In August 2018 Tranquility Base Founder, Andrew Rossiter issued a report on the state of cloud adoption within the global Financial Services arena. Given that we are at the beginning of a new year – and a new decade – we thought it would be interesting to revisit the report and speak to Andrew to see, in his view, what has changed and if anything had remained the same.
Andrew’s findings 18 months ago suggested that most financial firms were only really making limited use of private cloud but were exploring general cloud issues. At that time public cloud usage was still very low… but these same firms had ambitious plans for growth over the next five years.
We ask Andrew, are those growth plans coming to fruition?
“Although the cloud has moved up the agenda, there is still little in the way of large-scale migration occurring. There are a couple of household name banks that are migrating, but production usage in the cloud is very limited.”
In 2018 you discussed how the tier two banks are more adaptable to change…?
“This still seems to be the case due to the fact they are not so hamstrung by legacy systems, giving them the ability to be much more nimble and aggressive than their tier one counterparts. But this does not apply across the board within the tier two community.”
What is the state of play regarding Software as a Service (SaaS), Platform as a Service (PaaS) and Infrastructure as a Service (IaaS)?
“What has been very obvious over the last 18 months is the lack of progress on PaaS and IaaS. There have also been some prominent failures amongst institutions when it comes to building out PaaS and IaaS solutions. For organisations who began cloud migrations a year or two ago, the low hanging fruit that is ‘Lift & Shift’ has been harvested and now the more difficult workloads need to be moved – and this is where they are encountering some major problems.”
So how are the banks responding to these complex issues?
“Whilst many firms initially considered their current workloads for migration, we now see more greenfield projects starting, or the re-engineering of existing platforms. This of course is where most people see the value of cloud – in new applications and new ways of working. It has also been very clear that the difficulties of moving to, or building large-scale production systems in the public cloud has been massively underestimated. We have first-hand experience of the many blockers and issues to be overcome. Not least, within many large organisations these projects have been miscalculated in terms of complexity, the number of technology options, the sheer amount of foundational work required and the lack of skilled, battle-tested staff to carry out the work.”
Whilst adoption isn’t at the levels we might have anticipated, it is definitely still a top priority on the board agenda. What’s driving this?
“Back in 2018 for most firms, cost savings were not the main driver for moving to the cloud, it was the promise of flexibility, capacity and agility. Since then, we have observed a more nuanced take on this. Clients want to emulate the culture of the cloud companies, i.e. Microsoft has undergone huge transformation and Google and AWS are the poster boys for most industry leaders. The banks see themselves as technology firms who want to innovate, improve productivity and attract and retain the best talent. They believe that by using native cloud technology, this will help them on their own cultural transformation journey.
However, as previously mentioned, the lack of progress on building secure, repeatable, low-touch PaaS and IaaS platforms is holding them back. In the report I talked about “The ability to rapidly add computing power for front office / risk requirements, and to scale it back when not required is seen as being particularly useful” – however, this has proven to be extremely difficult for nearly everyone we have spoken to. Not just in terms of adding additional capacity to an existing application (in fact that has not been too hard) but being able to rapidly provision application infrastructure when the business or clients need it has not been achieved. This is because many companies have not been able to sufficiently automate their processes and still rely on existing manual provisioning and approvals for their cloud infrastructure.”
Dare we talk about financial services without mentioned the dreaded ‘R’ word? Just where does Regulation sit in the cloud strategy initiative? Last time around you discussed: “Data protection, driven by the new GDPR regulation in Europe, and the ability to see where all data is stored is also deemed to be important”…
“This is still an issue that has only just been addressed by the cloud vendors – or is currently in the process of being handled. The ability to geofence data is a feature that has come along only quite recently, and there is still work required to fully negate the concerns raised 18 months ago.”
In 2018 you predicted that. “Usage of public cloud is set to expand rapidly as firms overcome their reticence and embrace the cloud benefits of scale, speed and efficiency, with the advantages outweighing any risks or concerns. Fully adopting cloud involves many different areas, from new, agile ways of working through to the actual native cloud technologies themselves”. Has that come true?
“This prediction turned out to be a bit premature, in that many companies who tried to accelerate migration, become stuck in a quagmire of change, culture clashes and lack of experienced staff. I did at least give one caveat to my prediction: “the challenge being to find suppliers (and staff) who have the breadth of new skills in the numbers required”. Many customers have attempted to build out the foundational cloud components required but have become overwhelmed by the sheer size of the task. Interestingly, this is not specific to any one industry – many corporations across all sectors are struggling with the challenge, and in retrospect, maybe it is not too hard to see why?”
Stay tuned for part 2 where we consider why ‘getting to the cloud’ is more challenging than previously thought.