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July 20, 2021

How financial services can make a new home in the cloud

By thinking of a cloud migration similarly to moving to a new house, FIs can ensure an effective and efficient transition.

Anyone who has bought a new home or leased a new apartment knows the amount of preparation and forethought that go into the decision and the move itself: budgeting, square footage, features you can’t live without, sorting out which of your possessions fit in the new space, ensuring there’s room for guests or additions to the family and, most importantly, knowing when you have outgrown the space.

Some of these considerations are similar to those we hear our financial institution (FI) clients ask themselves when they move to a proof of concept or a full-scale project on the cloud. How much capacity do they need, and how can they optimize their cloud real estate? Which of their legacy approaches do they need to leave behind? What is the business reason for moving in the first place? 

By thinking of a cloud migration similarly to moving to a new house, FIs can ensure an effective and efficient transition. 

Four steps to a successful cloud migration

Here are four ways FIs can ensure an optimal cloud migration that delivers benefits to employees, processes, clients and the organization itself.   

  1. Take a people-first approach. It’s easy to get consumed by the technical aspects of a cloud migration: tooling, upgrades, depreciations, multi-cloud options, application programming interfaces (API), security, etc. However, FIs need to balance these technology concerns with the business changes the cloud entails and enables, both to reduce costs associated with the technology infrastructure and optimize revenue and profit margins.

    For instance, which dedicated teams will stand up the service, and who will perform ongoing maintenance and support? How will new business applications and use cases be onboarded to achieve more value from the foundational cloud solution?

    We worked with an FI client to implement a financial reporting solution that incorporated a cloud-native data management component. Keeping in mind business stakeholders’ needs for dashboards and reports that enable decision making based on a variety of key indicators, we introduced a mechanism to standardize the client data, which was expected to arrive in varying shapes and sizes from multiple locations. Without these standards, people would get confused by the meaning of the downstream analytics.

    Another way businesses can put people first — while also reducing costs and cycle times — is to automate maintenance activities. One of the largest benefits of the cloud is the ability to create resources with API calls or embedded APIs in tools and software. This puts the focus on the business outcomes rather than the updates, themselves. By automating repetitive tasks, people can focus on value-added activities, which ensures the business is taking full advantage of the cloud. 

  2. Focus on delivering value and business outcomes. Clearly define why you are moving to the cloud in the first place, with the help and agreement of key stakeholders. Document the business use case and continually update it to keep up with new businesses and technology circumstances, including business engagement, automation, data, value, architecture and visibility. FIs that understand and document cloud migration goals on a monthly, quarterly or semi-annual cadence are best positioned to adapt quickly to change.

    It’s essential to understand that the simple act of moving to the cloud is not a guarantee of cost savings — in fact, many FIs find themselves initially increasing their tech investment. Additional measures can mitigate the cost increase, however. We worked with a large payments client that had partially moved to the cloud to reduce its costs by 50%. By moving fully to the cloud, it no longer needed to maintain its legacy environment, which not only reduced costs but also enabled additional value-added capabilities and innovation via cloud-based automation and AI.

    FIs should also consider how business and market requirements may change over time. For example, we worked with a client that wanted to adopt many new sources of third-party data and incorporate new algorithms to find and retain new clients. By connecting the dots, the FI was able to make more meaningful decisions regarding product and service differentiation that led to a 25% increase in new clients and reduced attrition by 15%.

    By clearly defining business use cases, FIs can better understand where cloud investments should be made, as well as when to stop, start and continue these investments. For instance, we worked with a top-10 FI to augment its data and cloud capabilities to achieve a more holistic view of its data to enable more consistent cross-selling and upselling of products and services across channels and achieve greater share of wallet.

    The firm improved how it models customer profiles to enable highly-targeted marketing campaigns, while also improving the customer experience across the products and services portfolio. We then partnered with the FI to centralize the environment that allows internal business units to easily analyze and access data.

  3. Apply cloud-native thinking to the new environment. Many clients try to move all of their on-premises infrastructure to the cloud simultaneously. This is the equivalent of trying to move all of your studio apartment belongings to a house, where they are ill-fitting and stylistically inappropriate. To optimize cloud scalability, FIs must realize that architectural decisions for databases, firewalls and security that are used on-premises are often suboptimal when deployed on the cloud.

    While businesses might think they’re avoiding disruption by using their on-premises approaches, doing so ultimately inflates costs, reduces scalability and eventually reduces business outcomes. Reviewing cloud-native tooling and capabilities results in a more cost-effective and secure solution overall. If the decision is a third-party tool, make sure it can be automated to avoid errors, additional cycle time and excess headcount to the cloud platform.

  4. Go green while maintaining agility. Environmental, social and corporate governance (ESG) are  three central factors in measuring the sustainability and societal impact of an investment in a company or business. FIs are not only measuring other companies’ ESG, but are also being measured on their own ESG compliance. The growing demand for cloud infrastructure has led to a dramatic increase in energy consumption. For example, Google reported in 2019 that its data center electricity use had tripled in the last six years, a 20% annual rate of increase that far surpassed any other industry. Due to this increase and overall business sentiment on ESG, organizations are more deeply examining their energy demands. This is also due to the exponential growth of cloud service vendors’ data centers. 

    To achieve greener cloud computing, FIs must include low-power consumption as a requirement in their design, production and use of digital spaces. A green cloud solution such as Dynamic Voltage Frequency Scaling can reduce energy consumption and increase resource utilization, leading to energy savings, significant reductions in enterprise operational costs and greater business value.

FIs can more effectively and efficiently serve clients with a streamlined cloud migration that transitions people, processes and the organization itself in a way that optimizes business opportunities. By viewing cloud migration in a business light, they’ll ensure a bright future in their new cloud home.

Cognizant Insights Team

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