Here’s Why Cloud Migration Is So Important to Banks
Banks have traditionally been reliant on legacy systems and are often reluctant to make changes to their IT infrastructure, but as society as a whole continues to adopt cloud and consumers demand the latest technologies, it’s time these organisations followed suit.
Here Gareth Jones, Chief Information Officer at Fraedom, explains how banks can move to the cloud in stages, picking the most pressing workloads and moving them to the cloud incrementally, and adopt a hybrid technology infrastructure, touching on the inherent benefits therein.
Banks have traditionally been reliant on legacy systems, however, now almost half (46%) of bankers see these legacy systems as the biggest barriers to the growth of commercial banks. Technology is becoming an integral part of the banking industry and the pressure is on for these institutions to innovate and adopt the latest capabilities. Therefore, banks must overcome the reluctance to make changes to their IT infrastructure.
As new challenger banks increasingly launch directly to the cloud and consumers demand the latest technologies, it’s time for traditional banks to consider migrating to the cloud. Here’s how they can do this and the potential benefits they can expect to experience:
An incremental move to the cloud
Fortunately, banks needn’t see the adoption of the cloud as an all or nothing venture. Instead, it is possible to migrate in stages. Vitally, banks must acknowledge that doing a ‘lift and shift’ will offer limited benefit to their organisation or their customers as their workloads won’t be cloud-ready or scalable. Banks should see the move to the cloud as a gradual transition and start by migrating the most pressing workloads and services to the cloud in a controlled manner. This will ensure workloads are moved across securely, nothing is lost in the process and that customers aren’t impacted by significant periods of downtime. This will result in the adoption of hybrid technology infrastructure, at least in the short-term, which research by IBM found that 87% of outperforming banks are using to reduce operational costs. This approach is favoured by more than two-thirds of global banking executives surveyed by Accenture who intend to operate in a “bimodal” way — maintaining key legacy systems and those not easily replicated on cloud platforms, while transferring other systems and adding new applications in the cloud.
Fortunately, banks needn’t see the adoption of the cloud as an all or nothing venture. Instead, it is possible to migrate in stages.
As many banks are reliant on legacy systems, moving to the cloud, even as part of a gradual transition, can seem daunting. Therefore, seeking assistance from third-party fintechs that are much more accustomed to the technology and have the experience of carrying out many cloud migrations, can help to ensure that the process is smooth and secure.
The benefits of the cloud adoption
One of the most significant benefits of the cloud is its potential to help banks reduce core costs, particularly those associated with delivering new solutions, as well as overall operating costs. This is due in part to the fact it removes the cost of the upgrade cycle that comes with physical infrastructure. It also means banks no longer need on-site infrastructure management, allowing banks to focus resources on value added functions more closely aligned with their core business objectives. In the long-term, cloud adoption can help banks enhance customer satisfaction and bring products to market faster, therefore allowing them to maximise return on investment.
A further benefit of cloud adoption is increased scalability. Currently, organisations not utilising cloud services must invest in additional hardware in order to scale. This incurs a greater impact in time and money. Adopting cloud allows banks to scale on-demand, with cloud services able to expand and contract as needed almost immediately. This provides a far better capability to manage costs in line with user and business demands.
Agility and innovation
Legacy systems are still largely important to many banks’ daily operations, but moving to more agile systems is essential to growth and innovation. Therefore, migrating to the cloud helps banks overcome this issue, whilst also offering additional cost-savings.
With so many benefits, traditional banks can’t afford to ignore cloud technology any longer. While legacy systems may have once played an integral role in their business, these systems now widely act as inhibitors. A gradual transition to the cloud will enable increased operational efficiencies, while also providing the infrastructure through which they can begin to foster the same level of innovation as their cloud-native competitors. This will allow traditional banks to not only keep up with the changing technological landscape, but the ability to develop more innovative products and services faster will also help them to answer customer demands and compete with challenger banks.