COMMONWEALTH Bank is in high-level talks with cloud computing companies to speed up the launch of new products such as a digital-vault secure storage service for customers.

The talks are part of chief information officer Michael Harte's efforts to break the shackles of the traditional technology purchasing methods, which lock customers into costly, long-term licensing deals. Cloud computing has been dismissed as a buzzword, or Web 2.0 hype, but Mr Harte publicly stated more than a year ago that cloud services were welcome and inevitable in business.

The bank is in discussions with a number of providers, although Mr Harte declined to reveal names.

"Commonwealth is in close discussion with several key parties across the world -- both practitioners and possible service partners," Mr Harte said. The bank could introduce a "digital vault" service that would offer customers services beyond basic banking needs.

Financial institutions already spend millions of dollars on secure platforms for internet banking and the bank could take advantage of this brand loyalty to offer secure online storage space, he said.

"Commonwealth will explore the value of providing customers with a digital vault service should that be of value to, and needed by, our customers," he said.

Storage giant EMC has been promoting the idea so consumers can store digital photographs, videos and money in one virtual private vault.

The move to cloud computing will also help the bank cut costs.

Most software developers' revenue models allow them to charge licence and maintenance fees without providing clear value or sufficiently sharing the risk and reward of a customer's project, Mr Harte said. Commonwealth was intent of breaking that mould.

"For too long infrastructure, software and some service providers have had the upper hand of lock-in, term deals, high pricing and underperformance," Mr Harte said. "The traditional licensing business model is worn out and somewhat broken in the new cloud context.

"We can use our market-making presence to get services that are standardised, openly contestable and paid for on a unit price and per unit consumption basis."

The "big switch" to cloud providers was under way, he said, in a change driven by faster network and computing capabilities and the need for businesses to more effectively manage capital expenditure.

"While infrastructure-as-a-service is mature, software-as-a-service is catching up fast. With inevitable security and legal structuring, applications will be more widespread and the terms of trade will continue to shift in favour of the buyer.

"We're seeing real market shifts and consolidation from the sell side. Buy-side companies need to work smarter and together to force and accelerate market changes.

"Enterprise buyers need to really test their thinking and practical application and determine new ways to consume and create services for their customers and shareholders to drive serious value."

One example was in cloud storage, testing and development, where the bank could use in minutes and hours and only pay for what was consumed. 

"We don't need to pay the full sum for surplus capacity nor directly cover the capital cost of the underlying infrastructure.

"We can then free up our resources to focus on higher value activity closer to the customer and deliver service more rapidly and cheaper."

There was still resistance from classic box providers, but if that was prolonged it could be to the detriment of vendors, he said. "That's understandable ... they're not too keen on virtualisation, grid or cloud (but) market forces will break that."

Commonwealth's push into the cloud runs alongside its core banking system update, a $730 million program that is one-third complete.

The program also covers its New Zealand arm, ASB, and BankWest.

Commonwealth is the first bank to embark on such a project and its competitors have so far shied away from announcing a similar level of detail about their plans.