Goldman Sachs is deepening its relationship with Amazon Web Services, another sign of how acceptable the cloud is becoming to the financial industry.
The two heavyweights announced last week that they are developing a data utility in the AWS cloud that will host market data for Goldman’s financial clients, such as hedge funds. The investment bank already runs several large products entirely on AWS, including the Apple Card and its Marcus consumer banking business in the United Kingdom.
The effort is part of a nascent movement by big banks to put more applications in the cloud. In September, JPMorgan Chase said it planned to
Such moves have not been without incident. In 2019, Capital One was the victim of a
On Tuesday, AWS suffered a five-hour outage that affected many of its clients.
Goldman executives declined a request for comment about the outage. Many experts argue that lapses inevitably occur on all systems, traditional or cloud, and that the new technology’s advantages can’t be overlooked.
“When a cloud goes down for so many people at once, the aggregate effects are massive,” said Ray Wang, principal analyst and founder of Constellation Research. Yet “public cloud reliability is still better than most organizations’ ability to deliver on uptime.”
It’s essential for financial institutions to have a disaster-recovery plan and redundant systems for financial transactions and customer-facing services, he said.
“AWS has had a better track record than most, but it can happen to anyone,” Wang said.
Migrating legacy cores, mainframes
AWS said last week it’s developed new technology that could ease the migration of applications to the cloud. In a recent survey conducted by Deloitte, 65% of senior bank and capital markets executives said they had faced challenges adopting cloud computing.
One of the obstacles banks encounter is that many still conduct large portions of their business on old core-banking software programs that run on mainframes and in many cases were written in COBOL. The servers cloud providers use tend to be Linux/Unix- and Windows-based.
AWS’s new Mainframe Modernization service helps customers restructure code written for mainframes in legacy programming languages like COBOL and Customer Information Control System to modern Java-based cloud services. This service includes the use of software AWS developed that automatically converts COBOL code over to Java.
It also includes help with manually converting COBOL code or keeping workloads as written and re-platforming them to AWS with minimal code changes, said Scott Mullins, head of worldwide financial services business development at AWS.
Portions of the work will be done by partners including Accenture and DXC Technology.
Some financial clients have lowered their IT costs through the use of AWS, Mullins said. Discover Financial Services reduced the amount of time it spends managing storage by 90% and cut costs by 50% to 60% by relying on AWS, he said. Sallie Mae worked with Amazon Managed Services to move hundreds of servers at a time over several weekends. It decreased overall costs by 30% and met its savings objectives in the first year, according to Mullins.
Partnership with Goldman
Goldman’s relationship with Amazon Web Services began 10 years ago, when the bank sent the cloud provider a list of 1,000 security questions to answer.
“We like to be deep and thorough,” David Solomon, CEO of Goldman Sachs, said of the exhaustive list at AWS’s annual user conference last week.
Solomon sees the movement of banks like Goldman to the cloud as a part of the overall move to modernize a formerly paper-bound industry.
“The digitization of financial services is in the second or third inning,” Solomon said. “And there's an enormous amount of upside to collaborate and innovate, create products and services that take the friction out and allow our clients to spend more time on the things that actually make money, protect capital and advance returns.”
In 2019, when Goldman launched its Apple Card credit card platform on AWS, “that allowed us to innovate in a very, very different way with respect to the user interface and lack of friction in that broad platform for consumers,” Solomon recalled last week.
Goldman also runs the U.K. division of Marcus, its consumer banking unit, on AWS, as well as its transaction banking service for institutional clients, Marquee.
In Goldman’s latest AWS project, it’s building a data utility it calls the Goldman Sachs Financial Cloud for Data for clients like hedge funds to use.
“When people are looking at portfolio analytics and looking at trade history, one of the things they want to do is get very clean, broad data sets that span a long period of time,” Solomon said. “So machine learning and data capability and market experience are hugely important.”
Having better access to trade data and analytics tools should make those clients better decision-makers, he said.
“They should be able to recognize patterns better,” Solomon said. “It should give them an advantage or an edge in what they do.”
Goldman would like to emulate the path Amazon took from bookseller to technology provider, Solomon said to AWS CEO Adam Selipsky at the conference.
“There's an enormous opportunity in financial services and especially in a partnership like ours to provide banking-as-a-service in a very broad way,” Solomon said. “That's what you did with compute capacity and storage with AWS. We think a lot about that.”
