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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:
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.
Cloud adoption challenges fall under four main themes:
Business model Challenges include:
People Challenges include:
Technology Challenges include:
Governance Challenges include:
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.
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.
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.