Mention ‘cloud’ and the responses from financial services executives will run the gamut. While some will happily list the many benefits of a cloud-enabled business, others might still be figuring out how to get maximum value from their cloud initiatives. Recent research by Accenture
Cost savings, in particular, have proved elusive, with the research revealing that only 1 in 3 banks and capital markets firms reporting that their expectations have been fully met. There’s little doubt that, as a result of this, tough discussions are taking place in the C-suites and boardrooms of financial services firms around the world.
From the very earliest days of cloud, the business case was intriguing but counter-intuitive. On the one hand, it made sense to replace an expensive on-premise infrastructure with a hosting service that gave you flexible capacity on a pay-per-use basis, as well as unprecedented efficiency, agility and innovation. Especially if you were confident that availability and data security were at least as solid as on your own infrastructure, and that regulators acknowledged the fact.
On the other hand, it always felt strange moving the data and applications that are vital to the business off the premises and onto someone else’s servers, and putting up with considerable inconvenience while the migration was underway.
Because of this trepidation, most financial companies preferred to feel their way incrementally onto the cloud rather than embark on a decisive, holistic journey. Although banks almost doubled their reliance on the cloud between 2021 and 2022, this still amounted to an average of only 15% of their total workloads.
No one can dispute that it’s hard to move core systems off the mainframe and into the cloud. So it’s no surprise that the easier, less risky projects were tackled first … and on their own. Although the enabling layer and protocols were put in place for the organization as a whole, the migration of workloads seldom happened within a coordinated, enterprise-wide initiative. Where we are today is that the low-hanging fruit have been harvested and, for many financial services executives, the yield has been disappointing.
Which raises the question: Were these executives inspired by the overall potential of cloud, but let down by a tentative approach that could never realize that full potential? In other words, was there a price to pay for fragmenting a comprehensive migration and prolonging the process? It’s certainly true that the longer you take to move your workloads across, the longer you must pay for two sets of infrastructure rather than one—and that will definitely put a dent in your finances.
This conclusion was supported by a recent analysis Accenture performed for a large banking client, which included benchmarking against its major competitors. The study found that the value of accelerating the bank’s public cloud migration was $10 billion a year, mostly through unlocking nascent AI capabilities and freeing up data for the advanced analysis needed to improve customer acquisition and cross-selling.
Eight out of 10 banking executives expect to have at least 20% of their data in the cloud this year and cloud remains one of the top spending priorities for banks. Will these executives be disappointed with the results, or will they learn enough from their early piecemeal efforts to turn things around?
A lot is riding on this. As financial services firms contend with rising disruption and mounting threats, the ability to respond and innovate at pace takes on heightened importance. This, together with a host of other priorities like improving customer interactions, capitalizing on AI for competitive advantage and developing new, dependable revenue streams—not to mention transforming the organization—cannot be achieved without a strong cloud-enabled digital core.
These new cloud capabilities will have a profound effect on companies’ ability to adapt, innovate and grow. While executives should keep a close eye on the cost savings that cloud migration delivers, these savings are likely to be dwarfed by the financial returns as they become more responsive, relevant and competitive.