Dodging The Storm Cloud: Big tech needs to move data centers into bank vaults

Financial institutions could be the secret to data center operators getting prime city real estate for free

Could it be argued that cloud evangelism is starting to show its cracks? It seems that everyday there's a fresh report of a data breach. And increasingly, there are plenty of businesses that are migrating away from the cloud and back to local, on-site server hardware.

Cloud computing does have a number of huge benefits; and really points to the underlying reason for its popularity over recent years. A robust set of architecture that has been relatively cost effective with lower management obligations; global access; disaster recovery; but predominantly for ease of scaling.

But it's never been the perfect solution for all businesses though, and particularly in the case of financial institutions. They absolutely have a requirement for scalable storage, but it's always been a balance of providing that in conjunction with mitigating the main drawbacks:

• Latency matters — in trading, milliseconds can mean millions (or even billions).

• Cybersecurity is local — risks compound when you're sharing infrastructure with a thousand strangers. Colocation in data centers has mitigated some of this risk; but it's never going to be eliminated.

• Regulation is growing teeth — and it's biting down hard on sovereignty, auditability, and compliance.

We’re entering an era of data nationalism and zero-trust by design, where the idea of running sensitive workloads in some abstract, amorphous “region” doesn’t sit right with boards or regulators. Equally, ditching the cloud entirely isn’t viable either - there are too many dependencies.

But there's a solution: what if data center operators stopped trying to pull banks into the cloud - and instead brought the cloud to the bank?

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Data (city) centers - prime real estate for free

Site acquisition within inner-city areas remains a continuous challenge for modern data center operators. With most primary real estate in major cities such as New York, Seattle, San Francisco, Miami, and others often exchanging for extremely significant premiums that can only be genuinely justified and afforded by businesses making substantial, continuous, and stable profits.

As a result, many directly central inner-city areas - although possessing a large demand for data center infrastructure - often rely on sites up to thousands of miles away, owing to the uneconomic rental (and operational) overheads from running an inner-city facility.

There is significant mileage to be gained from rolling out more urban data center infrastructure though:

1. Deeper enterprise foothold. Some suggest that cloud growth is starting to plateau, and the next frontier is more likely to be industry-specific infrastructure.

2. Localized infrastructure has near-zero latency. Inner city clients such as institutions carrying out high frequency trading would pay a premium to have a lower latency than their competitors.

3. Future-proofing the cloud narrative. By embedding inside regulated institutions, data center operators avoid any potential regulatory whiplash coming for public cloud platforms. It becomes part of the critical infrastructure fabric, not an external dependency.

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The billion dollar idea: cloud infrastructure baked into bank vaults

This idea is a win-win if it can be pulled off: data center operators - Google, AWS, Equinix, Iron Mountain or Meta - launch specialist divisions to build embedded cloud infrastructure directly inside financial institutions. Private, secure, fully-managed micro-regions installed within the walls of a trading firm, investment bank, or clearing house.

As more office workers have shifted to more remote or hybrid working patterns, there's likely an abundance of square footage of space available to be repurposed - and still likely enough room for the plant, cooling and operational infrastructure required to run it.

I imagine this more as a a bespoke infrastructure cell, run by hyperscalers but physically and logically isolated to serve a single tenant. The data center operators would have a specialist team or division with the security clearance to operate and manage these systems exclusively.

Effectively cloud-grade tooling at zero latency for the financial institutions. Increased interconnectivity and infrastructure for data center operators. A win-win situation, which also provides a natural way out of the binary cloud/on-premises debate too.

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This could be a complete new category of cloud computing

A specialized team builds modular, scalable infrastructure nodes that live inside the walls (and under the policies) of the institutions they serve. Cloud-native tooling, AI-powered observability, API-driven provisioning - but with the physical security and audit trails you only get from an on-site infrastructure model. Infrastructure that’s sovereign, secure, and smart, without being centralized.

This is arguably less about building the cloud where it should be, and more about building it where it needs to be.

TH

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