More and more companies in the finance sector are facing considerable challenges with cloud transformation. On the one hand, there is a need for accelerated software development and the development of new business models. In the same period, the reliability of the IT infrastructure must be guaranteed.
A few years ago, skepticism about public cloud services was widespread in the financial sector: the risks and imponderables seemed too great, especially regarding data protection and regulations. Around 95 percent of financial companies use this technology today. And the entire industry plans to increase its workload to avoid typical mistakes and fully exploit the potential.
In addition to big data, deep learning, IoT, and artificial intelligence, the public cloud offers flexible scalability and lower personnel costs compared to the classic on-premise model. The advantages of cloud transformation for financial establishments are apparent. Recent updates suggest that there has been an innovation backlog in the banking sector concerning digitization.
But now the dams are gradually breaking, leading to a boost in digitization in the industry, the study shows. Ninety-five percent of the corporations surveyed already maintain their applications in the cloud and want to increase workload in the future. Scalability of the IT infrastructure is the top priority, followed by enhancing security and standardizing the IT infrastructure.
Conclusion: The industry has embraced the trend and is on the right track.
Yet, banks and insurance firms face the challenge of undergoing a digitalization process “from outside.” New FinTechs and InsurTechs, on the other hand, are often founded from the public cloud for reasons of agility and scalability. That’s why they initially followed this as part of their DNA.
Greater migration effort: Banks do not simply grow out of the cloud compared to young tech companies. They have to decide which functions, information, and services to move piece by piece to the cloud. And to what extent and in what time they want to achieve that.
In addition to calculating the monetary and personnel costs, regulations and data protection requirements may complicate the process. For example, the institutes must enclose a cloud exit procedure in place. This ensures that even in the event of a total failure of a cloud provider, be it for technological or other reasons, the client data is protected, and the most crucial functions can be maintained. Because of this, many are currently dealing with multi-cloud strategies.
The use of different cloud services from different providers can make sense. Organizations profit from improved reliability, increased flexibility and scalability, and reduced risk of vendor lock-in. However, the high complexity of such an undertaking too poses significant challenges for IT professionals. They must consider security, integration, and cost when orchestrating different cloud solutions. And plan for significantly more personnel, capital, and time than implementing with just one provider.
Golden rule: If several cloud providers provide the bank with services they cannot get from just one provider, it is advisable to consider a multi-cloud strategy. However, as a pure safeguard or to maintain an exit strategy, it usually does not justify the immense additional effort. Therefore, using the appropriate cloud infrastructure requires a precise needs analysis and implementation strategy. And last but not least, it depends on the existing IT infrastructure and your level of cloud maturity.
On the one hand, the precise analysis of the actual needs is crucial to implement cloud transformation efficiently. Ideally, companies individually evaluate what the optimal migration paths are. Other bases for assessment are the state of the current applications, the underlying application architecture, and a clear definition of the goals and benefits expected from the migration to the cloud. However, theory and practice are two sides of the same coin.
Suppose the analysis is carried out too abstractly and without the inclusion of practical experience. In that case, there is a risk of delays in implementation: the larger the scale of such a cloud transformation project, the longer the planning phase, as a rule. In extreme cases, so much time elapses that the analysis needs to be updated when implemented and no longer suits the needs because these have changed. Ideally, banks follow the example of FinTechs and InsurTechs to implement their cloud migration successively: Instead of an abstract needs analysis and implementation in one colossal act, application after application is brought to the cloud, transformation processes can establish themselves and prove themselves, which is equivalent to “natural growth.” equals.
But the best technology is only helpful if a competent IT team implements it. Therefore, according to the DevOps approach, the trend is away from large, classic software implementation projects and towards agile development. Software development and operation of this software are combined here. This promises smooth processes and a significantly reduced time-to-market. Only linking DevOps and cloud benefits enables a company to assume the public cloud to its full benefit.
Banks plan to implement a multi-cloud strategy in the coming years. In contrast, only 15 and 16 percent of banks and insurance companies already use DevOps with specialized roles for IT specialists. By retaining specializations, employees are more deeply involved in the development and operation of the applications, can react specifically to errors, and still ensure a symbiotic association between development and operations.
Even if the pressure to modernize the industry is high, the complex, time-consuming, and costly migration to the multi-cloud, in particular, requires expertise, dynamic structures, and innovative workflows so that the new technologies can generate added value. Otherwise, the public cloud project will quickly become a cost trap and slow down innovation where it should accelerate it. The discrepancy between the large multi-cloud ambitions of the banks and their comparatively weak DevOps implementation may indicate a future line of conflict: the cloud migration challenge is already big enough.
A multi-cloud strategy with two or more service providers is much more complex. This can only succeed with the appropriate internal governance structures. The fastest sports car is of no use on a dirt track. Therefore, institutes should ensure that the planning committees, budgets, employees, and internal organizational structures are ready for acceleration from the cloud.
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