The financial services industry has been notably tentative in moving to the public cloud, with a pre-pandemic study finding only 16% of the sector had done so, compared with the market average of 24%.
But the industry’s investments in digital capabilities in response to the pandemic have boosted banks’ confidence, and today we hear more interest than ever in public-cloud migration.
So far, however, the results from financial services’ cloud initiatives have yet to live up to their promise. One reason is the disconnect between the internal engineering teams — those responsible for migrating applications and infrastructure to the cloud — and the lines of business (LOB) that use the applications.
As engineering teams transition to Agile software development and a product-centric team structure, it’s not uncommon for Agile training to stop at the engineering function. LOBs, meanwhile, continue using waterfall processes that run counter to Agile. As a result, engineering lacks a well-defined operating model for working with LOBs on cloud projects, and the culture conflict becomes a disconnect that drags down cloud efforts.
Taking the enterprise view
Another reason cloud migrations fall short is that without an enterprise-wide plan, banks’ initial cloud initiatives tend to be bespoke in nature, focused on the departments demanding the data services and automation that are best attained in the cloud.
By failing to set organization-wide cloud adoption standards, banks miss the quick-scaling opportunities of cloud providers’ ready-made capabilities, such as data services, security services, or synchronous and asynchronous integration services. Equally important, they lack an end-to-end vision for how cloud will impact the entire organization. Instead of being part of an overall strategy, cloud becomes a series of IT migration projects that are transactional rather than transformative.
An enterprise-wide view of cloud, on the other hand, pays big dividends. It provides banks with the opportunity to prioritize their applications for modernization and match cloud providers’ strengths to their organization’s needs. Because most banks adopt a multi-cloud model to alleviate regulators’ concerns about reliance on a single platform, they have the flexibility to choose one provider when resiliency is the top criteria, and another when looking for the best choice to host their enterprise databases.
Positioning for cloud success
Through upfront preparation, banks can position themselves for faster, more purpose-driven cloud adoption, with a comprehensive plan that avoids the starts and stops of a piecemeal approach. Here’s how financial services organizations can get started:
- Identify how cloud will align with business goals and strategies. How will cloud enable real-time data and analytics? Agility and innovation? Enhanced customer and employee experience? Cloud migration will also require changes to your talent mix and team restructuring to fit the product-centric model. Cost management strategies will also be impacted because of the transition to a variable cost model and from CapEx to OpEx.
- From an engineering point of view, determine your organization’s North Star for cloud. Identify the key technical criteria for aligning with the business strategy, and map out how your organization will get there. For example, if innovation is a key component, how will you drive innovation to meet that goal? If always-on capabilities for customers is a priority, how will you achieve resiliency?
- Develop an end-to-end operating model that clearly outlines all details — including protocols, processes, guardrails, roles and responsibilities — to enable IT services providers and their consumers to support the business needs.
- Implement an enterprise framework to execute the migration plan. The first step is to take stock of the engineering group’s portfolio of digital services so they can be rationalized. By doing so, banks can determine which should be centralized to drive scale, and which should be federated to give LOBs the autonomy to move as quickly or slowly as they want to.
Next, develop a detailed cloud governance strategy that encompasses engineering, security, operations and LOBs. In Canada, banking regulators recently devoted a quarterly review to cloud governance, underscoring the importance of vision and strategy as well as operations and continuous improvement. Regulators’ message to banks offers universal advice: Make the move to cloud structured, thoughtful and compliant.
- Adopt new metrics. Banks should measure their cloud progress against key metrics and course-correct as required. Take cost, for example. Just as moving from on-premises to cloud changes the model from fixed to variable costs, the metrics for measuring costs change, too. Cloud’s pay-as-you go model enables organizations to continuously monitor consumption and cost based on CPU usage or application horsepower, stepping up measurement check-ins from quarterly to monthly or even weekly.
Not only are we seeing more banks interested in migrating to the cloud, but they also want to get there quickly. From what we’re seeing, banks that take a methodical approach to adoption across the entire enterprise are winning the race and realizing the full benefits of their cloud migration strategy.