Enabling transformation through cloud: Work to be done?
Posted on: Mar 28, 2018 by Jean Pierre LE TREUT
In previous blog posts, I have written about why change in Financial Services will be impossible without cloud. I’ve also highlighted that it is a hybrid cloud model that will be critical for banks and insurers. And I have covered strategies concerning moving applications to the cloud.The thread running through these posts is not just cloud but digital transformation—the goal of any business that recognizes times have moved on.
But the publication of the Atos whitepaper, “The Digital Business Continuum: Enabling organizations to thrive amidst disruption”, has shone a new light on what that transformation should look like.
Instead of a “one shot” attempt at digital transformation, it argues that banks and insurers must aim for continual transformation. As a result, organizations “must be able to adapt at pace”, “innovate extensively” and “highly optimize their internal operations”.
This brings me neatly back to my original blog post—such change in Financial Services will be impossible without cloud.
So let’s stop and think for a moment where we are with cloud in Financial Services. Have banks and insurers made progress? Will they be flexible, innovative and optimized enough to respond to the Disruption Trinity of societal, regulatory and technology change set out in the Digital Business Continuum whitepaper?
Have we seen progress?
There is good news. Banks are making decent progress with cloud in general. In 2017, for example, Société Générale and BBVA both announced cloud-first strategies. With major IT budgets at play (c. €2 billion in some cases!), it is clear to see why cloud could no longer sit outside the organization as Shadow IT and why more people are seriously looking at hybrid cloud models.
This demonstrates a marked change from just a few years ago when the majority of discussions about cloud were about virtualization. However, the maturity of cloud is still very disparate in Financial Services:
- Traditional banks are much more advanced compared to Insurance.
- Retail Banking is more mature than Corporate Investment Banking.
- FinTechs, InsurTechs and NeoBanks have fully embraced cloud.
What’s more, the motivation to embrace cloud may not fully support the organization’s “ability to adapt at pace” or “innovate extensively” as set out in the Digital Business Continuum.
The right rationale for cloud?
When cloud was first introduced to banks it was embedded as new reference architecture by the IT department. More specifically, it was embedded by Engineering and Infrastructure & Operations (I&O) teams. Their motivation (naturally) was to bring more flexibility, automation, and modernization into the realm of IT.
Let’s say that this was the successful part—introducing cloud to “highly optimize internal operations”:
- By automating IT operations to provide infrastructure, security, networks and other elements “as code” (meaning Dev teams could embed Ops in app conception).
- By complementing existing private cloud platforms with external public or privative cloud to benefit from the added flexibility and lower costs of pay per use.
The new challenge
One thing the Digital Business Continuum tells us though is that transformation must cover every aspect of the organization—from the leadership to the culture to an iterative approach to innovation.
This requires a step that many traditional institutions (even those with cloud-first strategies) have not yet made. And that is much greater alignment between the business and IT to be able to “adapt at pace” and “innovate extensively”.
Cloud is not just the domain of IT and it is not about trying to find a new global IT capability. Progressive banks are recognizing that they need to reorganize around cloud by bringing Dev, Ops, business people and others into teams—supported by all the cloud tools they need—so they can work in rapid, innovative bursts. That way they really can create apps to launch products within hours and respond fully to what the market demands.
As the Digital Business Continuum sets out, “companies need to operate in a state of constant flux, innovation and reinvention.” Progress is being made. But since cloud is fundamental to digital transformation, and continual transformation will be fundamental to business success, there is still much work to be done.