Many financial services companies are facing the challenge of technology. Cloud services are changing the game, and a lot of companies are struggling to keep up. We’re exploring cloud adoption in the financial services industry, and this post is looking at the benefits of the cloud.
Although any cloud migration should be planned and executed thoughtfully, the significant impact on business operations, pace of development, financial performance, and customer experience are tangible rewards that make migration an exciting endeavor.
The benefits of cloud adoption include:
Increased technology scalability and elasticity
Increased application delivery velocity
Reduced technology delivery costs
Improved reliability through a regional, distributed model
Scalability of the Cloud
One of the main technical advantages of cloud adoption is the inherent scalability the cloud provides, which reduces technical overhead and allows your teams to focus on efforts that move your business forward. Rather than being limited by set storage or computational capabilities, companies that operate in the cloud can scale up much more quickly as their business demands it. Cloud services allow your organization to consume various offerings as an as-needed service rather than a fixed asset, outsourcing the burden of overhead, scale, and upkeep to your cloud provider.
A specific example is utilizing cloud storage to reduce the risk, effort, and expense associated with company-managed data centers, a segment of IT infrastructure spending with a high barrier to entry that is difficult to scale sustainably. In 2015, Rob Alexander, CIO of Capital One, expressed a goal of reducing their data center footprint from eight in 2014 to three by the end of 2018 by transitioning to Amazon Web Services. This transition would allow Capital One to “be in the business of building great applications for [their] customers, not in investing to build costly and complex infrastructure.”
The on-demand elasticity of the cloud is another main motivator for cloud migration and adoption, particularly in relation to infrastructure. Not only can it take a significant amount of time to get new servers and related data center infrastructure up and running, once that hardware has been installed, it is very difficult to scale back down. The amount of capacity required for your business will inevitably vary over time, leaving you with peaks that strain your on-premise solution and valleys where that expensive technology is woefully underutilized.
Rather than “building the stadium for the Super Bowl,” leveraging a cloud solution allows your organization to use as much or as little of the cloud as necessary to complete the functions at hand, in turn allowing you to align infrastructure costs with the natural cycles or seasonality of your business. Given that the typical operating expenditures for an average data center are $18.5 million, and data centers are generally less than 50% utilized, there is a compelling financial incentive to avoid over-provisioning your data centers and capitalize on elastic cloud solutions.
This ability to scale and adjust your systems more nimbly can foster and enable the adoption of agile principles within your development organization. If your infrastructure, platform, or software solutions can keep pace with your development teams, the two can work in tandem to rapidly deliver working software in response to changes in your industry’s landscape.
Cloud capabilities and services have impacts throughout the entire agile development lifecycle. Your teams can use cloud-based software to plan and manage sprints across teams, offices, or even continents. When using cloud instances during development, teams have access to a virtually unlimited number of servers that they can use to spin up as many development and testing environments as needed to successfully deliver their sprint commitment. When it comes time to merge the code in advance of a sprint deployment, there may be a need to hold back a long-running feature branch from the deployment—an additional server in the cloud provides the space to do so. Finally, once code has been deployed to production, there are cloud-based monitoring and logging tools that can track the health of a production application and provide timely feedback that translates into new backlog items. Although each interaction may leverage a different kind of cloud offering, they all work together to reduce the friction and overhead that slows incremental progress.
Availability and Resiliency of Data
Another benefit of a cloud-based infrastructure is the availability and resiliency of data within a regional, distributed data center model. Once data is stored in the cloud, that data set can be replicated and relocated to a different data center operated by the same cloud provider, in another part of the world. This benefit is particularly meaningful when site resiliency is crucial to the profitability of the organization. In the event of an emergency or natural disaster near the original data center, the company’s functions and operations can be supported with minimal interruption by infrastructure located in an unaffected area. This reliability could quite actually be the difference between success or failure for an enterprise—in a recent survey, 33% of companies stated that a single hour of downtime would cost their firms anywhere from $1 to $5 million. Those dollar figures also do not begin to account for the “soft” losses of poor customer experience, reduced customer retention, and unproductive employee downtime caused by an unexpected outage.
A Strong Case for the Cloud
For financial services companies considering a migration to the cloud, there are numerous pros and cons they should consider. Although obstacles like security and compliance, a shift in expenditure model, and developing the necessary technical readiness need to be considered and mitigated, the promise of solution scalability, elasticity, and resiliency are exciting reasons to explore the possibility of the cloud. We hope this series helped to summarize these considerations and encourages companies to make the plunge into refining their IT strategy and leveraging cloud solutions where they are appropriate for your organization.
Trying to develop your financial services firm’s strategy and approach for a cloud migration? Working to implement security processes or enhance cloud governance within your current cloud environment? Navigating an integration between multiple cloud environments? Reach out to Credera to find out how we can help.