Financial services in the cloud: Catalyst for change

November 7, 2018

A blog post by Ranjit Bawa, cloud leader for technology, Deloitte Consulting LP, and Jim Eckenrode, managing director, Deloitte Center for Financial Services

Technology as a driver for change

We live in an increasingly dynamic world, where innovations and disruptions are almost a daily occurrence. One such example is the often-cited analysis that shows that the average company's tenure among the Fortune 500 has dropped from 75 years in the mid 1960's to just 15 years today. The increasing pace of globalization and technology development is often cited as the chief contributor to this decline.

Of course, other factors are certainly at play, including mergers and acquisitions, and in the case of the S&P 500, the committee's decisions about the companies that should be listed in that index. Indeed, some have asserted that the longevity of companies actually comes in waves, and that we're in a current period of lengthening corporate maturity. If that's true, it would suggest that another period of shortening lifespans is in the offing. A recent QuickLook Blog post focused on this subject as well. QuickLook analyzed the largest financial institutions from 2007 to 2018 and noted the changes seen since the financial crisis. If and when another period of rise-and-fall comes, I believe that technology will be a main driver.

Eliminating dependency on legacy core applications

For financial companies to harness new opportunities, they can't continue to be dependent on the legacy mainframe-based core applications that are responsible for much of the transaction processing and account recordkeeping that are at the heart of these businesses. Indeed, when asked about the most important technology initiatives within their company, almost 60 percent of respondents from G7 countries in a recent Ovum survey cited modernizing their core as one of their top three priorities. Yet most CXOs are not incented to modernize their core, given the complexity and the length of time required to get it right. It's also becoming increasingly difficult to find people who know how to work on these systems. A quick search on Indeed.com using the search term "Cobol programmer," yielded only 1,400 job openings. This in contrast to listings of jobs requiring more modern development languages, such as 80,000 Linux programmers, 77,000 with Java experience, and 40,000 with knowledge of C++. There is risk in doing nothing, as the gap between financial firms that have modernized and those that have not continues to widen. Those that don't modernize may find themselves on an island, with no good way to absorb the change coming their way.