パブリッククラウドの活用による変革とレジリエンスの実現

Celent recently hosted an in-person event, Navigating Turbulence, in New York City. I had the great opportunity to lead the cloud computing session: Harnessing Public Cloud for Transformation and Resilience.

We discussed how cloud computing has evolved dramatically during the past decade. Great strides have been made in cost flexibility, speed of product/feature update, and real-time digital customer engagement while reducing managing information security and compliance requirements.Our cloud panel and audience discussed the most pressing issues, trends, and developments impacting cloud computing in banking:

·How does the cloud help banks respond to navigating turbulence?

·How does the cloud journey differ by division (retail, corporate, etc.)?

·How cloudy will it get? How many clouds do I need?

·How can we rebalance cloud agility benefits versus growing cloud costs?

The Cloud is Helping Financial Institutions Navigate Turbulence

In a Celent cloud survey, financial institutions (FIs) said that they’re bullish on the cloud’s ability to deliver many business benefits. Agility and technical resiliency were the top issues. The ability to introduce new products and services (or update existing ones) connects directly to higher product sales and service, as well as increased customer satisfaction measures.

Interestingly, cost flexibility was ranked relatively high but only fifth. The ability to turn on premise, fixed IT costs into outsourced variable costs was perhaps the biggest sales pitch for cloud adoption a few years ago. How quickly things change.

But what is the value of this resilience relative to costs? An annual cloud survey from Flexera asked many questions, including “how is economic uncertainty changing your cloud usage and spend?” Forty-five percent of respondents said that cloud usage and spend is higher, while only 10% indicated that it would decrease. Remaining survey participants said it would stay about the same. These surveys provide strong indication that the cloud is an excellent IT strategy for navigating turbulence, i.e., market disruptions.

Retail Banking Appears to Be Ahead of Commercial/Corporate Banking in Cloud Adoption

A main discussion topic was how financial institutions move software applications to the cloud determines how long it takes to migrate and how much ‘cloud agility benefit’ FIs receive. The chart below shows three ways FIs can move applications to the cloud. Rehosting solutions without rewriting the software is the fastest, lowest risk migration method. This is a logical place to start as firms begin the cloud journey.

However, the more a firm reconfigures or rewrites an application, the more it can realize benefits derived from the cloud characteristics of componentization, API integrations, scalability, etc. in addition, cloud adoption and benefits vary by the line of business. For example, more retail banking software applications are being rearchitected for the cloud than for commercial lending and corporate banking applications. Digital retail channel applications and retail loan origination systems are typically SaaS based, whereas fewer commercial lending systems and corporate banking systems are migrating to the cloud due to re-architecture costs that many vendors are so far unwilling to pay.

Most Firms Are Using Multiple Clouds, Both Private and Public

“The Cloud” is the accepted vernacular, but of course there isn’t just one. There are a variety of reasons for financial institutions to utilizing multiple clouds. And not all clouds are public; some are private.

The Flexera survey asked about the number and type of clouds used. Eight-seven percent of the 750 firms surveyed are multi-cloud today. Moreover, Celent research shows that many FIs started with private cloud deployment followed by a shift to public cloud deployment for ‘non-mission-critical’ applications such as a core banking system or loan servicing system.

It is Time to Rebalance Cloud Agility Benefits and Cloud Costs

We discussed how the cloud helped FIs digitally transform during the pandemic, and it continues to assist during this period of financial institution turmoil in 2023. Celent estimated in 2021 that 70% of FI technology costs are maintenance spend. This percentage has declined for some financial institutions investing in cloud computing and CIOs can point to it as a benefit, as is a reduction in the average time to implement a software update from 10 weeks down to one month or less.

While cloud usage is up, so are costs, and managing cloud spend has overtaken security as the top cloud challenge today. Certainly some of the cost increase is simply increased transaction volumes. But costs are also higher because tiered pricing didn’t help as much as believed, fees for additional servers were higher as volume scaled, and inflation increases kicked in. Bank budgets are under pressure and CIOs are under pressure to manage these rising costs better.

Into the Clouds

Cloud computing adoption continues to accelerate in financial services as its value proposition continuously improves relative to on premises, licensed software applications. The costs and risks of keeping legacy, on-premise applications versus modifying and rewriting these systems for the cloud is increasingly tipping the scales towards rearchitecting software applications for off premises deployment. Cloud computing is ultimately about changing your firm to innovate better and faster, with cloud technology as the enabler innovation.

I look forward to seeing you at a future Celent or industry event!