The great cloud
what banks need
Senior Managing Director —
Global Banking Lead, Accenture
Managing Director —
Banking Cloud Lead, North America
Mainframe operations are finally moving to the cloud
After years of saying it’s sure to happen, mainframe migration is finally here. Accenture's new survey confirms that banks are migrating their core functions to the cloud with a high level of commitment and the expectation of positive results.
Our survey of 150 banking executives across 16 countries focused on large banks that are planning to or are in the process of migrating their mainframe workloads to the cloud. The research found that tentative pilots and protracted rollouts are simply not in the playbook. In this fourth volume of the Banking Cloud Altimeter, we’ll explore this exciting push forward into a new beginning of core modernization, innovation and growth.
“While there are still banks that are hesitant about moving their core applications to the cloud, those that have made the decision are going all in,” says Michael Abbott. “They’ve bought the business case and now they’re eager to reap the benefits.”
Have you or are you planning to migrate your legacy mainframe systems to the cloud?
What share of your core systems are you planning to operate in the cloud?
When is your organization planning to reach its targeted mainframe migration to the cloud?
Planned mainframe migration to the cloud survey results. How does your organization compare?
Josh Glover is nCino's president and chief revenue officer, responsible for global sales, pre-sales, business development, channels and alliances, and marketing teams, in addition to leading nCino's business and operations.
Josh looks back at how banks’ perception of the cloud has changed since the early days and shares his view on what it means to them today:
We see a real forced reckoning. Financial institutions began to understand that if they’ve been delaying digital transformation, they can’t continue to wait. And even if they’ve already begun the cloud journey, they’re figuring out ways to optimize and accelerate that. So today – we are not spending a lot of time talking to the market about why banks need to move to the cloud. We’re talking to them about how to move to the cloud. As partners, Accenture and nCino, have significant experience that has given us a proven point of view on that ‘how’ and we have jointly navigated great deployments with financial institutions who have been trailblazers. Those lessons learned position us to help others drive forward.
Years ago, if you wanted to get on the cloud to do commercial lending, you would’ve had to potentially build something in-house. Now you can come to the table and get a packaged offering with nCino and go live in months, not years. That is a real paradigm shift. The benefits of the normalization of cloud are huge: overall flexibility and accessibility to integrate various solutions that streamline business processes and reduce risk.
Beyond the business processes, there’s a lot of untapped data that financial institutions have in the cloud. As they continue their journey, now they’re realizing that having all that data in one place gives them opportunities within their market that they didn’t know were there. It’s given them a lot more transparency into how their institution is running and where they can go forward.
You have to take an aggressive but realistic view about how you can continue your business operations but achieve the business lift you want. Even at nCino, as we continue to grow, we modify our technical systems pretty quickly. If you don’t have the right experience and the right team that’s really strategizing how to drive the business change, you might not get the lift you want.
What banks need to know about migrating their mainframe
Shifting core systems to the cloud is the new reality for banks
“After years of saying it’s sure to happen, it’s finally happening,” says Michael Abbott. “What we’re seeing is a paradigm shift.”
For decades, the financial services industry was a bastion for mainframe computing. Big iron offered not only the capacity and speed to handle the exceptional volumes associated with core processes, but also the resilience demanded by an essential service such as banking. However, as MIPS outpaced revenue growth and as mainframe architects and engineers became endangered species, these proprietary platforms became increasingly difficult and costly to sustain.
At the same time, banks were changing their stripes. These venerable institutions that were known for their prudence and conservatism were having to become agile, innovative, responsive and efficient. To an ever-increasing degree, their mainframes were starting to feel like millstones.
The uncomfortable reality is that mainframes’ highly complex, interdependent and tightly coupled architectures cannot address today’s business challenges—a fact that more and more banks recognize. The proof is in the research. Our recent survey of 150 executives at large banks that either plan to or are in the process of migrating their core functions to the cloud reveals that more than 8 out of 10 intend to move the majority of their mainframe workloads to the cloud. Within this group, 22% said they plan to move at least 75% of their mainframe workloads to the cloud.
Banks are clear and resolute in their planning: 82% of both groups are determined to meet their targets in the next two to five years.
Banks go all in by opting for public cloud
The cost-efficiency, flexibility and regulatory compliance of modern public clouds, along with their experience of migrating non-core functions make it harder for bank leaders to justify keeping on-premise mainframes.
It’s no surprise, then, that as banks change their position on mainframes, public cloud has become the preferred option—63% of the executives surveyed said they planned to use primarily public cloud services, compared to 31% for hybrid cloud and 6% for private cloud.
Embracing the public cloud makes business sense. “More and more, the public cloud is proving itself in financial services,” says Nicole Lanza. “Especially when it comes to security and resiliency.”
In recent years, to accommodate banks’ particular requirements, public cloud service providers have built many custom solutions for the industry—like AWS control tower, a compliance framework that monitors the cloud environment and helps banks achieve regulatory compliance.
They have also built resiliency into their public clouds and are able to offer banks unprecedented scalability.
In this video, Nicole Lanza discusses moving core functions to the cloud with Keri Smith, Accenture’s applied intelligence lead for financial services.
“Instead of having employees build and maintain the infrastructure and the whole stack, banks can rent ‘boxes’ as and when they need them,” says Lanza. “There’s a whole suite of services they can just tap into and use, in the same way that you’ve got a bunch of apps on your phone. This gives banks far more scalability and elasticity than they ever had with their mainframe.”
In this video, Nicole Lanza and Keri Smith discuss how banks can get a strong return on investment with cloud transformation.
The barriers to migration are still significant
For those banks that are hesitant to move all of their core functions to the cloud, the two main concerns are the risk of disruption to the business and the complexity of the operational changes (which includes an inadequate understanding of the legacy core code). Forty-four percent and 42% of the respondents, respectively, rated these as significant or very significant barriers to moving their legacy mainframe systems completely to the cloud.
That’s not a huge surprise. Banking executives are risk-averse and moving the core business applications comes with risk.
“It’s complex stuff; it must be done right,” says Lanza. “But it’s a risk that needs to be taken. Banks that don’t make the switch face not only the risk, but the certainty of losing their competitive edge.”
There is a correlation between this risk and the complexity of the bank’s mainframe environment. The biggest contributors to this complexity are the lack of necessary skills and how core applications are integrated with other systems.
The way banks’ core applications are integrated with other systems can increase complexity.
Question: Which of the following statements best describes your organization’s core banking applications?
Almost 40% of the banking executives in our survey said their mainframes are more than 10 years old, and 41% are running 100 or more applications on their mainframes. Only 9% have stabilized their mainframe maintenance costs in the last few years; most have seen these costs increase, while none have seen them drop.
“This is not surprising, applications running on the mainframe are often old, have been maintained by numerous developers over the years, and are fragile,” says Balon. “One client estimated $1M every time they wanted to make the simplest of changes due to this fragility.”
“To get the most out of the cloud, a bank doesn’t need to turn every staff member into a software engineer. But it does need to build a network of cloud evangelists that extends across the organization, and that understands how the cloud can be leveraged to increase agility and competitive advantage. How it can drive value.”
The sketch below provides a visual summary of the technical and digital fluency skills required by the organization to realize the full benefits of migration to the cloud. You can also read more on this topic in Volume 3 of the Banking Cloud Altimeter: Is your bank's culture limiting the value of cloud?
In this video, Nicole Lanza and Keri Smith discuss how a bank's culture can be both a challenge and an opportunity for cloud adoption.
Source: Accenture’s Mainframe Migration to the Cloud in Banking research, based on 150 respondents across 16 countries
Source: Accenture Industry Cloud research
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