Cloud migration is an ongoing journey—one that doesn't stop after planning and implementation. Banks must have a plan for continuous transformation and optimization.
In parts one and two of this series, we focused on how to envision a bank's migration to the cloud and how to execute a cloud migration. In this third article, we examine the evolve phase of a bank's cloud strategy.
The evolve phase is the process of setting and implementing the bank's operating model after successfully completing a cloud migration, as well as the process of evolving the bank's culture towards a full embrace of the cloud. At this stage, management of the cloud moves from the strategy and migration team to the operations and support teams. A focus on sustainment and continuous improvement is critical to maximize the organization's investment in cloud technology.
Realizing the ROI of cloud technology
The cloud is a fundamental tool for building and strengthening a bank's digital functionality—how the tool is used is what gives it power.
If the cloud is not fully adopted and embraced by the organization, banks face several significant business risks, including:
- Fractures in the culture between employees who are on board with the new technology and those who are resistant to change.
- Damage to employee morale and productivity due to lack of skills and knowledge on how to use the new technology or what questions to ask.
- Stagnated innovation because of employees being intimidated by the cloud.
- Continuity disruption due to underuse, overuse, or misuse of the cloud, potentially leading to poor service, unhappy customers, and cost overruns.
When applied correctly, the cloud opens opportunities for banks to improve customer service, boost employee productivity, operate more effectively, and innovate with agility. But none of that can happen without dedicated and consistent effort to optimize the cloud. Banks can optimize the cloud by:
- Maintaining usability
- Keeping costs in line with budgets
- Investing wisely in new technology to improve capabilities
- Showing others how to leverage the cloud to better perform their roles
This is what an operating model will achieve.
The key components of a cloud-specific operating model
Cloud adoption won't change a bank's operational priorities (customer and employee satisfaction, innovation, profitable practices, etc.), but it will require a shift in the way a bank functions. As Mike Gelesz, Industry Leader for BDO Consulting's Banking & Financial Services practice, puts it, “the operating model of the past is not going to be one that fits the future.”
The cloud gives a bank limitless space to build and integrate infrastructure and tools, improve functionality, and try out new ideas in line with modern-day technology. Because of this, a key goal of the evolve phase (and resulting operating model) should be to shift attitudes away from the “what can we do with what we have?” approach that defined on-prem setups, and towards a “how can we iterate to get us where we need to be?” approach that defines cloud platforms.
Moving an entire workforce in this direction to achieve target ROI requires changes to a bank's current operating model in three key areas:
1. Training
The cloud's features and capabilities will be new to many at the bank—employees from all lines of business have to be trained and learn new ways of working. Start at the very top by reframing technology as an operational expense vs. a capital expense.
On-prem technology was a capital expense. Banks purchased hardware, maximized what they bought to its full potential and bought new hardware when they needed to expand.
Cloud technology can and should be monitored and optimized on a regular basis, adjusted and refined when required, and constantly increasing in capability. This consistent effort would fall under an operational expense. And like other operational expenses, anything less than hawk-like oversight can quickly lead to overspending.
As such, the new operating model should include education about as-a-service economics and how to find value in a vast anything-as-a-service (XaaS) marketplace. A strong change management plan and supportive organizational structure is also important to help identify and improve skill sets as well as build an innovative culture.
2. Technology
Operations teams need to stay current with the ever-changing software and solutions that can integrate with the cloud and understand how these technologies can create a better experience for both customers and employees. They must also adapt to the rapidity the cloud creates. If the bank can't move quickly to implement solutions, it could miss out on key opportunities.
Embracing new technology isn't limited to the IT team. Familiarity with emerging technologies and the possibilities that the cloud offers will be beneficial to everyone who works at the bank because an idea for innovation and improvement can come from anyone.
For example, someone on the front lines could come up with an automation that will improve customer service. In a culture that empowers its people with cloud knowledge and encourages them to leverage the cloud, that idea could be shared, built, trialed and ultimately, rolled out across working groups. But that will only be successful if everyone understands the technology and its business value.
Encouraging people (especially decision-makers) to fully understand the features and capabilities of the cloud, what the emerging technologies are, and how it all works together to impact customer experience should be part of any new operating model.
3. Security
Understanding emerging trends in cybersecurity is critical. The statistics on cybercrime in the banking industry showed a 1,318% YoY increase in ransomware attacks in the first half of 2021. This is the lion's den that all banks must be prepared for when operating in a cloud environment.
The operations team should understand the differences between on-prem and cloud security, such as where the weak spots are and how today's bad actors are breaching them. They need to understand how ransomware works, how to spot it, and how to teach others to spot it. And they need to understand how cybercriminals monetize the data they steal. Knowing which areas of your cloud holds the most value to attackers is one of the best ways to know where to direct security efforts.
Any operating model the bank creates should have an unambiguous approach to security that includes clear lines of responsibility and definitive strategies for prevention, detection, and response. In a highly regulated environment like financial services, banks must also regularly evaluate and optimize their security strategy, to validate governance processes, improve risk identification and management, and implement platform-specific best practices.
How to create a cloud-specific operating model
The operating model defines how a bank translates its cloud strategy into actionable operations. Rather than waiting until after a migration is complete, the model should be part of your cloud migration from the beginning, when the bank is envisioning its strategy.
Developing and implementing a bank's cloud operating model consists of the following steps.
While there are many types of operating models, banks commonly use one of these three:
- Centralized
A team of dedicated cloud specialists operate as a business unit to manage the bank's entire cloud operation. Other business unit leaders or procurement leaders come to them with requests.
- Centre of Excellence (CoE)
Business units are equipped with dedicated cloud specialists whose activities are coordinated by a centralized group that takes on training, adoption of analytical tools, innovation, knowledge sharing, and communication between all cloud specialists to ensure organization-wide adoption of cloud-enabled transformation best practices.
- Hub and Spoke (H&S)
A distribution method whereby a central location(hub) is connected to multiple other devices and passes products, workloads and information to smaller business units (spokes) for processing so that maximum level of efficiency can be maintained.
No one approach is right or wrong, and banks will sometimes evolve from one approach to another as their needs change or their business grows. Ultimately, whichever style a bank chooses to implement, its operational model should satisfy these five requirements:
- A stable cloud platform that works the way it should.
- An easy path to evolving the cloud platform over time.
- An environment that creates leanness and agility for employees.
- Clear communication and processes for addressing business needs.
- A leadership team committed to continuous improvement.
Finding help when and where you need it
The evolve phase of cloud migration is a continuous life cycle. It requires multiple perspectives and capabilities to be successful, as well as a different approach to the way a bank provides operational support.
BDO has a long history of helping banks grow and evolve and can support your organization through the entire cloud migration journey. Our team can:
- Review the current state of your operating model today.
- Determine the support you'll need in the future after your cloud migration is complete.
- Evaluate if the migration was successful.
- Identify where the gaps are and how to fill them.
Our capabilities include reviewing cloud roadmaps, evaluating skill sets in business teams, improving readiness levels, and helping banks to scale capabilities to meet customer expectations.
Book a consultation so we can help you maximize your return on investment on your large-scale cloud migration and technology modernization efforts.
Mike Gelesz, National Industry Leader, Banking & Financial Services, Consulting
Rishan Lye, Partner, Advisory Services, Technology
Denis Repin, Partner, Consulting, Technology Services