The need for speed - cloud demands from Folk2Folk

One of the main advantages of cloud is that it offers enterprises of any size a chance to grow at their own pace. It’s a feature that makes it particularly attractive to start-ups; there’s little need to invest large sums of money on an IT infrastructure and there’s no need to try to second guess how big an infrastructure: over provision and you’ve wasted money, underestimate and you’re playing catch-up.

Cloud providers realise this, or at least they should do, it should be one of their main marketing weapons. But things weren’t quite so clear-cut for British peer-to-peer lending company Folk2Folk when its approach to several cloud companies – with one exception – fell on deaf ears.

Folk2Folk had a very clear idea of its needs and had already decided that cloud was the way to go. The reason for this flexibility becomes clearer when we look at how the company operates. Karl Straw, IT director for Folk2Folk, explains:

The approach we take is different from P2P. We have an online platform and physical branches,” says “for customers who prefer face to face meetings.

This approach came out of the company’s origins.  When it was founded in 2013, unlike many peer-to-peer lending organizations, it didn’t emerge as an online company but arose as an offshoot of a firm of solicitors looking for a way to help fund their clients’ business plans.  There was a need to look for alternative sources of funding as banks are reducing the amount of lending they’re providing, hence the emergence of Folk2Folk.

But, as Straw explains, doing things a bit differently needed a different approach to IT too. The company  had started off by using a traditional solicitor’s package but this wasn’t appropriate for all its needs, there was a need to have something that could enable rapid growth and be flexible enough to meet changing requirements. The company was growing rapidly and had already reached a £120 million in loans.

Straw early on decided that Folk2Folk was going to go down the cloud route and he started looking at his options:

I’d decided that I wanted to find one vendor to give me everything I need and I looked at two alternatives: AWS and Azure.

While AWS had the market clout, Straw eventually plumped for Azure:

I chose it because of the Microsoft brand name. In particular, I needed a company that could provide support; our company IT department was one person – me.

He says that while AWS looked attractive on price, it didn’t offer full integration with existing systems so there would have been an additional overhead there:

For example, a lot of our systems are integrated with Office 365 – AWS doesn’t do that.

Straw not only wanted one company’s cloud product to run Folk2Folk’s system but he also wanted one company to look after the system:

I couldn’t run it. I did a pen drawing of what was needed and if we were to going to implement them all, I realised that I would need 25 people in the IT department.

But deciding on an underlying system was only part of the issue. Straw started scouting around for a service provider to plan, implement and manage the Folk2Folk system. It was a well-established company with ambitious plans for growth and should have been an attractive prospect for a cloud business.

Rackspace was the first of six firms contacted to respond and it wasn’t put off by some ambitious deadlines that Folk2Folk had decided upon:

None of the other firms had got back to me so we outsourced the whole build to Rackspace and gave them an impossible deadline. We called them on 23 June and wanted the build completed by 1 August - 39 days from our first call.  They gulped and we made some compromises.

The two sides did reach an agreement based on this very tight deadline and everything went according to plan, says Straw:

We signed the contract on 30 June and loaded all our data on the weekend before 1 August.

It was fast work but, and here’s the rub, it was completed two days before the first of the five remaining companies got back to Straw about doing the work:

I think there was a feeling that we were a bit small to be a priority to them. We are relatively small but growing: we started with a spend of £6,000 a month, the next month it was up to £8,500 and the next month went up after that – the aim is to keep growing.

Folk2Folk’s infrastructure matches this drive for growth.  The company moved to its second iteration on 14 August, and now, in November, is already on its fifth iteration. The Azure-based system currently supports 45 head office users and 1300 customers, running nine virtual servers for live production and six test and development boxes.

The Azure-based system has been designed to be flexible, says Straw: 

We build everything in modules so we can change quickly. If we ever decide that Azure isn’t right for us we can move.

Many companies in regulated industries are wary of cloud.  But Folk2Folk did not worry about this aspect of the implementation, according to Straw:

As a company we are regulated by the Financial Conduct Authority (FCA). We have already got out interim licence and are on rapid track to get our permanent one. Our data is only hosted in the EU and we know which datacenter it’s in and where they can move to.

And, as the security concerns that scare off many potential cloud customers, Straw is pragmatic:

One of my previous roles was with the Ministry of Defence. I know Azure security and I’m fully aware of the security measures that Rackspace have. I would have to spend about £160,000 to match that.  Just look at the amount of money we’d have to spend to read every single security bulletin.

Best of all, Straw says, he’s free to spend his time working out how to deploy his infrastructure in a way to support the business rather than spend his time firefighting:

I don’t have to keep the lights on, Rackspace does all that.

This means that the system is set up to enable Folk2Folk to launch various new products, concludes Straw, noting that the company is now looking for different ways to work with financial advisors so they can cut back on the paperwork needed in implementing a loan:

We’re in the process of launching Innovative Finance ISAs and self-invested pensions.  We’re also looking to roll out to tablets and mobile phones.

My take

The experience that Folk2Folk had should be a wake-up call to cloud providers. If they’re going to base their businesses on thriving, large corporate and ignore the SMEs as too small and the start-ups as too much hassle, they’re leaving the field clear for companies like Rackspace who are much more responsive to customer needs. 

Straw wouldn’t reveal the names of the other providers who acted in a dilatory fashion but there’s a lesson for the cloud industry here and the lesson applies to providers in the UK, US, mainland Europe or wherever. Cloud is all about speed, flexibility and agility: it’s why customers want it and providers need to be able to respond to those needs quickly – if you’re not supporting your customers, you’re going to be history.