012 Credit Union Environmental Scan.

While it might be some time before core processing moves exclusively to the cloud, operating at least partially on the cloud is quickly becoming standard practice. But it depends, in part, on how you define it.

Some say cloud computing is merely a new term for application service provider (ASP), software as a service (SaaS), or outsourcing.

Once used almost exclusively by small credit unions, hosted applications delivered in an outsourced or SaaS model are getting a closer look from larger credit unions that once appeared committed to an in-house approach.

Defining ‘the cloud’

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Experts are still debating the definition of a cloud-based solution. Rudy Pereira, senior vice president of operations and technology at $7.8 billion asset Alliant Credit Union, Chicago, participates in the BITS Financial Services Roundtable’s Cloud Computing Subgroup.

The subgroup has defined the “essential characteristics and basic features” of cloud computing as any solution that offers:

• Broad network access;
• Rapid elasticity;
• Measured service;
• On-demand self-service; and
• Resource pooling.

Pereira, who's chair of the CUNA Technology Council and vice chair of the CUNA Councils, says SaaS solutions offered by core processing vendors fit within that definition of cloud computing. An SaaS solution provides software in a central location for on-demand access by licensed users, usually via a Web browser.

But broad definitions of cloud computing, says Scott Hansen, executive vice president of business development for Harland Financial Solutions, Lake Mary, Fla., don’t address the flexibility and mobility of a true cloud solution.

Credit unions that rely on Harland Financial Solutions’ outsourced solution can visit data centers in Des Moines, Iowa, or Englewood, Colo., and see their rack of servers and even the wire that transmits their data from the core processor to the credit union. Since data doesn’t travel outside the credit union’s assigned server, Hansen says it’s never truly in the cloud.

In contrast, “public cloud” solutions offered by companies such as Amazon, Microsoft, and Rackspace rely on data centers located around the world. Applications and data move from one center to another based on demand—meaning your data could be stored in Hong Kong in the morning and Miami in the afternoon.

“Private clouds” offer another option. In a private cloud, specific hardware is dedicated to one company’s use, although the hardware might be located in multiple data centers in different locations. Private cloud data flow among the hardware to make the best use of pooled resources.

“Hybrid clouds” combine the characteristics of both public and private clouds, shifting from one to another based on the type of applications or data being used.

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