Cloud migration is slowly gathering pace, with many banks realizing the value at stake, from cost-optimization and unlocking the potential of artificial intelligence (AI) to gaining a competitive edge. However, there are some challenges to overcome.
At the latest Sopra Banking Summit, Gaëtan Dumortier, Service Delivery Manager for Service-as-a-Software and Cloud Services at SBS, and Mathieu Bonnet, Cloud Transformation Manager at Sopra Steria, discussed the topic. They covered the driving factors, concerns with transitioning, and examples of the cloud in action. Below, we explore the highlights, including how Sopra Steria and SBS work with clients to ensure their cloud journey is as smooth as possible.
Public vs. private cloud
Financial institutions (FIs) tend to invest heavily in emerging technology and are often early adopters. When it comes to the cloud, strict regulations and legacy infrastructure resulted in investment mostly in the private cloud, helping FIs modernize processes, applications, and skills.
Public cloud adoption has been somewhat limited. But today, banks are reviewing their strategies and introducing new frameworks. As a result, transitioning to a public cloud using an incremental approach is gathering momentum. Hybrid models are also popular.
Cloud migration: current state
Analysis by McKinsey estimates that Fortune 500 FIs could create $60 billion to $80 billion in run-rate earnings before interest, taxes, depreciation, and amortization (EBITDA) in 2030 by utilizing the cloud. Meanwhile, Gartner says the cloud will become a “business necessity by 2028,” shifting through several stages before it reaches that point: technology disruptor, capability enabler, innovation facilitator, and business disruptor.
Most FIs already have a cloud presence, but adoption is still in its infancy. For example, according to a report by Capgemini, 91% of FIs have started their cloud journey (compared to just 37% in 2020), but many haven’t achieved full business value at scale. Indeed, over half of the firms surveyed have only migrated a “minimal portion of their core applications to the cloud”.
Moreover, research shows that one-third of cloud migrations fail outright and only a quarter of organizations meet their deadlines.
Drivers of cloud migration
Regardless, the benefits of the cloud are myriad, from boosting cost-effectiveness and fostering innovation to staying on top of regulations and ever-changing customer expectations. With that in mind, it’s no surprise businesses across all verticals are leaning toward the cloud.
As part of that, FIs are transitioning to the public cloud. Given the increasing pressure from fintechs, customers, and regulators, there’s no option but to speed up their shift.
Mathieu Bonnet says it’s all about delivering business value. The cloud “enables financial institutions to launch offers more rapidly, cope with legislation changes by leveraging its strong technical foundation, and it’s also a means to instill an innovation culture”.
For Gaëtan Dumortier, the primary driver of SBS moving to the cloud was improving the quality of the services they offer their customers – mainly in terms of availability and resilience. On top of that, SBS now has greater ownership and flexibility regarding infrastructure management, allowing them to be more reactive when it comes to client requests. Furthermore, the services offered by AWS enable cost savings.
Challenges facing financial institutions
The advantages are clear, but there are issues to contend with, from adjusting strategies and operational capabilities to infrastructure and legacy system considerations. Mathieu Bonnet and Gaëtan Dumortier outline six challenges banking clients may face when migrating to the public cloud.
- Strategy
- Cybersecurity and data privacy
- Cost
- Return on investment (ROI)
- Complexity/data flows
- Skills shortage
For instance, in terms of strategy, sharing and aligning stakeholders on a common vision and goals is paramount – AWS’ migration readiness Assessment Tool comes in handy here. To overcome the ROI factor, Sopra Steria and SBS help banks understand the business value of modernizing.
Strategy is more than technology
When Mathieu Bonnet works with customers on cloud migration, the idea is to build new digital services on top of the legacy system to rapidly bring value. “We modernize the legacy in an iterative manner, targeting specific domains or applications where migration will bring a lot of value,” he says.
This progressive method requires the two areas to sync and coexist in terms of connectivity, routing, identity and access management, data transfer, disaster recovery, and so on.
Using their Discovery Assessment offering, Sopra Steria works with clients to “define their evolution strategy with a roadmap and recommend modernization scenarios,” including lift and shift, re-architecture, and rebuild.
Meanwhile, Gaëtan Dumortier highlights the need for effective data management when transitioning financial institutions to the cloud. “Migrating that amount of information is, of course, a risk. To ensure data integrity, we use several mechanisms and services offered by AWS.” On top of that, SBS leverages validation reports and takes care of other aspects like disaster recovery and compliance.
Migration examples
SBS migrated a European online consumer finance bank from the private to the public cloud – a nine-month collaboration, resulting in:
- 99.99% Availability
- Full horizontal scalability
- Resilience by design
- Best of breed regarding security
Sopra Steria supported the UK’s Financial Conduct Authority (FCA) on its migration journey, designing and building a new public cloud platform for regulatory data submission for over 120,000 users. The outcome was as follows:
- Positive feedback around speed and ease
- Real-time insights and reporting, improving the user experience
- Lower operational running costs
- Easier to manage, maintain, and upgrade
- Ability to cope with sudden increases in demand
- Design enables users to submit regulatory data quicker
- Better visibility regarding historical records
The platform can process 30 million transaction reports per day, reaching over 60 billion over five years.
Embracing the public cloud
Financial institutions are jumping on board with cloud technology, but few realize its full potential. By following best practices, using the right frameworks, and collaborating with a trusted third partner, banks can shift to the cloud with ease while ensuring safety and lowering costs.
Perhaps most importantly, the cloud isn’t just another technology, but a new way of doing business itself – an operating model – that cannot be ignored.
Listen to the “Application landscape in the cloud: transitioning” session here, and for more expert content, subscribe to our newsletter or visit our Insights page.