Ride the cloud-native wave

This article originally appeared in The Fintech Times.¹

Momentum around cloud computing discipline and technology adoption have been steadily gaining traction in the financial services industry over the last several years. The events over the last 20 months put that trajectory into hyper drive—at first to address immediate business continuity needs and later to continue efficiency and profitability gains, particularly in a sustained hybrid workplace. 

Central to those efforts, cloud-native strategies are becoming better understood, so adoption is becoming more mainstream. An organisation can significantly improve delivery flexibility for technology solutions and develop highly available, reliable, and resilient systems through cloud-native strategy, which includes service-based architecture, API-based communication, container-based infrastructure, and domain-driven processes for development and deployment.

The journey to becoming cloud native starts with upskilling and/or reskilling the workforce and transitioning legacy operating models to cloud-native models, including technology, legal, risk, compliance, information security, vendor management, and procurement. These can be significant culture-change undertakings and require executive buy-in, alignment, commitment, and perseverance to see them through.

Cloud-native strategy helps with a phased approach for cloud computing adoption. While all the green field and new development can start with a cloud-computing discipline, the existing platforms and applications can step in for cloud transformation and minimize any undue business disruption risk. Such a strategy also helps with balancing the trade-off between business delivery and cloud transformation.

While the financial services industry has lagged compared to other industries, organisations can gain three key benefits from implementing a cloud-native strategy: increased flexibility, access to information, and operational security.

Flexibility

Every organisation is moving to or has moved to the cloud—or so it may seem. Cloud ecosystems give organisations the ability to scale, providing high levels of operational resilience and increased efficiency. Cloud-centric strategies prioritize agility, enabling organisations to quickly adjust, integrate new capabilities, and adapt to an evolving regulatory landscape. All of these qualities are instrumental in supporting business growth objectives, in both the short and long term.

It’s critical to ensure the ability to determine what information can live on the public cloud and what information is needed to manage on-prem, particularly in the financial services industry. Public cloud deployment is not always the best option for an organisation’s every need. Workloads with specific security requirements, data residency needs, high compliance and regulatory thresholds, or those that have complex integration requirements with legacy on-prem platforms, may require or perform more efficiently with on-prem ecosystems. Cloud-native applications and solutions are developed in a way that they can be deployed in a public cloud or on-prem environment, providing true flexibility and enabling friendly existence with hybrid cloud industry ecosystems.

These benefits are coupled with the reality that internal resources can often be spread thin, may have limited cloud expertise, and may have limited enterprise change program delivery experience. Companies often seek out cloud transformation service providers that have the dedicated resources, time, and knowledge to manage change, transition, integrate and protect their businesses within a cloud-native ecosystem—giving the internal teams the flexibility to focus on business growth and client service.

Access to information

The demand for information by both internal users and external consumers is at an all-time high and rapidly growing. Multi-channel digital information delivery for internal and external stakeholders, paired with expectations of 24x7 availability and data analytics, are how financial services organisations can differentiate themselves. The larger financial services institutions’ technology platforms and applications are generally business line-based (retail banking, commercial banking, insurance, wealth management, etc.). They’re generally a collection of in-house built, end-user computing applications and open-source and third-party licensed heterogeneous technologies, which are hosted on prem and/or externally—all coming together to deliver various critical needs for an organisation. Each business line generally has its own data warehouse with different underlying technologies.

Such landscapes make it extremely difficult to meet the demand for access to information. Data management is an evolving challenge for much of the industry. From regulatory and compliance requirements to customer analytics, the data collection, management, access controls, and analysis of sensitive data are necessary for any successful information delivery strategy. 

By building data management capabilities that are cloud native, financial services organisations free themselves from extensive data warehousing costs, streamline data management time, and gain access to the data processing efficiencies the cloud offers by bringing the enterprise data to one place and leveraging cloud computing-driven artificial intelligence, machine learning, and analytics capabilities for information analysis and delivery. Organisations can also adapt quickly for shifting regulatory and compliance requirements more easily and gain valuable data-driven insights.

Operational security

Protecting a financial services company’s data is paramount and underscored by IT budget priorities. According to an IDG Research study conducted in May 2021, 65 per cent of surveyed IT leaders reported plans to increase their cybersecurity spending. And 25 per cent named cybersecurity initiatives, such as real-time security monitoring and forensics, as the most important things they and their teams were actively addressing. 

In order to ensure true data privacy and protection, cloud-native strategies and implementation programs must also be cyber-forward. Cyber-forward processes prioritize a cybersecurity business strategy and ensure an appropriate mix of agility and protection are built into the IT journey, covering in-house developed applications, as well as third-party licensed technologies along with corporate IT. A cyber-forward strategy ensures that information security is part of software development life cycle and not an afterthought. This approach balances the need for an optimum customer experience with data privacy and protection. A few of the benefits of implementing a cyber-forward strategy include 24x7 security monitoring,  AI/data-driven advanced threat detection, data security, trust and reduced risk of cyberattacks.

What’s ahead for the cloud

Financial services organisations should keep an eye on four related technology trends this year:

• An uptick in investing in systems that support the management of and fluidity across cloud and on-prem capabilities and services, helping with efficiently operating in a hybrid cloud environment
• Increased integration of automation and machine learning, enabling better data management, analytics, bandwidth, and security 
• The sectioning of data and workloads across architectural tiers based on an organisation’s specific functional and resource needs 
• A hybrid cloud deployment and operating model, covering critical business needs, such as resilience, high availability, disaster recovery, business continuity, and existence within the broader financial services ecosystem 

¹“Ride the cloud-native wave,” The Fintech Times, edition 42, page 13. Thefintechtimes.com.