Benefits of cloud adoption for FIs
1. Capex optimization
The cloud helps to reduce fixed IT costs required for hardware devices and allows companies to easily expand their business operations. The pay-as-you-go model provides improved flexibility and eliminates the need for significant up-front capex, particularly those associated with delivering new solutions, as well as overall operating charges, enabling a shift from it being a capex to an operational expense.
Our survey reveals that in the next two years, the cloud, on average, will enable an annual cost-saving of US$21.14m related to capex. This is further expected to rise to US$45.43m in the next five years. These savings allow businesses to reinvest in other parts of the business and accelerate growth.
2. Scalability
Gradually, cost has become a less important factor as the cloud’s other business benefits have emerged. These include infinite scalability, lower barriers to experiment, improved customer retention, security and business resiliency. Adopting cloud solutions allow financial services companies to be right-sized, i.e., scale up or down on demand, with cloud services being able to expand and contract as needed almost immediately. This provides a much better way to manage costs in line with user and business demands.
3. Speed to market
The cloud enables developers to adopt a fail-fast approach to build and test new products and applications, and bring them to the market quickly. Conducting analytics in the cloud is also one of the emerging driving factors, since it enhances business intelligence, strategic planning and targeted marketing. The financial services companies that were surveyed reported that technologies such as artificial intelligence (AI) and/or machine learning (ML) (30%), data (20%) and advanced analytics (20%), distributed ledger (15%) and blockchain (10%) would also enable their move to the cloud in the next 12 months.
Although multiple benefits are associated with cloud-first strategies, several financial services companies are hesitant to move all their IT and business systems to the cloud. The risks and challenges to cloud adoption vary — from data security concerns to lack of IT systems and related change management components as well as lack of expertise and skilled resources.
To address these concerns and challenges, it is imperative for financial services enterprises to assess their existing IT landscape and build security models that are appropriate for the architecture being implemented.
Existing IT landscape assessment
82%of the respondents had assessed their current IT landscape before cloud-first strategies
Our survey indicated that 82% of the respondents had assessed their current IT landscape before cloud-first strategies while 91% of the respondents acknowledged the fact that they have reviewed or assessed the risks or concerns that they may encounter during their cloud-first strategies or implementation of cloud solutions.
Organizations that were surveyed reported that strict security and compliance regulations are top of mind for everyone in the MENA region, from C-suite IT executives and senior leaders to IT managers and developers. This is followed by a lack of expertise and skilled resources, and reduced interoperability with regulators or government entities. Cost or lack of local vendor solutions and lack of IT system and related change in management components are relatively minor concerns.
Many of the organizations’ CTOs and CIOs expressed that for a successful cloud implementation journey, they require extensive support on regulatory compliance and governance concerns, cost assessment, and training for IT developers and support staff.
Leaders of FIs must rethink how the cloud transformation will impact their business, customers, supply chains and employees. A thorough risk assessment is imperative, which will enable FIs to fully leverage cloud capabilities. Transformation challenges can be overcome by adopting a nuanced and focused strategic approach.
The way forward
Based on our survey, we have recommended key priority areas for the financial services institutions that will help them stay agile and prepare for the future.
- Focus cloud investments on updating and modernizing the IT infrastructure.
- Leverage hybrid cloud strategies to maintain and support their legacy systems while simultaneously taking advantage of the multi-cloud model to gain efficiencies, resilience and agility.
- Integrate cloud strategies with the business model, and ensure that cloud is fully software-defined, automated and abstracted.
- Invest and take the necessary steps to manage cloud environments, including the security and compliance of cloud services.
- Plan, implement and maintain comprehensive risk management, security, privacy and compliance program.
- Change business operating model.
- Meet customer expectations in a digital-first world. Reach customers via new digital distribution channels and deliver innovative business offerings across the financial spectrum. Integrate with open banking platforms, application programming interfaces (APIs), AI and/or ML and other technologies to transform the customer experience.
- Create a financial services product ecosystem. Develop cloud-native applications and services that expand digital opportunities and market outreach.
- Turn data into actionable insights quickly and cost effectively. Exchange and monetize financial and real time market datasets, securely, easily and at scale.
- Build engineering skills and culture. Drive cloud skillsets across development teams
Summary
FIs are increasingly turning to the cloud not only to optimize their capex and scalability but also to unlock new avenues of growth. They are leveraging cloud technology for digital transformation, creating new customer journeys through innovative offerings, driving business agility and resilience. However, it is a prerequisite for FIs to have a risk assessment strategy in place before transitioning to cloud.
