By Varoon Rajani, Founder and Chief Executive Officer, Blazeclan Technologies, a division of ITC Infotech and Sid Sengupta, Head of BFS&I Practice, ITC Infotech, Europe
As banks face mounting pressures to innovate and meet rising customer expectations, cloud migration has emerged as a transformative strategy. McKinsey’s Global Banking Annual Review 2024 highlights a critical juncture: embracing cloud technology is essential for banks aiming to enhance efficiency and drive growth. Yet, the journey is fraught with challenges. While 72% of banks acknowledge that cloud solutions can help them achieve their business goals, only 13% have fully migrated their data. This significant gap reveals the complexities of cloud adoption and underscores the urgent need for banks to navigate these hurdles effectively to unlock the full potential of cloud technology.
Navigating Cloud Migration
Cloud migration has become a focal point for banks aiming to enhance efficiency and customer service. On average, cloud migration can take up to 15 months, especially for larger institutions. Significant impediments exist, such as legacy systems and organisational complexity, with many institutions struggling with obsolete infrastructure that stifles progress. The challenge of ensuring elasticity—the ability to scale resources based on demand—also complicates effective cloud implementation.
These hurdles reflect a broader struggle within the banking sector to fully leverage cloud technology. While 40-50% of workloads have made the transition to the cloud, many institutions find themselves bogged down by cumbersome approval processes that stifle innovation. This highlights the urgent need for streamlined governance, where automated systems can simplify the path to deployment, allowing teams to focus on creativity rather than bureaucracy. Developers are upset when they are unable to swiftly deploy solutions, while finance teams face unanticipated costs because of unmanaged cloud spending. These challenges are exacerbated by the hundreds of legacy software that are still in use at many banks, some of which were designed 20 or 30 years ago and operate on antiquated technology such as Windows 95.
To truly embrace the cloud, banks must develop a cultural shift toward agility and collaboration, backed up by strong cloud governance and FinOps strategies that not only track costs but also allow teams to innovate. Addressing these difficulties will allow them to restructure their operations and realise the full potential of the cloud, resulting in a more dynamic and responsive banking experience for their clients.
The Appeal of “Lift and Shift”
The “lift-and-shift” approach—moving applications to the cloud without redesigning them—offers immediate benefits like reduced infrastructure costs and faster deployment . However, this method often leads to missed opportunities for optimisation and transformation, as neglecting to re-architect systems can result in inefficiencies that ultimately undermine the benefits of cloud computing. Retaining outdated processes may create operational bottlenecks, and many banks underestimate the ongoing costs of maintaining these applications in the cloud.
Successful cloud adoption extends beyond technology; it necessitates a cultural transformation within organisations. Engaging team members and creating a supportive environment are critical for a successful shift. Continuous training and open communication can help overcome resistance to change, ensuring that everyone understands the cloud strategy. By prioritising support and inclusivity, banks can foster a sense of ownership among employees, paving the way for a more effective and sustainable cloud migration that benefits the entire organisation.
Transformation and Automation: Critical to Success
To fully leverage cloud capabilities, institutions must emphasise transformation alongside migration. Automation is critical for improving operational efficiency and service delivery. Without integrating automation into cloud operations, institutions risk falling into patterns of inefficiency that stifle innovation and responsiveness to market demands. Automating routine tasks frees up resources for strategic initiatives while enhancing agility, allowing banks to rapidly scale and adapt to changing customer needs. Robust governance mechanisms are vital to manage these automated processes effectively.
Regulatory Compliance and Modernisation of Legacy Systems
As banks implement cloud technologies, they must traverse the intricacies of regulatory and compliance requirements that govern their operations. Adapting to new regulatory standards while protecting data security and privacy can be challenging. Modernisation of legacy systems is crucial, as outdated infrastructure can impede compliance efforts and limit the ability to leverage cloud technologies fully. Financial institutions need to develop strategies that integrate compliance into their cloud framework, ensuring they meet regulatory standards while maximising operational efficiency.
Conclusion:
As banks navigate their journey toward cloud adoption, addressing these challenges head-on is critical. By focusing on transformation rather than mere migration, leveraging automation, and fostering a supportive culture, financial institutions can unlock the true power of the cloud. This strategic approach not only enhances operational efficiency but also positions banks for future growth in an increasingly digital landscape.
In upcoming articles, we will explore specific strategies for overcoming these challenges and maximising the benefits of cloud technology within the banking sector.