Posted: 27 May. 2019 05 min. read

Banking on the Cloud

Getting the best from reaching to the clouds

As all four major Australian banks publicise their aspirations to move to a simplified, more agile and cost-efficient operation, hybrid cloud capabilities are at the heart of enabling this growth and transformation goal.  As banking organisations create new business models, cloud will enable a simpler, efficient and more customer aligned bank.

Cloud investment is growing

The Economist magazine predicts that cloud’s importance across all industries in developed and developing countries will grow by more than 400% in the next five years, with banking leading the surge. A soon to be published assessment of the public cloud’s contribution to the Australian economy by Deloitte Access Economics also identifies cloud’s significant economic contribution over the past five years.

Retail banks in Australia continue to embrace cloud technologies, with forecasts of continued growth expecting a shift of between 5% and 10% of their resources to cloud-based services by 2020. This increases last year’s and this year’s associated spend by 8.5%.  Gartner predicts Australian organisations will spend $5.6bn on cloud this year, a 20% increase on 2018. 

The Cloud Industry Forum reports that cloud penetration stands at 88% in the UK and is similarly high in Australia. Australia’s predicted growth rate is 20.3% vs a global rate of 17.3%.  

What are the benefits of cloud to banks?

The main benefits of the cloud identified by major banks so far has been related to cost and development times. Although important, the exponential benefits of cloud run much deeper than this. 

As well as helping to appropriately balance their books, cloud supports major banks spend more time on the customer experience, delivering faster ‘time-to-insight’ from data, and a decrease in development time for both new applications and updates. 

Cloud is also a paradigm shift in developing and deploying technology solutions to serve a firm’s purpose. Cloud technology is driving ‘creative destruction’ or in other words, facilitating a complete change in the way businesses operate. 

Three standout benefits for banks are:

  • Standardising processes and information across a large number of business units
  • Agility from decreased development time
  • Redirection of CAPEX to a better return on investment. 


However, in general effective cloud use tends to be the exception rather than the rule in Australia, especially during initial cloud adoption. In a survey of 204 Australian C-level executives, 97% said: ‘They would have made different strategic decisions during their first cloud migration.’  

What are the lessons?

Barriers to effective cloud utilisation include under-development of cloud management strategies, over-spending on cloud budgets, and underestimation of business risks.

The major issue in Australia is the skills gap that arises as companies attempt to adopt cloud without dedicated resources and specialist knowledge. This gap, which is primarily due to inadequate planning, underpins cloud adoption weakness. In a labour market where nearly half the companies hiring full-time staff for cloud initiatives take between three to six months to hire, this gap can dramatically extend timelines and increase costs associated with cloud adoption. 

Understanding both the challenges and benefits of cloud adoption 


Cloud adoption challenges fall under four main themes: 


Theme Challenges:


Business model Challenges include:

  • Technology can change at the pace of the business – this is unprecedented
  • Cloud largely shifts organisational focus from making things work, to making things work better or differently
  • Cloud destroys legacy business models and technology solutions, and requires firms to enable creativity and innovation to fill the void 
  • Cloud largely standardises business processes, requiring behavioural and cultural change
  • Businesses need to focus on building differentiation on top of standardised solutions
     

People Challenges include:
 

  • Well designed and integrated cloud solutions drive down manual work in business teams, and technology team size
  • Cloud increases automation, shifting effort from utility roles, to value-add roles requiring firms to adjust their resource pools
  • Cloud repositions IT from being a technology delivery function to an enabling and coordinating function that finds, harnesses, and coordinates external cloud solutions requiring quite different roles 
  • Reskilling people as their roles change due to DevOps or NoOps facilitation by the cloud


Technology Challenges include:
 

  • Managing a legacy onsite and cloud based architecture can be challenging due to different technologies, batch based architectures, and proprietary or closed architectures
  • Create a single source of truth between legacy solutions and multiple SaaS: the data lake strategy
  • What cloud technologies to use, for what purpose: IaaS, PaaS, SaaS or a combination?
  • Establishing the foundations including transforming the network, and enriching the Configuration Management Database (CMDB).
  • How do all Cloud Capabilities integrate and operate in an end-to-end Enterprise Architecture and Operating Model?
  • Connecting legacy: is it a simple matter of deploying Application Programing Interfaces (APIs)?
  • Managing the transition of IT spend from legacy to cloud, while maintaining legacy in-house solutions
  • How do you drive exponential value from cloud? Migration to cloud or DevSecOps?


Governance Challenges include:
 

  • Procurement will become more intensive as more vendors are engaged than in the current state
  • Commercial skills are needed to continually optimise cloud spend 24x7 
  • Transforming the technology operating model
  • Determining how best to address cloud risk, regulation, and compliance
  • Ensuring the business model evolves to embrace the paradigm shift of cloud
  • Keeping or improving resilience and service level agreements (SLAs)?
  • Determining offshore data hosting and privacy regulations.
     

As most banks are in a maturing cloud journey, understanding and optimising their cloud strategies and transition is critical. Any inconsistent application of a new technology can fracture the internal IT ecosystem, put service delivery at risk, and even endanger sensitive data. 

However, the overall benefits give a business the opportunity to offer better, faster and more personalised value to customers to sustain the business and grow it. Financial services organisations need to strategically prepare and respond to this significant business change and more than ever ensure that their business units and technology strategies and functions work collaboratively as one for the benefit of the whole enterprise and the customers it serves.

Meet our authors

Yousaf Mir

Yousaf Mir

Partner, Technology Strategy & Architecture

Yousaf is a Partner within Deloitte's Technology Strategy and Innovation Group. He is also the Technology Strategy Lead for Financial Services in Victoria. Yousaf has worked with Financial Services clients across the UK, Europe and APAC with a particular focus on helping banking clients optimise their cost base and integrate emerging technologies. He’s passionate about putting cloud computing to work, and addressing the challenges that exist with implementing resilience, security and regulation.

Clive Minchin

Clive Minchin

Director Technology Strategy and Architecture

Director Technology Strategy & Architecture brings both his technology strategy and design experience of complex architectures to help organisations navigate the transformational challenges of moving from legacy platforms to leading edge technology.