What challenges do financial services organizations face as they strive to fully adopt the cloud?

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The cloud promises great returns for organizations that invest in it, and it has proven its worth time and time again over the past 18 months. But while they may have survived the pandemic, some companies are still struggling to see the promised return on investment.

Recent Computing to research, presented in a webinar last year found that nearly two-thirds of financial services organizations are not seeing the full promised benefits of their cloud initiatives – and while most believe their cloud usage will grow over the next three years, it remains an underutilized resource at present. Only 37% of respondents said their organization currently stores half or more of their data and applications in the cloud, for example.

There are several reasons why this might be the case, and most can be attributed to a lack of understanding of how and why the cloud can help. We spoke to Matt Horsham, head of financial services at Kainos, to discuss how financial services organizations are using the cloud and the key challenges they face.

Computing: Sixty-six percent of companies say they are not getting all the benefits promised by their cloud initiatives. What are the reasons why cloud transformation in financial services organizations might not deliver the promised business results?

Matt Horsham: First, there may be a lack of continued focus on business results. Any change in technology, and right now especially cloud adoption, presents a technology-driven challenge and can then become a technology-driven project. Many companies end up aiming for a technological state and not a business outcome. It’s hard to stay results-oriented, which is why so many change programs fail to manage it consistently.

The second factor is changes driven by industry regulations, that is, changes to existing business and technology processes, rather than redesigning the customer experience and creating the necessary technology landscape.

Finally, many organizations aim for the easy change and avoid the difficult, but expect the results that the difficult change would bring. This means that many financial services organizations stop early because they are both risk averse and unable to judge what the risks really are – and the impacts of those risks.

CTM: Why are financial services organizations, in particular, hesitant to fully adopt the cloud?

MH: Financial services is an important sector, with many different factors influencing technology change and projects. I’ll split my points into those that have a legacy core and those that don’t – basically this lines up with banking and insurance.

Traditionally, core banking has systems that are old, and often mainframes or, at best, Unix servers. These are difficult to modify and do not lend themselves to digital systems or methodologies. Insurance generally has a much shorter refresh cycle than banking; for example, most of us renew our auto or home insurance every year, which means system changes are easier to make. There aren’t many insurers with mainframes for their core systems; However, many insurance practices remain non-digital, and even paper-based.

So while moving edge, volatile, and more naturally digital services to the cloud can often be done with minimal resistance, moving down the stack, closer to core services and systems, becomes more difficult and has a greater impact on the fundamental parts of the business, and that makes people more hesitant.

CTM: What are the common obstacles financial services organizations face when migrating to cloud workloads?

MH: The hesitation I just mentioned is the key. Typically, change projects, and IT change in particular, stall or lose momentum due to lack of trust from key stakeholders. Early on, business stakeholders may be skeptical of changes to their processes and systems. Once they are confident and have agreed on a business case, technical leaders are not convinced that they can deliver or that the business needs match their technical strategy or business architecture. ‘business. With a technical change strategy in place, the project is handed off to the delivery staff, usually a plan that fits on a slide, which means these stakeholders lack confidence in the delivery. This lack of confidence is overcome with a more detailed and achievable plan. Once the delivery team is engaged and confident, the new systems are sent back to the business who either forgot what they asked for or where the people in the field weren’t made aware of the change on the point of being visited, here trust is built by educating users, providing them with friendly guides to move from the old to the new.

The other major obstacle we see is the lack of accessibility to the basic functions of the new, more digital services. There is a “digital-on-top” model common in financial services organizations, where entire applications are written to provide pseudo-APIs to a non-digital core, be it a mainframe or paper-heavy process combining manual and technological activity and challenges. . In theory, this makes lower levels of the technology stack available for digitization and migration to the cloud. In reality, the complexity of the systems, weakened as additions and deletions and the proliferation of communication channels, dissuades people from even starting the work of modernization. There is no easy answer to this, but there are a number of techniques to remove the complexity by gradually reconstructing parts of the system in a more flexible numerical way, or by accepting that it will continue to exist and using robotics to create a better experience.

CTM: How can financial services organizations unleash the power of the cloud without a wholesale migration?

MH: Your question is actually the answer to this one. Don’t consider a wholesale migration as the only option. Keep in mind the business outcome you want to achieve and make sure the planning and design you do is geared towards that. A model of defining a vision, strategic goals and then a strategy can be useful – it can facilitate, encourage or even force people to be more brutal in their decision-making. If an app provides little value, or there are multiple apps that perform a similar function, or it takes a lot of effort to maintain and run, then maybe the best thing to do is to disable it?

The cloud can provide opportunities for cost reduction or revenue generation. These come in different ways, but identifying and then focusing on the area that is important is what generates benefits.

Educating the business on when the cloud presents a better option is also key, to pivot and change course when building services. The cloud has a big advantage over committing to a large fleet of infrastructure. Research the key cloud benefits applicable to your organization and make sure your technical decision makers are fully aware of them.

CTM: What are the most important considerations for financial services organizations when building a resilient, modernized cloud-first IT infrastructure?

MH: You used the word “build” and I’m going to stretch it slightly to cover design, build, migrate to, use, maintain and operate. I talked about this in a previous answer: make sure you know what you want to achieve, not in terms of technology, but in terms of business results.

The key to any change program is communication – make sure you know who your stakeholders are, should be and will be, and establish good communication between them.

Involve cloud experts – don’t fall into the trap of treating the cloud as just a data center, which is easy to do. If you move your ability but don’t change it, you won’t get much, if anything at all.

Don’t fall for false economies – better to do it right, in stages, than all at once for what seems like a lower cost, but without the benefit.

Finally, have a migration and transition plan. The hardest part of any project is moving from one state of affairs to another, so break it down into smaller achievable chunks. The intended end state can be changed throughout, in a controlled manner. If people know what travel is like, they find it less of a concern and ultimately less disruptive.

To learn more about the obstacles that arise when migrating to the cloud, whether through hybrid or multi-cloud models and the measures that must be put in place for the cloud to be an enabler of innovation in financial services organizations watch the webinar Kainos hosted with Computing last year on demand now.

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