What are the challenges facing financial services organisations when striving for full cloud adoption?

clock • 7 min read
Only a third of financial firms are storing half or more of their data and apps in the cloud
Image:

Only a third of financial firms are storing half or more of their data and apps in the cloud

Many financial services organisations are built on legacy tech, and moving to the cloud is no simple task - but it is important

The cloud promises great returns for organisations that invest in it, and it has proved its value time and time again over the last 18 months. But while they might have survived the pandemic, some companies are still struggling to see the return on investment that was promised.

Recent Computing research, presented in a webinar last year, found that nearly two-thirds of financial services organisations aren't seeing the full benefits promised from their cloud initiatives - and although most believe their use of cloud will expand over the next three years, it remains an underused resource at present. Just 37 per cent of respondents said their organisation was storing half or more of their data and applications in the cloud at present, for example.

There are several reasons why this might be the case, and most can be traced back to a lack of understanding about how and why the cloud can help. We talked to Matt Horsham, head of financial services at Kainos, to discuss how financial services organisations are using cloud, and the key challenges they are facing.

Computing: Sixty-six per cent of organisations say that they aren't seeing the full benefits promised from their cloud initiatives. What are the reasons that cloud transformation in financial services organisations might be underdelivering when it comes to the promised business outcomes?

Matt Horsham: Firstly, there can be a lack of continued focus on business outcomes. All technology change, and at the moment particularly cloud adoption, presents a technology-focused challenge, and can then become a technology-driven project. Many firms end up aiming at a technology state, not a business outcome. It is difficult to remain outcome-focused, which is why so many change programmes don't manage it consistently.

The second factor is changes driven by industry regulations - that is, changes being retrofitted into existing business and technology processes, rather than rethinking the customer experience and creating the necessary technology landscape.

Finally, many organisations aim at the easy change and avoid the difficult, but expect the outcomes the difficult change would bring. This means that many financial services organisations stop early, because they are both risk averse and poor at judging what the risks - and impacts of those risks - really are.

CTG: Why are financial services organisations, in particular, hesitant when it comes to fully embracing the cloud?

MH: Financial services is a big sector, with a lot of different factors that influence change and technology projects. I'll split my points into those with a legacy core, and those without - loosely this aligns to banking and insurance. 

Traditionally core banking has systems that are old, and often mainframes or at best Unix servers. These are difficult to alter, and do not lend themselves to digital systems or methodologies. Insurance usually has a much shorter refresh cycle than banking; for instance, most of us renew our motor or home insurance annually, meaning that system changes are more easily achieved. There aren't many insurers with mainframes for their core systems; however, a lot of insurance practices remain non-digital, and even paper based.

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

CTG: What are some of the common obstacles financial services organisations face when migrating to cloud workloads?

MH: The hesitancy just touched upon is key. In general change projects, and IT change particularly, get blocked or lose momentum due to lack of confidence of key stakeholders. Early on, business stakeholders can be dubious about changes to their processes and systems. Once they are confident and have agreed on a business case, then technical leadership are not confident that they can deliver, or that the business needs fit within their technical strategy or enterprise architecture. With a technical strategy for change in place, the project gets passed to delivery staff, typically a plan that fits on a slide, which means these stakeholders lack confidence in delivery. This lack of confidence is overcome with a more detailed and actionable plan. Once the delivery team are engaged and confident, the new systems get passed back to the business who either forgot what they asked for, or where the people on the ground didn't get informed of the change about to be visited upon them, here confidence is built by educating the users, providing them with sympathetic guides to move from old to new.

The other major blocker we see is the lack of accessibility to core functions from newer more digitally enabled services. There is a 'digital on top' model common in financial services organisations, where whole applications are written to provide pseudo-APIs to a non-digital core, whether that be a mainframe or a paper-heavy process marrying manual and technology activity and challenges. In theory this makes the lower levels of the technology stack available for digitisation and migration to cloud. In reality the complexities of systems, grown fragile as things are added and removed and communications channels proliferate, put people off from even starting the work to modernise. There is no easy answer for this, but there are a number of techniques to remove the complexity by gradually rebuilding parts of the system in a more flexible digital way, or accepting that it will continue to exist and using robotics to create a better experience.

CTG: How can financial services organisations unlock the power of the cloud without a wholesale migration?

MH: Your question is actually the answer for this one. Don't consider a wholesale migration as the only option. Keep the business outcome that you want to achieve firmly in mind, and ensure that the planning and design you do is focused on that. A model of defining a vision, strategic objectives and then strategy can be helpful - it can facilitate, encourage, or even force people to be more brutal in their decision making. If an application provides little value, or there are multiple applications that perform a similar function, or it takes a very high amount of effort to maintain and operate, then perhaps the best thing to do is to turn it off?

The cloud can provide cost-cutting or revenue generation opportunities. These come in a lot of different ways, but identifying and then focusing on the area that is important is what drives benefit.

Educating the business on when cloud presents a better option is also key, to pivot and change course when building services. Cloud presents a great advantage over committing to a large infrastructure estate. Seek out the key cloud benefits applicable to your organisation and ensure your technical decision makers are fully aware of them. 

CTG: What are the most important considerations for financial services organisations when building cloud-first, resilient and modernised IT infrastructure?

MH: You used the word "building" and I am going to stretch that slightly to cover designing, building, migrating to, using, maintaining and operating. I touched on this in a previous answer: make sure that you know what you want to achieve, not in terms of technology but in terms of business outcomes.

The key to any change programme is communication - make sure you know who your stakeholders are, should be and will be, and set up good communications between them.

Get cloud experts involved - don't fall into the trap of treating cloud like just another data centre, which is easily done. If you move your capability but don't change it, you won't achieve much, if anything.

Don't fall foul of false economies - better to do things right, in stages, than all at once for what appears to be a lower cost, but then not achieve the benefit. 

Finally, have a migration and transition plan. The hardest part of any project is changing from one state of affairs to another, so break this down into smaller achievable chunks. The end state being aimed for can be changed throughout, in a controlled manner. If people know what the journey looks like then they find it less concerning and ultimately less disruptive.

To learn more about the obstacles that arise when migrating to the cloud, whether via hybrid or multi-cloud models and the measures that need to be put in place for the cloud to be a facilitator of innovation in financial services organisations watch the webinar Kainos ran with Computing last year on demand now.