Five Strategies for Successful Cloud Adoption

While detailing the benefits of the cloud and its use options, Puneet Chhahira, Head of Marketing and Platform Strategy, Infosys Finacle suggests that Hybrid Cloud is the approach suited to the current level of development.

Just a few years ago, several banks were questioning why they should move to cloud; today, the typical question is how and how soon we can go to cloud. Of the several reasons for adoption, scale, resilience, analytics and competitiveness rank right at the top.  Unlike on-premises infrastructure, cloud can support rapidly growing transaction volumes with resilience; it can scale up to meet a demand spike on one day and go right back the next; it can flexibly offer massive computing resources needed for advanced analytics and innovation; and finally, it enables banks to compete with cloud-native competitors on equal terms.

But it will take some time before banks attain cloud critical mass – when 60 percent of their workload has migrated to cloud and is unlocking its full value. Our research, Infosys Cloud Radar 2021, found that only 14 percent of banks have achieved this. The industry is still working through some issues, such as a need for more regulatory clarity on cloud adoption. The good news, however, is that a growing number of regulators are supporting cloud, subject to banks meeting data residency conditions.

For banks planning their cloud journeys, we recommend five strategies for accelerating migration and maximizing value.

Progress to the right

The cloud journey progresses along a continuum that has Infrastructure as a Service (IaaS) at the left end, Software as a Service (SaaS) at the right, and Platform as a Service (PaaS) in between. The way applications are deployed, and the stack is managed, is different in each case.

A traditional bank running on on-premises infrastructure will likely pass-through IaaS and PaaS before arriving at the Software as a Service stage, where there is maximum value. But for cloud-native, digital-born entities, this is certainly an option, one that they are exercising by favouring the SaaS model above all others.

As far as banks are concerned, the tilt is towards leveraging PaaS as well as SaaS for non-mission critical, non-core applications such as CRM and marketing automation.  Banks should capitalize on their success in these areas to migrate critical applications like core banking and digital banking to cloud, with the awareness that the farther right they reach on the cloud continuum, the more value they get from the deployment.

One transformation, many approaches

Banks have accumulated a variety of legacy applications over decades, a vast majority of which are not suited for cloud “as is”. They need to plan the migration wisely, taking care to pick the best approach among several for each application based on its characteristics – size, customization level, mission criticality, and requirement of transformation skills.

The popular transformation approaches include:

  • Lift and shift traditional, non-cloud applications as they are and run them in a cloud environment
  • Lift, and optimize traditional, non-cloud applications by making a few modifications, and run them on cloud
  • Refactor traditional, non-cloud applications with the help of cloud APIs and middleware
  • Replace traditional, non-cloud applications with new cloud-native apps that are either composed in-house or subscribed from SaaS providers

The effort as well as the risk involved increase as one goes down the order, but so do the returns. A bank has to find the best multi-pronged approach for its context, since there is no single approach that will work for all applications.

The forecast is hybrid cloud

Banks are divided about which cloud is best, public or private. Public cloud has several advantages, but when there are limitations, such as latency or regulatory vagueness, it takes a back seat to private cloud.  On the other hand, private cloud is costly, and takes effort to maintain.

So, the answer to the “public or private?” question is actually “hybrid cloud approach”. When one considers factors such as risk, return, scale and security, one may choose different cloud approaches for different applications and workloads.

Hence for the foreseeable future at least, hybrid approach will be the optimal solution for the majority of banks undergoing transformation. But hybrid adoption has only just begun. In our survey, only 31 percent of respondent banks were using hybrid cloud; 41 percent were in a private cloud, while 28 percent had migrated to a public one. Banks should accelerate the move to hybrid cloud and create the conditions for success by redesigning organizational processes and culture that enable this flexibility.

More cloud, the better

One of the cloud concerns being typically debated is vendor lock-in. As the ranks of providers grows, and efforts to introduce standardization and interoperability succeed, it’s opening doors to multi-cloud. Today, banks have the freedom to distribute their workloads on the clouds of multiple providers, such as hyper-scalers, specialists, and regional players. Our view is that as providers increase in number, they compete harder by offering services, security, and more innovation enablers. Banks should therefore leverage multi-cloud to avail the best offerings.

But even as they work with multiple clouds, most banks are likely to have a preferred vendor. It is imperative to define the operating model, including the tech stack, processes, and talent required, for this hybrid multi-cloud environment early in the planning process to maximize the chances of success.

Go the distance

While the value of cloud is undeniable, extracting it can be tricky. Returns on cloud investment increase not only with cloud footprint but also with the quality of business innovation. On the flip side, patchy efforts yield weak results. The critical mass of 60% referred to earlier, is a big factor in value realization; unfortunately, only a slender minority of banks have achieved it.

Banks are convinced about the need for cloud; now they must show urgency in adoption. We have seen from experience that cloud-mature organizations with significant migrated workloads have not only achieved defensive objectives – cost control, remote access, resilience and security – but also offensive goals, such as innovation and quick time to market. The journey to cloud is highly rewarding. But only for those who go all the way.