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February 14, 2018

Taking FinTech to the cloud? Beware the ostriches

By Chris West

Beware the ostriches. Yes, they’re among you. Especially if you work for a bank, and even a FinTech.

By 2021, one out of every two adults in the world will use a smartphone, tablet, PC or smartwatch to access financial services.

The writing is on the wall. Unfortunately, some of us are choosing to ignore it.

Open banking will spur new business models that require technology transformation. The cloud is critical to this change. Obviously, it can deliver the agility and scale to get an edge over the competition. Arguably more important, however, is that the public cloud removes the drudgery from building and maintaining systems, allowing organisations to move faster and concentrate on strategic imperatives.

Traditional financial institutions like Westpac to challenger banks like Oak North, already overstretched by the pace of technology change, are making the move to the public cloud.

Unfortunately, technology on its own isn’t enough. IT teams are sometimes populated by ostriches that prefer to bury their heads in the sand. This risk-averse internal culture has led to a limp-wristed approach that fails to capitalise on these benefits. They want to tick the “cloud” box for the board and the investors, but ignore the enterprise-wide change necessary. In fact, unless IT leaders truly commit to the cloud, there is a danger it will be counter-productive and detrimental to the business.

What are the common fallacies of ‘playing it safe’ that banks and FinTechs should avoid to wring every drop of value from the cloud?

Splitting the deck

Government regulations and industry standards are central to doing business. When datasets are migrated to the cloud, it can be difficult to stay compliant. Thus, when deciding which assets should be uploaded, ostriches, fearful of compliance and governance issues, will only use the public cloud for non-critical systems like development or testing, or contingency systems such as disaster recovery and backup.

This is a mistake. If the production estate remains on premise then IT leaders are effectively, ‘splitting the deck’ and will find themselves supporting two worlds. This means having to support and secure additional resources, or worse, put additional strain on an existing team to handle the complexity of two very different infrastructures. In the process, IT teams are forced to forego the cost, ease of use and scalability benefits that had led them down the public cloud pathway in the first place.

Often, the adoption of new technologies precedes the processes and systems that are needed to harvest their full potential.

Hedging your bets

78% of IT decision makers believe that concerns about vendor lock-in prevent their organisation from maximising the benefits of cloud resources. This distaste for vendor lock-in has IT teams hedging their cloud estate by moving their IT stack into the public cloud via a number of different providers.

This approach might seem like a failsafe but, in actual fact, it means that IT leaders are only accessing the lowest common denominator of services from each vendor. Much of the value in the public cloud sits within the automated and advanced capabilities that unlock capacity and drive innovation. Lowest common denominator thinking means ending up with systems that work just like the ones you used to build yourself. By hedging their bets, IT leaders are not capitalising on the very capabilities that prompted the transition to the cloud in the first place.

Hybrid cloud” doesn’t mean vendor agnostic, it means horses for courses. To truly drive innovation, IT must back the favourite in each race. Hedging your bets should not be an option.

Double or nothing

The final fallacy is trying to replicate on-premise systems in the cloud – effectively ‘doubling-up’. Ostriches are ignoring a plethora of native services in the public cloud ranging from machine learning analysis, in-built security and networking capabilities.

Instead, reluctant to change, ostriches merely duplicate existing tools and processes, leading to limited scalability and even more maintenance and licence costs than prior to migration. Furthermore, these on-premise tools and processes won’t stretch to meet the scaling demands of the cloud, leading to performance issues. For example, network security appliances in the cloud often ride roughshod over the built-in controls offered, damaging resilience and maintainability.

For established banks that have an existing on-premise setup, migration means reassessing business needs, and taking stock of the current systems in place to meet these – what works and what could be better? This effectively forms a checklist of required functionality and level of service when looking for a provider and their ecosystem. Once the new lay of the land is locked down, IT leaders should look to amend standards, procedures and even culture to fit. A copy and paste job won’t work.

Going ‘all in’

Banks and FinTechs need to take an ‘all in’ approach when it comes to migrating to the public cloud. It’s a change that is set to underpin digital transformation across the financial sector. But only if IT leaders stop burying their heads in the sand, carve out a new internal culture and fully commit to the cloud.

Chris West is a Cloud Solutions Architect at Travelex

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