Five Strategic Areas Financial Services Firms Can Adopt To Accelerate Their Cloud Journey

    By Simon Hull, Head of Financial Services at BJSS

    Simon Hull

    Cloud as a Strategic Imperative

    Cloud is a key enabler for Financial Services firms in their pursuit of business agility, revenue growth and cost optimisation (a topic I discuss in detail in a recent whitepaper).

    Covid has created an impetus that has seen cloud migration accelerate, and the promise of cloud has elevated in strategic importance and gained board-level attention. For the digital transformation ambitions of financial institutions, it has become a necessity, a driver of innovation and an enabler of optimisation.

    The journey to cloud in financial services has been slower than in other industries. SaaS solutions are commonplace, but concerns regarding areas such as security, data residency, integration complexity and performance have contributed to a cautious approach. There is also a reticence to move critical business applications and data to the cloud.

    The pandemic has pushed the agenda, with many organisations hailing their use of cloud services as being critical to enable both business continuity and agility to adapt to new demands.

    It’s now time for firms to step back and assess what they have achieved so far in their cloud journey, including the pandemic induced rush to move to the cloud, and to take a strategic approach to ensure the right decisions have been and will continue to be made – it is a time of ‘reckoning and reflection’. Risk officers have seen that bad things haven’t happened despite the urgency – but how can they assure themselves that will persist?

    In the Gartner Paper “Devising an effective cloud strategy by addressing 5 key areas”, a framework is presented that will enable organisations to navigate the cloud journey with a clear focus on business outcomes and best practices.

    Click here to access the Gartner report

    Gartner’s Five Key Areas for Cloud Strategy

    Gartner proposes a bi-modal approach to cloud strategy that considers both the existing estate of applications, processes and data (mode 1) along with leveraging the agility and speed to innovate and take advantage of cloud-native capabilities (mode 2).

    Gartner further describes the five key elements of the strategy as:

    1. Cloud Decision Framework
    2. Cloud Operations Best Practices
    3. Cloud Application Migration and Development
    4. Hybrid Cloud Deployment
    5. Becoming a Cloud Service Provider

    A Cloud Decision Framework provides a consistent way to evaluate when and how cloud services are used, considering benefits, costs, risks and security. This enables a consistent evaluation of applications and use cases for the move to the cloud.

    The framework looks at benefits and challenges across several factors: application factors (such as business requirements, need for agility, current architecture and user distribution), data (such as compliance and security issues, size of dataset and update frequency), integration points (nature and frequency of interactions, latency concerns, need to move data between cloud and on-prem) along with operational and innovation considerations (operational costs and efficiency must be combined with mitigation of risk to current business operations, balanced with the need to innovate).

    Based on the evaluation of these factors, a view of cloud readiness, along with benefits, risks and challenges should be determined for each potential cloud scenario. This then allows the organisation to plot a sensible path by prioritising the high benefit and low-risk cases and eliminating those that are low benefit and high risk.

    Cloud Operations Best Practices must be established for the use of cloud in areas such as security, management and governance of public and hybrid cloud services, along with vendor management. With these best practices, the perceived risk goes down, and paths to concrete value go up.

    Hybrid and multi-cloud environments provide unique security, management and governance issues. Considerations here include data security and encryption, IT management across multiple services, governance over groups offering services, and supporting technologies.

    Application Migration Options must be understood and selected based on the business goals and characteristics of each application. Those that are cloud-ready could be moved to cloud hosting in a “lift and shift” approach. This may realise some cost benefits but is not leveraging true cloud potential. Going further, application development strategies need to evolve to understand where and how cloud-optimised and cloud-native applications can be created, and what opportunities arise for the organisation as a result.

    Cloud optimisation involves refactoring/redesigning applications to take advantage of cloud platforms’ global-class characteristics, such as horizontal scalability, fault tolerance, high performance, efficiency, and interoperability.

    Cloud-native applications are designed from the ground up to take advantage of the defining characteristics of cloud computing. They are built using the core principles, patterns and best practices that deliver and support these characteristics.

    Typically a six R’s classification (Re-host, Re-platform, Re-factor, Re-purchase, Retire, Retain) is made for each application.

    Considering the Hybrid Cloud Deployment approach, organisations have a host of options from on-prem cloud services, private cloud, public cloud, distributed cloud and even cloud-inspired on-prem solutions. Trade-offs around cost, complexity, security and control, and the level of cloud benefits (such adaptability, flexibility and elasticity) that can be achieved must be carefully considered and aligned with business objectives. Containerisation is an approach that can be followed to enable a degree of portability across each deployment type.

    Finally, Gartner raises the importance of thinking like a Cloud Service Provider, focusing on when and where the enterprise will deliver application functionality, information, or business process capabilities to its customers or business partners.

    Click here to access the Gartner report

    Next Steps for Financial Services Firms

    I think Gartner has nicely set out and explained five areas of key strategic importance for cloud strategy. I like the structured assessment of strategic options and application migration priorities, and the alignment to business objectives that underlies each stage.

    One thing I would add is a focus on changes to the IT operating model required to make this a success. Migrating workloads to the cloud requires a new IT operating model designed to handle a dynamic environment. This operating model includes redefined roles and responsibilities, reskilled staff, new budgeting and financial controls, and redefined governance and operating procedures. Legacy thinking needs to be transformed to embrace and promote the new models, to ensure hearts and minds buy-in and success. At BJSS, we have helped banks define and migrate to this new target operating model as part of their cloud transformation.

    I would also tailor the approach to the Financial Services context. Within the highly regulated Financial Services environment, following a robust cloud strategy framework such as this will give firms the confidence to push past some of the barriers to adoption that I mentioned earlier. An explicit focus should be given to particular areas of importance such as security, compliance, data encryption and performance.

    Additionally, the complexity of financial services technology estates leads to integration challenges. The need to move data safely, securely and performantly across different cloud and on-cloud environments must also be a key consideration. Executing the transformation while maintaining business continuity is also critical, along with understanding new cost optimisation and management models and how they differ from traditional on-premise hosting.

    At BJSS, we follow a similar approach to that described by Gartner, working with clients as strategic partners on their cloud migration journey. Our Consulting and Cloud Platform practice provides specialist expertise in cloud strategy and engineering. We also have a Landing Zone accelerator to bring forward the time to value for compliant cloud solutions, and we offer a full managed service.

    We have led wholesale technology transformation for clients moving them to cloud and managed services-based models. We have enabled capital markets clients to move critical business functions such as trading onto cloud environments and have developed secure cloud-based fintech incubator environments for several major banks. We not only bring the cloud expertise, but also agile delivery and engineering practices that enable our clients to rapidly innovate and take full advantage of all of the capabilities of the cloud.

    To learn more about the way we do this and our success stories, please visit our dedicated Cloud & Platform landing page.

    Successful Cloud migration requires careful consideration, expert design and precise execution across the organisation. So, it makes sense to engage partners with deep technical expertise, dedicated resources and practical experience in delivering at-scale cloud solutions for some of the world’s largest organisations.