As recently as three or four years ago, our cloud conversations with bankers circled around their inability to adopt because of security, compliance or skilling issues – concerns, which while valid, distracted them from the urgency of adoption. But things changed dramatically and quickly as the major ecosystem players, including regulators, moved forward in their understanding of cloud; as the hyperscalers and regional players spread their data centers around the world to meet data residency requirements; and as the value proposition of cloud became stronger and stronger. Further momentum came from a totally unexpected source, the pandemic, which accelerated digital adoption and increased the urgency towards cloud adoption.
That being said, cloud has progressed beyond dynamic infrastructure provisioning or IT modernization to the stage of business transformation. It is no longer just a technology lever of efficiency, resilience, and scale but a catalyst of ecosystem innovation, time-to-market, and business value creation. We knew this from experience, and recently, we validated it through a survey, Infosys Cloud Radar 2021, covering 2,500 business and IT executives from 12 industries and 5 countries.
The one resounding message from participants was that critical mass in cloud adoption was necessary for achieving meaningful results: enterprises realized speed and capability gains only when they shifted 60 percent or more systems to the cloud. Below that, there were some improvements in “defensive priorities” (cost, access, resilience) but nothing that would provide a competitive edge.
Speed, capability, and scale were the top 3 cloud objectives, overall, for all respondents. But the finding applies equally to the banking executives in the survey.
Speed: Fighting competition from several sources – incumbents, challenger banks, neo banks and digital businesses – banks are hunting for ways to accelerate time-to-market, one of the few defensible advantages they have left. By crashing the technology resourcing timeline from months to days, even hours, cloud has become a huge enabler of competitive edge.
Capability: The survey also revealed that cloud enhanced digital capability on many fronts, from omnichannel service to process automation to data-driven insight. In the last case, cloud’s influence is unmatched as it allows enterprises to organize data from several sources quickly and on top, provides compute power, algorithms and tools to process the data into insights that can be applied to mitigate fraud and risk, personalize prices, decide next best offers and actions etc.
Scale: As banking transactions migrated from branches to online, and then open banking, channels, the frequency of customer-bank interaction went up manyfold. To appreciate just how much, consider UPI payment transactions in India which crossed 3.2 billion in just a few years. The banking systems of the past were never built for this kind of relentless scale and resilience to deliver 99.9995 percent uptime on a 24x7 basis. Cloud is best placed to support this level of scalability, and that too dynamically.
So, speed, capability and scale are the top reasons why enterprises are migrating to cloud. And they are going about it by taking a hybrid cloud journey, at least for now. Financial services organizations house most of their systems on private cloud (41 percent), followed by 31 percent on hybrid cloud and 29 percent on public cloud. This is not merely a lift and shift of workloads; living in a hybrid cloud environment where applications and data reside in different private and public clouds, and there are many cloud partners to deal with, requires banks to adopt new ways of working. Rewards await those who commit: as the exposure to hybrid multi-cloud increases, so does the value to the organization. It is abundantly clear that hybrid multi-cloud is the way forward.
But a few questions linger, such as how long before the bank sees a decent ROI. The study is unequivocal that symbolic investments will not deliver returns; enterprises must move at least 60 percent of their workloads to start seeing real value. This is true for private, hybrid, public and multi-cloud environments. Also, the value increases with the adoption of software-as-a-service models, which leads to business operations running on the latest versions to help maximize value from technology investments.
With regard to overrun of cloud budgets, once again, the research shows that organizations with 60 percent or more of their workloads on cloud are more confident about their cost estimates. This is probably because they are able to dynamically allocate compute capacity between applications to maximize cost efficiency and also because they have more budgeting experience.
Finally, a common misunderstanding is that cloud migration can produce great results in isolation. The reality is that value gets unlocked only when a confluence of modern technologies (and a business strategy, skills, and culture) comes together. The most powerful technology combination is cloud, AI, and API which, once 60 percent or more business functions leverage, really strengthens an organization’s ability to unlock substantial value. In fact, our research study shows that enterprises can add up to $414 billion in net new profits annually through effective cloud adoption.
In short, one needs to go the distance to reach the destination.
Puneet Chhahira - Head of Platform Strategy and Marketing, Infosys Finacle