Other parts of this series:
The banking industry has been talking about and moving towards cloud for a decade now. So much so that 95% of banks have already adopted cloud in some form. This high-level acceptance of cloud provides an opportunity to dive into the nuances and move beyond “Should we invest in cloud?” and towards “How do we invest in cloud; what is the best strategy?”
This question is particularly complicated because of COVID-19, cloud skeptics and a shift towards multi-cloud strategies. That’s why we’ve created a new research report called The Cloud Imperative for the Banking Industry. Throughout this series, I will be diving into these details and nuances, starting with COVID-19’s impact on the cloud conversation.
Cloud in Banking Before COVID-19
While banks have been talking about and successfully migrating parts of their business to cloud, they have also been hesitant to embrace a full-cloud strategy. Instead of jumping in, they are moving slowly and incrementally, picking and choosing which parts of their business to migrate.
In theory, this would be a good thing, allowing banks to see the impact of a small migration before fully committing. The problem is that by picking pieces of the business to migrate, banks are not seeing the full power and benefits of cloud, and thus are short-sightedly feeling disappointment.
In fact, only 35% of banks say they have achieved the benefits they expected from their cloud initiatives. But is this due to cloud itself or the disjointed implementation strategy?
Complicating matters is the fact that two camps have evolved throughout the years. On one side there are the evangelicals who fully embrace cloud immediately and for the entire business organization. On the other side there are the skeptics who often cite security concerns, regulations and potential competition with the largest cloud service providers. Before COVID-19, it was most often up to the evangelicals to argue the case for cloud and to address the questions and concerns of the skeptics. But since COVID-19, this debate is shifting.
COVID-19 is Shifting the Cloud Mentality in Banking
As difficult and devastating as COVID-19 is, it also provides banks an unexpected opportunity. Since the pandemic has already upended operations as an emergency, this is a chance for banks to reinvent their business rather than slipping back to old ways of doing things before COVID-19.
Most banks are past the stabilization phase of the pandemic and are currently coping with a new normal. This means they are in a state of relative calm to review their business strategies in a new world, while also doing a post-mortem on their response to COVID-19.
What many banks might find during this post-mortem is that if they were on the cloud, their response to the pandemic would have been much smoother, faster and overall easier. Without a doubt, COVID-19 is increasing the urgency for banks to shift to the cloud.
This urgency is also changing the dynamic between the evangelicals and the skeptics. With more data showing the benefits of cloud (10-20% cut in operational costs and 30-50% shorter time to market), the burden of proof is shifting to the skeptics to answer the question “why not move to the cloud?”
Many of the arguments skeptics used against cloud are no longer viable.
Cloud service providers are investing heavily in security, knowing that their entire business model rests on making banks and other clients feel confident about their safeguards. And regulators are increasingly open to cloud strategies, as risk and compliance assessments get stronger and more sophisticated.
It’s clear that the cloud conversation is moving quickly. At this point, banks understand that cloud is necessary and an immediate need. But how do they get there, and what kind of value should they expect? That will be the discussion in the next part of this blog series. In the meantime, read more details on the cloud imperative in banking in our full report.