Geopolitical shocks highlight the need for diversity in cloud providers

{"text":[[{"start":null,"text":""}],[{"start":6.9,"text":"European banks have been growing increasingly uneasy about their over-reliance on American cloud service providers, but the fallout of the recent conflict in the Middle East has brought the issue into sharp focus. "}],[{"start":19.9,"text":"Souring relations between the US and Europe as a result of President Donald Trump’s trade wars and his declared interest in Greenland had already made some European lenders nervous about their dependence on the likes of Amazon Web Services, Microsoft Azure, and Google Cloud — the big three US cloud providers that dominate the global market."}],[{"start":41.65,"text":"The unease stems from fears that growing political risks could force US cloud providers to restrict services to banks in Europe or cut off access to critical applications and data at the behest of the Trump administration — a concern that has been ratcheted up by the conflict in Iran."}],[{"start":58.15,"text":"No such restrictions have been imposed by the US president but the conflict in the Middle East has nevertheless prompted more immediate problems, with AWS facilities in the United Arab Emirates being hit by Iranian retaliatory drone attacks after the Islamic republic sought out US-owned targets in the Gulf region."}],[{"start":null,"text":""}],[{"start":78.75,"text":"AWS suffered issues when two data centres in the UAE were struck by drones at the beginning of March, the company confirmed in a statement. A third facility in Bahrain was also affected, with AWS confirming the strikes caused structural damage, affected power lines, and in some cases caused water damage in attempts to extinguish fires."}],[{"start":99.45,"text":"Colin Kerr, head of banking and payments at research group Celent, says: “Several gulf-region banks experienced significant outages [as a result]."}],[{"start":107.9,"text":"“No doubt this will have raised concerns that echo the sentiment of some regulators — that the concentration of banking services on a few ‘hyperscalers’ [large cloud service providers] poses heightened risk.”"}],[{"start":120.85000000000001,"text":"He adds that the “naysayers”, those alarmed by the issues posed by being overly dependent on AWS, Microsoft and Google, will “feel vindicated” by the events."}],[{"start":null,"text":""}],[{"start":131.05,"text":"The drone attacks caused widespread disruption to local banking and ecommerce apps, leaving consumers and companies without access to essential services. "}],[{"start":140.35000000000002,"text":"Dave Scola, US chief executive of Form3, a London-based fintech, says: “Many have tended to treat the cloud as an abstract and untouchable entity, forgetting that it exists in physical buildings that can be targeted."}],[{"start":154.70000000000002,"text":"“While conflict is a very extreme example of disruption, drone strikes on cloud data centres in the UAE and Bahrain are definitely something of a wake-up call.”"}],[{"start":164.3,"text":"Tone Rørbakken, chief executive and co-founder of cross-border payments infrastructure provider Unite Global, agrees: “Events like these bring together physical, geopolitical and digital dependencies in a way that is difficult to ignore. Scenarios that were previously considered remote are now being actively modelled."}],[{"start":183.10000000000002,"text":"“What recent events have done is accelerate a shift from theoretical resilience planning to more practical reassessment.”"}],[{"start":190.65000000000003,"text":"A worrying outcome for the leading cloud providers is that the attacks, alongside worsening diplomatic ties, push non-US lenders to accelerate any plans they have to look beyond the big three."}],[{"start":202.95000000000005,"text":"Indeed, Unite Global says it has been approached by almost 50 banks searching for another provider over the past 12 months, while Maurizio Poletto, chief operating officer at Vienna-based lender Erste Group, recently voiced the concerns of many in the industry at an event in March."}],[{"start":220.55000000000004,"text":"Speaking at the Institute of International Finance’s European Summit in Brussels, just days after the AWS drone attacks took place, he said: “If you asked me previously whether a global company would stop serving Europe, I would have said no. But it is more realistic today.”"}],[{"start":238.15000000000003,"text":"The sticking point for lenders, however, is that there is not much choice beyond those that dominate the sector, especially as the major US providers are lauded for their advanced cyber security skills, agility and superior disaster recovery capabilities."}],[{"start":253.70000000000005,"text":"Scola says: “There aren’t a lot of alternatives and, on the whole, data centres run by cloud hyperscalers are remarkably efficient, particularly when compared to the alternative of banks building and running their own platforms.”"}],[{"start":266.40000000000003,"text":"Rørbakken agrees and, despite the number of enquiries her company has seen over the past year, she says banks are not “rushing” to replace US cloud providers outright as most institutions still see them as essential."}],[{"start":278.90000000000003,"text":"But she does recognise that lenders are stepping up their efforts to reduce their dependence and are looking to appoint additional providers on top of one of the big three they perhaps already use."}],[{"start":289.40000000000003,"text":"“What has changed is the lens through which the cloud is being evaluated. It is no longer primarily a question of cost and scalability, but increasingly about control, jurisdictional exposure, and the ability to operate under stress scenarios."}],[{"start":304.25000000000006,"text":"“There is a growing recognition that relying too heavily on a small number of global providers introduces structural vulnerabilities,” she says."}],[{"start":312.75000000000006,"text":"Scola of Form3 adds: “Diversification — both geographically and across providers — is essential to limit the systemic risk of an outage. In practice, this means multi-cloud architecture that can continue operating even if an entire provider fails.”"}],[{"start":336.35,"text":""}]],"url":"https://audio.ftcn.net.cn/album/a_1776669677_5113.mp3"}