Doing cloud right in the financial services industry

Pressured by growing customer expectations and the need to modernize systems, the banking and capital markets (BCM) industry is at a critical juncture. Many banks are turning to cloud for rapid service delivery and increased agility, and those that execute well-planned cloud strategies and have the right skills in place can benefit greatly.

This paper explores the challenges facing BCM companies today, how they can benefit from cloud, and the steps that are crucial for taking advantage of what cloud has to offer. The focus is on the importance of building a business case and knowing what is required to execute a cloud strategy that delivers the scalability, security and simplicity that come from getting the cloud approach correct.

The challenges of the new digital world 

The past decade has seen a radical transformation in financial services. The COVID-19 pandemic has increased customers’ appetites for digital-first services, and startups with disruptive banking technologies make the marketplace even more competitive. Disruptor scale-ups are using born-in-the-cloud and mobilefirst technologies, combined with product engineering operating models, to transform how we engage with our financial institutions and shape our customer journeys.

Even as the industry quickly evolves, many companies remain stagnant. Traditional financial organizations are held back by the complexity of legacy systems and the high cost of change; they have failed to transform their operating models and significantly reduce their technology costs. Consequently, their potential for improving business performance is massive.

Many BCM companies have nonstandard and inefficient processes that are tied to existing infrastructure and disparate applications. These contribute to deployment times of months, if not longer, for initiatives such as new digital-first applications — ultimately decreasing return on investment. That’s in contrast to the cloud, where companies can leverage new financial industry innovation to make bigger leaps faster. Maintaining rock-solid security and avoiding data loss are ongoing, if not heightened, challenges, along with acquiring the right skills in a tight labor market. Companies also need to bolster their environment, sustainability and governance (ESG) capabilities to stay ahead of regulatory expectations, strengthen public trust and demonstrate that they’re adopting social priorities. 

High on the to-do list of many BCM business leaders:

• Kick-start stalled workload migrations while reengineering business processes to harness lower-cost technology enablers
• Accelerate the variability of technology costs and enable consumer pay models to align cost with business value creation
• Expand productivity gains through deeper automation and operating model transformation
• Minimize the amount of time from ideation to customer first use

The good news is that the successful execution of a carefully planned cloud strategy can help solve many of the technology and business challenges facing BCM companies today. The hard part is convincing decision makers of the business benefits of cloud, crafting a workable and realistic strategy, and getting all the pieces in place to execute it.

Cloud is reshaping the BCM business

The cloud computing landscape continues to mature, and innovations are making the decision to migrate workloads and data to the cloud a matter of when, not if. As the use of sophisticated and secure ways of migrating to the cloud grows steadily across the industry, many financial services institutions are reaping business benefits by making the move. The most sophisticated path to cloud migration is with DXC’s approach, which focuses on deploying the right technology at the right time on the right platform to enable a secure, technically appropriate and cost-effective hybrid platform that is compliant with regulations related to zero data loss.

Cloud transformation is being driven by the need to drive market share and crosssell. BCM companies are constantly seeking new ways to cross-sell services and bring more products to market faster. By adding speed, automation and flexibility to the technology and application landscape, cloud is becoming tightly interlocked with BCM cross-selling strategies because it more easily unlocks the necessary tools.

Cloud-based applications are enabling banks to operate more efficiently, grow revenue by supporting transactional systems and create collaborative ecosystems. Cloud provides beneficial risk management capabilities, as hyperscalers add innovative features such as risk engines to their cloud offerings. Cloud also provides regulatory-related benefits such as better monitoring tools, greater transparency and improved security.

Banking and financial services businesses are data-heavy, and cloud enables companies to scale up and down quickly as their data processing needs change. Cloud’s flexible pay-as-you-go pricing model delivers not only greater agility but also the cost-effectiveness all companies are looking for. Cloud enables complex analytics such as analyzing trading patterns or monitoring customer engagement.

Many DXC Technology customers are working with us to operationalize and manage public cloud, hybrid cloud and multicloud environments. One customer, a large trading exchange, has moved more than half of its workloads to the cloud and is benefiting from greater agility to respond to rapid changes in the industry and the use of data. Cloud enables the trading exchange to scale its consumption as needed and get up and running quickly in new markets.

Cloud is also enhancing the trading exchange’s research and development capabilities by enabling it to try out new services and technologies to determine whether they deliver business value. In addition, it makes it possible to automate hundreds of business processes more easily, resulting in significant cost reductions.

Five steps to cloud success

To remain competitive, BCM companies must harness large amounts of customer data, cross-sell products and services, and go to market quickly. This requires a well-considered strategy, which begins with a deep understanding of the company’s business and technology landscape, as well as a clear understanding of the benefits cloud can deliver. To achieve cloud success, BCM companies must take these steps:

1. Build a business case that helps decision makers understand the benefits of cloud. At many companies, there is a lack of understanding of what the business benefits of cloud actually are. This often comes from poor business case creation.

BCM companies need to craft well-thought-out, well-structured and carefully planned business cases that demonstrate the business benefits of a platform move to cloud. It is important to clearly spell out the business advantages of building capability out natively in the cloud versus doing it on premises. Business cases should include total cost of ownership benefits and the return that can be expected based on a specific amount of investment in the cloud transformation.

Finally, it is critical to communicate the business case in a way that makes the benefits easy to understand. Having a cloud strategy that delivers efficiency and scalability when developing products for shorter time to market is absolutely crucial for any bank seeking to remain competitive while achieving sustainable security and profitability.

2. Identify what should migrate to cloud and what should not. Planning and assessing cloud adoption, migration and optimization requires a thorough assessment of the current infrastructure — how and why it works, with a clear path to improvements through stringent testing. Using an approach that allows for a hybrid or multicloud environment, or a single public cloud provider, or an on-premises/private landscape, combined with hands-on performance monitoring, will help establish a regular checkup on your cloud infrastructure. For this reason, it’s important to have the right cloud partner and technologies to manage cloud network performance.

With DXC’s approach, we carefully assess the strategic, operational, financial and technical realities of an entire IT estate and develop an integrated vision of the best ways cloud can deliver business value. In contrast, a cloudfirst or cloud-only approach is often rooted in poor strategy, and execution suffers as a result. When assessing what to migrate and what not to migrate to cloud, companies must focus on new technology capabilities that deliver benefits such as improvements in automation, orchestration and observability.

Start with an assessment to identify the constraints that the current technology environment is putting on the business. For example, at DXC we identified a situation where our customer had separate environments for development and release instances. Moving to cloud simplified things, because every development environment could instantly be upscaled to a release environment. The customer gained the ability to vertically scale an existing development environment, then perform a release, and then turn it back to a development environment the next day.

3. Address security requirements early and often. The use of cloud technology in BCM is not new; the industry has been using cloud for noncritical systems such as email, CRM and application development for many years. However, critical transactional applications, including those for deposits, loans and more, were not moved to the cloud because banks feared doing so would be a security risk. Instead, banks historically relied on creating IT infrastructures using hardware in data centers — all owned and operated by the bank. Until recently, this provided a workable solution to protect the facility against perceived risk.

But times have changed. Today, cloud-enabled security can simplify a complex security environment and increase speed and flexibility — while improving your confidence in the ability to deliver secure and available services. Security in the cloud has matured, and with the right security enforcement tools and detection systems, the cloud can provide a safe and secure platform for even the largest financial organizations.

Security requirements should be addressed as a key part of a company’s cloud strategy and remain top of mind through all implementations. Addressing security requirements and preventing data loss should be viewed through two lenses: security and regulatory. It’s not enough simply to have workloads in the cloud; they must be configured correctly, or else data could be compromised. Such threats have significantly increased in nature due to heightened political tensions and cost-of-living pressures. Many regulations require maintaining reliable services — the threat of data loss, including customer data, exists with the loss of network access, backup failures or other problems.

4. Incorporate ESG as part of your cloud strategy. Banks and capital markets firms are increasingly making ESG initiatives a top priority. Their customers want to know whether their investment portfolios are carbon neutral, and exchange operators are emphasizing the importance of ESG-compliant reporting. Cloud can help companies improve their ability to process large amounts of data and automate processes, making it an essential component of ESG initiatives.

A cloud strategy should include the ability to put ESG at the product level, for example, to inform a customer about the carbon footprint or carbon offset involved in getting a loan. In fact, companies should aim to wrap ESG considerations around everything to the extent that the cloud is used to not only modernize infrastructure and use less power, but also to eliminate elements of the infrastructure. A well-planned cloud strategy should include goals to reduce emissions by migrating on-premises data centers to more energy-efficient cloud solutions.

In addition, companies should take advantage of new features cloud providers have introduced that deliver sustainability-related functions such as tracking, analyzing and reporting environmental data. This will increase companies’ insights into their carbon emissions related to cloud services and calculate how to further reduce emissions by moving applications and services to the cloud.

5. Make sure the right skills are in place. The benefits of moving to cloud can’t be realized without people who have the right skills to deliver on a well-crafted strategy. Yet the tight labor market is making it difficult for companies to attract and retain experienced professionals with the right cloud skills — not just easily obtained certifications. Companies need to make sure acquiring the right talent is part of a well-planned cloud strategy, and to take a multifaceted approach that combines internal recruitment with the expertise of an experienced partner.

Companies need to be precise when deciding what will be built in-house versus what can be purchased as a standard off-the-shelf solution, then skill up accordingly. It’s important not to try to build skills around nonstrategic requirements. It will be very rare to find the full range of skills in any one person, so don’t spend too much time seeking out those unicorns. Instead, focus on building cross-functional teams. Also, look into freeing up people who are tied up by day-to-day IT issues that could be automated. Train them and help them develop the skills you need.

Finally, it is advisable to gain skills from suppliers that have the right cloud experience, particularly in application domains that support the current business processes that the company is changing. Look to access specialist skills from systems integrators where mission-critical, highly available and highly secure environments are needed.

How DXC can help

DXC is leading by experience, helping financial services organizations around the world with their cloud transformations. Here are some examples of our work in banking and capital markets:

• DXC helped Westpac New Zealand, the country’s second-largest bank, upgrade its technology and move key applications to a cloud-based platform, leading to greater efficiency, reduced risk and lower costs.
• We helped migrate the development and delivery of key applications to a software-as-a-service cloud for GoldenSource, a leading enterprise data management software vendor for BCM companies, resulting in cost savings and enabling the company to increase its digital offerings.
• As part of a groundbreaking digital transformation project, DXC is working with GEFA BANK, a leading provider of sales and investment mobile solutions in Germany, to migrate mission-critical applications and data from its data center to a cloud platform.
• As part of our support of BCM companies, DXC manages 250 million customer deposit accounts globally, and processes 275 million cards daily for 475 banks and 2.5 trillion account balances each day in the United States alone.

Choosing the right partner is essential for success in the cloud transformation journey. DXC has a heritage of running mission-critical operations. We have made significant investments in digital strategy, cloud migration tools and operations, and we know how to help BCM companies accelerate change.

We begin our engagements by working with our customers to understand the specific environments and functions of their applications. We then work with our customers to develop business cases that demonstrate the value of moving to cloud.

Our approach, based on a strategic mix of cloud, multicloud and on-premises platforms, is being applied at enterprises worldwide to provide faster business results with less cost, disruption and risk. For BCM companies, this could mean modernizing systems or migrating applications to the cloud and identifying the right combination of both paths. Cloud is beneficial in highly regulated, data-rich financial services industries, where DXC is transforming the digital capabilities of Lloyd’s, the world’s leading marketplace for commercial, corporate and specialty risk solutions. We are helping Lloyd’s deploy cloud-based solutions to automate processing and accounting, reduce operating costs, and offer faster and better service to customers.

Through our cloud approach, we have continued to invest in modernizing legacy architecture as well as in new cloud-native skills. We can help BCM companies like yours establish a business case for cloud and develop a cloud strategy focused on delivering business value. Most importantly, our cloud professionals have the experience and expertise to execute a successful cloud strategy that delivers the speed and agility you need to stay competitive.

Learn more about DXC and Banking and Capital Markets.