Morgan Stanley Expands Use of Cloud in Tech Modernization

  • 08/06/2021

Morgan Stanley is shifting some of its core workloads to Microsoft Corp.’s Azure cloud platform as part of a move to accelerate the modernization of its information technology environment. It is also working with Azure to roll out new cloud features that executives of the two companies said will benefit its clients and ultimately the highly regulated financial services industry.

The partnership, which builds on several technology projects that began about two years ago, was announced jointly Wednesday.

Morgan Stanley said it would move some compute-intensive applications to the cloud, such as risk systems that perform billions of calculations daily. The bank will also move client-facing applications to Azure, as well as data and analytics workloads where they can store petabytes of data on the cloud.

Engineers at the two companies plan to roll out new features to improve the time it takes to get products to market and to allow teams at Morgan Stanley to innovate faster, said Rob Rooney, the bank’s head of technology, operations and firm resilience. “The cloud is central to that,” Mr. Rooney said.

For example, they will work to develop higher levels of encryption for Azure’s data lake, which is a centralized repository for storing data, Mr. Rooney said.

The engineers will also work to roll out a set of security protocols for Azure that will be specifically tailored for the financial services industry and the regulatory environment in which banks operate.

Not having financial services-specific security standards makes it difficult for technologists at banks to take advantage of new cloud features, Mr. Rooney said.

“That makes it very hard to manage because … all of a sudden new features are released and they don’t actually do what you want them to do from a security perspective,” Mr. Rooney said.

The financial services industry is complex in part because it is highly regulated and regulations differ globally for consumer finance, wealth management and institutional businesses. “For us to take the next big step, [cloud services providers] are not fully there,” Mr. Rooney said.

Banks have been slower than other businesses to shift sensitive data to the cloud, citing security concerns and regulatory barriers. Instead, many financial firms over the past decade have invested billions into data centers and other internal platforms. But that momentum began to shift in recent years, market analysts said.

“Cloud providers have matured their platforms to help improve a lot of efficiencies, such as IT modernization and enhanced data security,” said Jason Malo, director analyst at technology research firm Gartner Inc., covering banking and financial services. “A successful track record on security and resilience goes a long way,” in helping banks trust cloud providers, he said.

The partnership is mutually beneficial, and both companies plan to shape the future of technology innovation in the financial services industry, Mr. Rooney said.

The bank “has been going through a very deliberate process around making sure they fully understand what is involved in taking a big bet on cloud,” said Scott Guthrie, executive vice president of cloud and AI at Microsoft.

As a result of the partnership, Morgan Stanley will step up the use of Microsoft’s cloud-based tools for collaboration among employees, the bank said.

Jerry Silva, a research vice president at research firm International Data Corp., said the Covid-19 pandemic hastened efforts by large banks to shift more workloads to the cloud. He said the flexibility of cloud computing helped many lenders meet unanticipated surges in demand, such as emergency loan applications under the federal Paycheck Protection Program.

Bank of America Corp. and International Business Machines Corp. struck a similar partnership just a few months before the pandemic struck, aimed at developing cloud-based security tools and top-level encryption, among other capabilities.

Though Mr. Silva doesn’t see banks migrating all of their workloads to cloud: “But they will create operating environments that span on-premise, private, and public cloud, probably with multiple cloud services providers,” he said.