{{item.videoDuration}}
{{item.title}}
{{item.text}}
{{item.videoDuration}}
{{item.title}}
{{item.text}}
Dr. Konstantin Rubinov
Manager Digital Intelligence, PwC Switzerland
Isabella Sorace
Senior Manager Financial Services Transformation
The banking industry has drastically changed over the past several years: regulatory and compliance requirements have become more complex, customer expectations are increasing and FinTechs are challenging the status quo. Faster data processing capabilities help financial institutions to counter some of these challenges: Banks can react quicker when a client defaults on a loan or mortgage, and ensure that they comply with a new regulation.
In searching for a technology that helps to process and analyse big data faster and that enables digital transformation, financial institutions are increasingly turning to the cloud. This trend is especially pronounced in the US. According to the PwC US Cloud Business Survey, 92% of the participating bank executives in the US characterize their financial institution’s cloud maturity as high or medium. In Switzerland, the adoption rate is still lower but steadily increasing. This commitment is not surprising, given that 38% of the financial services executives said that cloud is central to their business strategy and critical to revenue growth.
How do banks realise this potential? First of all, each bank’s cloud transformation looks different. Nonetheless, we can observe some common pitfalls and challenges financial institutions encounter throughout their journey.
“Being a close advisor to our clients in the financial services arena, we could witness first-hand the energy and the extra value that is created when they embark on a cloud journey. Thanks to our multi-faceted expertise (banking, technology, data just to mention a few), we have partnered with many of them to support this transformation, and we know that the cloud is one of those technologies that will profoundly change the industry, in ways we probably cannot even imagine yet.”
Ever wondered how your cloud journey compares to others?
By taking the survey, you will be able to measure your company against others, find out more about trends and other executives’ cloud strategies, and tap into collective intelligence from business leaders in the US and Switzerland.
Pitfall #1: The fallacy of infinite possibilities
The Gartner Hype Cycle illustrates the different phases of how companies are adopting cloud technology: Initial general excitement about emerging cloud-related technologies is followed by a peak of inflated expectations, which results in disillusionment. When financial institutions are embarking on their cloud journey, they are anticipating doing faster data processing immediately. These expectations are rarely met after their first steps in the cloud.
Tip: Establish clear expectations
It is important to create a clear understanding of the possibilities and limitations of cloud computing. Concrete examples can also help develop a common understanding of the expected results throughout the journey.
Recently, the Finance function of a European multinational bank had set up a new cloud data platform to reduce the daily reporting cycle from four days to one day. The expectation was that the 'infinite resources' available in the cloud would significantly improve the speed of the overall process. In reality, crunching the same amount of big data took comparable time on the new cloud platform. Because even with infinite resources, processing large datasets takes time and the analytics dashboards need time to refresh.
Another global bank had to manage its expectations due to projected costs. The business wanted to build a highly detailed report which would have required to compile terabytes of daily financial data. Loading such an enormous amount of data in the cloud and paying for their storage would have rendered the projected solutions economically unfeasible. Although the cloud offers an abundance of capacity, financial institutions need to find a trade-off between technical and economic viability. From a technical standpoint, the granularity and size of data, for example, must be supported with data models that are built specifically for big data. Such data models are optimised for speed, consider the lifetime of data, and support caching and recalculation.
”We entered the cloud journey thinking we could easily get fully granular financial modelling in real time – although that is still an aspiration, we understand now that the cloud brings extra speed, but it still has some physical and economical limitations. Still, the cloud has increased the efficiency and speed of our processes in a way no other technology was able to deliver.”
Pitfall #2: Approaching cloud computing with a limited perspective
More often than not, a cloud transformation is considered primarily an IT project that has a beginning and an end. This approach, however, prevents companies from fully capitalising on the cloud. After all, utilising the cloud is a transformational journey involving constant learning and no fixed end date, and it has implications for the business and operations of the company as a whole. It requires a well-defined, agile and adaptive pursuit, a business-oriented strategy, as well as close collaboration between technology and business teams.
As one of the first steps on their journey, companies must define the desired business outcome and select the right business and use cases. Based on our experience across different sectors, it is imperative to carefully think through the selection of the business case. Therefore, questions about revenue generation and cost reduction need to be addressed: Does it give rise to new capabilities which in turn can lead to benefits such as an increase in business? Does it generate new insights or result in the development of new services? To which extent do the implemented cloud-based autonomous solutions lead to a reduction in workforce costs?
Some of the financial institutions we supported had good experiences starting out by selecting tangible use cases with a low level of complexity. The selection of the use case should serve the overall strategy and chosen business case. Reporting elements are usually a good choice for several reasons. The reports will be used by a range of business teams right from the beginning of the cloud journey, and it increases their familiarity with new self-service solutions over time. Such low complexity use cases make it easier to evaluate dependencies and to redesign processes for the new cloud environment, which in turn helps to avoid merely lifting and shifting data. A careful selection of the first use case allows a company to successfully add other use cases over time as part of its long term cloud strategy.
A European bank, for example, started its Finance function’s cloud journey by focusing on ICAAP (Internal Capital Adequacy Assessment Process) reports. While they constitute just a small element in the function’s reporting framework, moving them to the cloud as use case presented several advantages. It allowed to consolidate various reports on Microsoft’s cloud service Power BI and to assess the dependencies associated with the information flow necessary to compile the ICAAP reports. Building up on this experience, the bank continued to gradually move other Finance processes and reports to the cloud.
“Starting our cloud journey by moving just some of our key reports was the best strategy to pave the way towards broader cloud adoption. We learned how it works on a small case and could replicate success stories and adopt lessons learned for all the subsequent cases that, together, formed our long-term cloud strategy”.
Tip: Opt for a cloud-native transformation
Lifting and shifting data and applications from the legacy IT systems to the new cloud environment often results in disappointment. Some companies pursue this 'lift and shift' approach because it is faster and easier. However, it drastically limits the benefits in comparison to a so-called 'cloud-native' transformation, where applications are built and run on the cloud. Benefits of a cloud-native approach are manifold. By utilising native cloud services that are preconfigured for easier scalability and parallelisation, companies can improve speed and performance. As a cloud-native transformation requires a shift in understanding and mindset of how technical and business teams work and operate, it is a chance to create a culture of constant development. It also allows employees to learn about the technology and how to leverage cloud services better. While a cloud solution might not necessarily be cheaper than the traditional IT infrastructure, it allows companies to optimise costs: to lower security-related expenses or to reduce headcount and payments for software licenses.
Tip: Widen the scope to measure results
Speed improvements can also be made through faster development, deployment, and release cycles for the overall data analysis process. As an example, cloud computing gives users access to cloud-based business intelligence solutions and user interfaces. With these new solutions, business users have now the possibility to instantly create reports out of granular data themselves without relying on dedicated support teams and waiting several hours. Similar benefit applies to Risk teams that develop risk models. With the help of cloud technology, they can parametrise such models on their own without involving IT, which accelerates time-to-market of new models.
Many companies defined technical KPIs – such as 'availability' and 'latency' – for assessing the speed gained through cloud computing. These KPIs, however, are hardly able to capture the added value that has been achieved in the examples described above. Companies must therefore introduce metrics that focus on the improvements made thanks to such enhanced capabilities such as 'time to deployment' or 'rate of change'.
Pitfall #3: Assuming that only the IT department needs to understand cloud computing
Turning the cloud journey into an agile and transformative experience for the workforce is a great opportunity for upskilling employees and for increasing productivity. Developing a culture of learning and programs to cultivate cloud skills is one possible way to combat the widening cloud talent gap. However, the approach needs to be integrated into the overall cloud strategy, and it bears most fruit when both business and technical experts assume joint responsibility and are enthusiastic about creating value together with and in the cloud.
Cloud skills go beyond technical knowledge. It is much more a change of mindset that focuses on cloud computing’s ability to spur a business transformation. Technical specialists, therefore, must understand the broader economic change that results from the cloud journey and business experts must gain insights into the possibilities and limitations of cloud computing.
“Our move to the cloud was only successful because we managed to overcome the old mentality that business provides requirements and technology implements them…”
Exploring the benefits of cloud computing
Cloud – in its many forms – is a critical enabler of broader business transformation. It helps connect systems, data, devices and emerging technology in ways that can help companies respond more quickly and flexibly. While faster data processing times are certainly one benefit that companies appreciate, the following advantages present further opportunities:
- Improved data management: Going to the cloud gives companies the chance to build data models from scratch and to avoid redundancies. It also increases transparency, facilitates data sharing and helps establishing data lineage.
- Overcoming legacy issues: New data models and data architectures allow users to clean up data issues that may have existed previously. A cloud-native approach, in which applications are built and run in the cloud, enables companies to overcome any limitations of the past IT architecture.
- Greenfield status: Data, operating systems and applications are made from the ground up, in and for the new cloud environment, and allow companies to fully capitalize on speed and agility.
- Self-servicing: Tools like Microsoft’s Power Bi, which focuses on interactive visualizations and business intelligence, allow users to create their own reports and dashboards. This eliminates the dependency on other teams for compiling such information.
To make use of cloud computing’s ability to accelerate growth and innovation, business leaders need to align their cloud strategy with their business objectives. And with that, they need to look at their cloud investments not as IT expenditures, but rather as the beginning of a journey that leads to sustained outcomes for their companies.
#social#
Contact us
https://pages.pwc.ch/core-contact-page?form_id=7014L000000PpJwQAK&embed=true&lang=en
{{filterContent.facetedTitle}}
{{contentList.loadingText}}
{{contentList.loadingText}}
Contact us
Manager, Cloud Intelligent Automation, PwC Switzerland
Tel: +41 58 792 2564