Major decisions that will determine the future of a financial institution’s cloud
Most financial institutions today have a presence in the cloud, but implementation in the financial services industry is still in its infancy. Only 13% of financial services executives surveyed in a recent McKinsey survey had half or more of their IT footprint in the cloud.
However, cloud adoption is gaining momentum. Over the next five years, more than half of respondents (54%) plan to migrate at least half of their workloads to the public cloud.
Given the value at stake, this sense of urgency is hardly surprising. A McKinsey Analysis found that Fortune 500 financial institutions alone could generate up to $60-80 billion in recurring EBITDA in 2030 by leveraging the cost optimization levers and business use cases unlocked by the cloud.
Some early adopters are already making inroads into this value pool. A European bank was able to deliver the same result with 20-30% smaller teams, after integrating them on DevSecOps and the cloud. Another bank in Asia that migrated more than half of its workloads to the cloud can now develop and launch several new products quickly and at scale in international markets. And another European bank has partnered with a leading cloud service provider (CSP) to develop AI-based cyber defense capabilities to improve security for its customers.
These examples are still outliers in the financial sector, where most companies have been hesitant to move to the cloud at scale. There are good reasons for this hesitation, as migrating to the cloud is particularly complex for financial institutions. Additionally, the IT landscape of financial institutions is particularly varied, with 40-year-old applications running alongside more modern systems.
These and other challenges have led financial institutions to move more incrementally to the cloud, running limited experiments, for example, or targeting a subset of applications based on ease of migration. or by staggering their efforts to coincide with a planned exit from a particular data center. Focusing on a few of these types of high-impact “lighthouses” can be effective in building early momentum. However, institutions that do not define an overarching aspiration and put in place the right success factors to achieve it often fail to capture the value of the cloud.