How can banks position themselves for faster, more purpose-driven cloud adoption? What are the pitfalls? How should they think about multi-cloud strategies and the “hyperscalers” to unleash the business value from cloud?
As banks and financial institutions seek increased agility, scalability and innovation to compete in a changing landscape, they turn to digital transformation, like any other company. In general, companies that want to scale their digital solutions and reinvent their business models, look for help from public cloud service providers.
The financial services industry, however, has historically been notably tentative in moving to the public cloud, with a pre-pandemic study finding only 16 percent of the sector had done so, compared with the market average of 24 percent. This might be changing now; according to our recent study, the industry’s investments in digital capabilities in response to the pandemic have boosted banks’ confidence.
Today, we hear more interest than ever in public-cloud migration. Yet, only approximately 30–40 percent of banks’ current workloads are in the public cloud. What’s hampering development then?
When banks move beyond legacy IT systems to modernize and automate their platforms with cloud technologies, they deal with a myriad of choices and challenges. Should the bank adopt a private, public, or hybrid cloud environment? What about security and compliance? Cost and effort?
From our viewpoint, failing with cloud initiatives within financial services mainly depends on these factors:
– Lack of cloud competency, combined with the complexity of managing the technical debt that large organizations have built up over years, with a rich flora of on-premise servers, applications and hardware.
– Disconnection 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.
– Lack of an enterprise-wide plan; without it, 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.
When adopting cloud, Nordic organizations are increasingly turning to multi-cloud strategies, according to an ISG survey. This is true for banks too; 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.
This is where the hyperscalers come in – Amazon Web Services (AWS), Microsoft Azure and Google Cloud. They have all built cloud data centers in the Nordics, which is important to align with EU regulations and Schrems II. Managing several hyperscaler platforms, however, is complex and requires significant competency. Gartner has warned against mixing the three major hyperscalers because “it is a full-time job keeping up with a single cloud”.
To succeed, it is crucial to upskill internal teams and/or bring in an experienced partner like Cognizant. All three hyperscalers are partners to us and we have a dedicated business group for each one. This makes us tech-agnostic, providing cloud-native, hybrid cloud and on-premise IT infrastructure services, based on the client’s needs.
Whether it’s migrating the entire core infrastructure to one or more cloud service providers, aka hyperscalers, or just simplifying a handful of processes using Software as a Service (SaaS) tools, the cloud represents the digital future. The pandemic has accelerated the ongoing cloud adoption and during 2021, 51% of Nordic organizations are predicted to reach IDC’s highest level of cloud maturity.