The importance of cloud adoption in financial services
This post was sponsored by AT&T Business, but the opinions are my own and don’t necessarily represent AT&T Business’s positions or strategies.
Despite a slow start, migration to the cloud has gained momentum in recent years. According to Gartner, the public cloud market is projected to grow to just under $600 billion worldwide in 2023, an increase from $490 billion in 20221. As organizations continue to invest in and upgrade their infrastructure, moving to the cloud is no longer optional. It must become an integral part of a company’s digital transformation strategy.
Digital transformation must begin with a network that can handle the demands needed to support it—a modernized network. And it, in turn, enables for cloud connectivity for the applications that run in the cloud. These include voice and collaboration tools, job- or industry-specific applications, and many others.
Cloud adoption and cloud connectivity in the financial services industry—from banks and credit unions to wealth management firms and insurance companies—is just as needed as any other industry.
Impacts of cloud adoption and cloud connectivity in financial services
Two obvious benefits of cloud adoption and cloud connectivity are agility and scalability. This was evident a few years ago when many of us switched to remote work overnight and companies scrambled to provide homebound employees with access to enterprise platforms, as well as customers who increasingly want more digital financial services. The ability to quickly deploy new resources when needed can help financial institutions meet a sudden surge in demand without interrupting their services. And for institutions looking to scale their physical footprint (e.g. going abroad), the ability to expand on the cloud also helps to simplify the process without having to look for locally hosted data centers.
Emerging tech, network modernization, and ESG reporting
Beyond supporting the anywhere, anytime work culture, migrating to the cloud also can help organizations leverage the full benefits of emerging technologies such as artificial intelligence, which is crucial to the deployment of new products and services for banks to remain competitive and to generate revenue. It is no wonder that banks are prioritizing the shift of data workloads to the cloud to better support their machine learning and artificial intelligence (AI) efforts.
Migrating off of legacy core systems, which includes moving from aging networks and modernizing the network to fiber, can also help to reduce the complexity and cost needed to maintain and patch outdated systems. The more modern tech stack can provide increased resilience to cyber incidents — with broader use of Zero Trust models. Workload allocation across the entire enterprise can be optimized, reducing operational costs and carbon emissions with less idle capacity and fewer unused resources.
And finally, as regulatory requirements for Environmental, Social, and Governance (ESG) reporting and climate risk disclosures evolve, cloud service providers are developing data analytics capabilities to meet the demands from investors. The market will continue to expand in the coming years as more institutions leverage the cloud to improve ESG reporting and strategy.
The ROI of network modernization
Network modernization can produce strong ROI for your business, but you need the right strategy and technology to exceed your digital transformation goals.
Challenges of cloud adoption and cloud connectivity in financial services
The talent gap is one of the most commonly cited top challenges when it comes to configuring and deploying cloud services. And while migrating from complex legacy core banking systems and aging networks, financial institutions must ensure that their teams have the skills and knowledge needed without disrupting operations or exposing the systems to risks. Securing timely support from third party service providers is crucial as well. In addition, cybersecurity is also of utmost importance, especially when dealing with money matters; exposure to operational incidents can erode the trust that is paramount for the industry.
Understandably, for a highly regulated industry, security and compliance can present another challenge. Concerns by jurisdictions over data sovereignty, for example, may prevent financial institutions or their foreign operations from deploying cloud services, damping the potential benefits.
Embarking on the cloud journey
As the saying goes, with challenges come opportunities. So how can we start?
- Plan well. This is a marathon, not a sprint. Start by getting a good understanding of what needs to move and why. Migrating to the cloud is a big change in architecture that’s built from the network up, and frankly, in culture and mindset. And we cannot expect such transformation to happen overnight. It is important to take small wins in order to build confidence. Change takes time, to build trust and adopt. I remember when the kids were younger and I was trying to explain to them how the photos are not really on the phone per se but in the cloud, they asked me: “If data is in the cloud, does that mean we can see data when we fly? If we can’t see it, how do we know it is really there?”
- Put customers in the center to realize the full business value. While it is tempting to focus mainly on the cost savings and operational efficiency points of view, it is even more crucial to approach the transformation effort with customers in the center of your strategy. Take a holistic approach and think about the end-to-end customer experience. What functional capabilities do you want to provide for customers and business partners? What are the outcomes you are looking for and what will the ecosystem look like? What third-party services need to be in place and how can you best implement them? Modernization efforts allow financial institutions to break away from the constraints of legacy platforms, enabling them to innovate faster and provide more personalized services driven by insights from data.
- It is not all-or-nothing. Cloud connectivity and adoption do not have to take a one-size-fits-all approach and the model can vary based on compliance, security, and scalability needs. Many larger financial institutions have adopted a hybrid cloud model, which includes the use of both public and private cloud services on- or off-premises, while some others choose to operate entirely in the cloud. Some financial institutions prefer a multi-vendor approach, with different providers supporting different components or workloads, as a means to diversify their risks. Although, the drawback with such a model is that supporting a multi-vendor deployment environment will require staff with expertise working in multi-cloud environments and with different providers, increasing the burden of training and sourcing in an already tight labor market.
Regardless of how financial institutions choose to embark on the cloud journey, having the right trusted technology experts from planning through deployment, migration, and maintenance will help lessen the burden and mitigate some of the risks associated with such an undertaking.
The finance world is changing, along with customer needs and expectations. It is time to take a comprehensive look at your network and technology stack, and re-imagine a new future where we can better serve more people in new and different ways.
Learn about AT&T Business financial services solutions or contact your AT&T Business representative.
1“Gartner Forecasts Worldwide Public Cloud End-User Spending to Reach Nearly $600 Billion in 2023,” Gartner, Oct. 31, 2022, https://www.gartner.com/en/newsroom/press-releases/2022-10-31-gartner-forecasts-worldwide-public-cloud-end-user-spending-to-reach-nearly-600-billion-in-2023.
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