Cloud Computing in Financial Services: How to secure buy-in and prepare for migration

Published : 9 years ago, on 24/11/2015

By Rahul Singh, President – Financial Services HCL Technologies

The financial services industry’s relationship with cloud is evolving from something of a ‘wait and see’ approach to increasingly widespread adoption. Initial fears over the suitability of cloud for the financial industry have subsided following the acceptance of hybrid cloud as a suitable compromise between security and agility. Gartner recently predicted that this model of cloud will prove truly productive within the next two to five years. This offers a clear indication that hybrid cloud uptake will continue to grow as businesses across all industries come to realise the benefits, and financial services will be no different.

Many within the sector now recognise the potential that cloud has to improve services and act more flexibly in order to meet customer needs more effectively. Switching between banks is now easier than ever thanks to the Current Account Switch Guarantee, so delivering great customer service has never been more important. With cloud offering the opportunity to provide better customer service than ever before, it’s not surprising that implementation is on the increase among financial services firms.

So why has the sector been slow to jump on the cloud bandwagon until now? Security used to be one of the biggest barriers blocking the road in such a regulated sector; when cloud computing first emerged on the scene, it was easy for IT departments to reject it as a pipe dream. Many were understandably cautious about moving core business functions off-site, but concerns have eroded in line with the growing popularity of hybrid and private cloud. Indeed, the majority of IT departments are now aware that cloud does not mean every aspect of IT has to leave the building.

Overcoming the hurdles

With concerns around security and compliance beginning to ease, the time has come for many financial services organisations to give cloud serious consideration. Many CIOs are now set to begin the process of securing stakeholder buy-in from across the broader business.

With infrastructure and applications often managed by a range of separate departments, all parties must be united and willing to travel in the same direction before the journey can begin. Often this fundamental change in structure can prove a stumbling block. Of course, cloud adoption isn’t as simple a process as just switching off existing systems. Many within the financial services sector are already in the process of modernising their legacy infrastructure. This process could well be happening on a department-by-department basis, so proposing a business-wide migration to cloud could be presented as a method to unify the organisation.

During the planning stage, CIOs can struggle to identify examples of tangible business benefits that cloud has brought to their peers. The answer is to look across to the telecoms industry, where organisations have found it easier to build a business case by introducing additional revenue-making services as a consequence of the move to cloud. Financial services providers should look to replicate this activity and identify ways cloud can bring tangible benefits to their own customers, in the form of new products and services.

Being able to call on expert help can prove invaluable in attempts to secure buy-in from senior business leaders. Banks in particular must spend time building an understanding of how applications and infrastructure currently operate, whether or not it is possible to operate them using a cloud-based system, and what the best approach would be to make the move happen.

This can prove particularly difficult for large or multinational organisations, because the difference in legal structures from country to country makes it impossible to use a one-size-fits-all approach. They must investigate whether cloud activity is legal in each country they are serving. For example, while the Netherlands’ national banking regulator has given the green light for the use of Amazon Web Services, in Switzerland it’s a completely different state of play. Swiss law says banking data cannot leave the country, unless the customer has given prior consent, so the country’s financial sector has given cloud a wider berth. The stark contrast shown by these two countries reflects the importance of bringing in the assistance of somebody who has been through the process before.

Two key stages to prepare for migration

Once buy-in has been secured, businesses must put plans in place for a structured cloud migration, or risk enduring a bumpy ride. There are two key stages in the journey to a successful migration. First, the organisation must take stock of its current IT assets and processes.

The starting point is to get an understanding of what is already in place, so the business must undertake an objective assessment of its application portfolio. They must begin this process by identifying which applications are designed in a way that makes them suitable for deployment in the cloud. Those that are unsuitable should then be objectively analysed to determine whether there is a business-case for retaining them or whether they should be decommissioned. Once the business has identified which applications will be moved to the cloud, it should then consider what the impact on its licensing agreements will be. The majority of on-premise apps have specific licensing set up for the traditional scenario, and when they are transferred to the cloud, vendor terms and conditions can often change. As such, organisations should consider which licences can be carried across from existing agreements, and which ones need to be re-negotiated.

Opportunities to consolidate assets should also be identified and acted upon. For example, applications are becoming increasingly capable of providing a growing number of capabilities, which could render others surplus to requirements. It is also important to identify processes that can be streamlined, with a particular focus on the elimination of non-value-adding activities.

Second, the business must decide how much should be virtualized, and what should remain on-premise. As Gartner says, the cloud may not benefit all business functions equally, and financial services institutions shouldn’t lose sight of the fact that non-cloud solutions will sometimes be more appropriate for their needs. Of course, many organisations already run important business functions through cloud-based systems such as Office 365 for email and Salesforce for CRM. However, when it comes to certain core applications such as mainframes, it could be harder to find robust proven cloud use-cases to be emulated.

Ready for take-off

With a firm roadmap in place, financial services organisations will be in a good position to migrate to hybrid cloud. However, they must remember that integration poses challenges: it is not as simple as opening a box and plugging something in. The skills needed for a successful cloud migration do not necessarily already exist within the organisation. Without the guidance of an expert eye, it can be difficult to guarantee cloud services deployed will align with wider business needs. As such, many will come to call upon the support of their technology partners to benefit from the expertise of somebody who has already trodden the same path.  As cloud adoption amongst financial services firms accelerates in 2016, now is the time for those that have yet to plan their own migration to take action, or risk being left behind by more forward-thinking competitors.