Other parts of this series:
In my previous post, I wrote about the changing dynamics in the cloud conversation. But a conversation is just that—a conversation. It’s meaningless if banks don’t take action. In this post, I will outline the considerations for a successful cloud strategy, potential value and overall challenges. For more information, read our detailed report The Cloud Imperative for the Banking Industry.
Determining Value and Strategy from Cloud
Talking generally about cloud strategy is complicated. Every bank is different, and there is a myriad of factors that create nuance. Before I dive into this generally, please don’t hesitate to request a meeting with us to talk about your specific situation and how we can help you.
Essentially, there are five elements to a successful cloud strategy.
Within these five elements are even more considerations that influence a cloud strategy.
- Pace of Change for Innovation: For most bank products, customer needs and regulations are changing quickly, highlighting the need for an agile approach to product development. Similar to this, banks need to be able to innovate and fail quickly, and require the flexibility to experiment and try new things without overly impacting the bottom line. Cloud offers this flexible and agile approach.
- Nuance in Cost Savings: There’s plenty of evidence that running in the cloud is cheaper than running your own infrastructure. But moving to the cloud offers a moment for banks to rationalize and “clean up” their application ecosystem, removing redundancies and other unnecessary applications. Finally, cloud service providers (CSPs) are constantly upgrading their technology and offering new functionalities, absorbing development costs that would normally be the bank’s responsibility.
- Open Banking: Banking data is increasingly shared, often required by regulators. Unfortunately, most legacy systems are not equipped for this and, even worse, are not designed for real-time data capturing and analysis. The cloud helps integrate data holistically into a bank’s day-to-day business and DNA.
- Risk Management: As I alluded to in my previous post, CSPs know that security in the cloud means survival for their companies. With so much at stake, they have a strong incentive to get it right. Additionally, banks can help mitigate some of this risk by adopting a multi-cloud strategy, which I discuss in more depth below.
Of course, cloud strategy is only as good as the execution. Assuming migration is well-executed, banks can expect to achieve the following benefits by migrating their different cloud application architectures:
- Digital and Core Applications: 30-50% uplift
- Big Data Ecosystem and Analytics: 40-70% uplift
- Data Warehouse and Reporting: 20-60% cost reduction
- Storage Optimization: 10-90% uplift
- Data Control and Security: 30-40% uplift
- Workspace Visualization: 10-30% uplift
For more details around this potential value, see page 12 of the full report.
The Challenges of Enterprise Cloud Migration
All of this talk about the great potential of cloud in banking obfuscates the reality: enterprise cloud migration is difficult. One major question which banks need to resolve is whether to go with the public cloud, private cloud or a hybrid model.
In addition to this, banks will need to outline mitigation strategies for a number of challenges.
- Security: At the end of the day, banks are legally responsible for their data, even if their data is in a CSP cloud. So they will need to take control of regulatory compliance and aggressively test each release.
- Business Complexity: Banks can manage their business complexity by piloting more simple workflows first and then being disciplined in scaling out to other, more complex processes.
- Application Architecture Complexity: With complex application sprawl, banks should avoid tackling everything at once. Instead, start with high-impact use cases and work down from there.
- Misalignment Between Business and IT: Sometimes, business and IT objectives related to the cloud can be at odds. This can be mitigated through open communication, engaging the right leaders and aligning product owners.
- Skills Gap: Working with cloud infrastructure is a new way of working. To be successful, banks will need to upskill their workers and shift their culture.
- Legacy Infrastructure: Old infrastructure can significantly impede a bank’s ability to take full advantage of the cloud. This will likely require moving to a more agile operating model and upgrading technology to leverage automation and self-service capabilities.
You’re Not Alone
Despite these challenges, all banks are at the same crossroads. It’s easy to talk about the benefits of cloud in banking, but the road to getting there is often long and difficult to navigate. But you don’t have to do it alone.
At Accenture, we have a long history of helping banks manage their cloud migrations. We’ve done it so often that we even have a tool, myNav, that assesses, designs and simulates cloud solutions. To learn more about this, ask us for a meeting. And to dive deeper into the cloud imperative in banking, read our full report.