Cloud Strategy in the Financial Services Industry

In the current rapidly evolving digital landscape, the cloud has emerged as a game-changer across industries. An example is Nationwide Building Society leveraging the cloud to accelerate its deployment of AI for their Know Your Customer (KYC) checks  improving their customer service and cost savings. However, embarking on a cloud adoption journey requires a strategic approach to unlock its full potential. Simply plugging into the cloud will not generate the value needed to directly enable business outcomes at the pace required.

A well-defined cloud strategy is crucial, encompassing a roadmap and guidelines for leveraging cloud technologies to achieve business objectives, enhance operational efficiency, and enable digital transformation.

More than 70% of Enterprises are already using cloud technologies in one way or another according to Gartner research, however, many are struggling with various challenges in how they can optimally move to, and sustainably run on, cloud platforms.

This is especially true for the financial service industry, where embracing cloud strategy has become imperative to stay competitive, drive efficiency, and deliver innovative customer experiences.

Read more on our thoughts on Before moving to the Cloud.

To fully understand the significance of a well-planned cloud transformation, it's important to consider the setbacks that can arise without adequate planning. These include:

• Gaps in security posture due to absence of cloud governance and guardrails
• Cloud bill shock due to inefficient financial processes to monitor and manage cloud cost - according to Flexera, 28% of cloud investment is wasted due to inefficient cost management
• Inability to utilise latest cloud services due to as-is migration of legacy workloads using lift and shift approach
• Failure to realise the expected cloud returns due to selecting the wrong cloud operating model
• Business complexity and challenges due to failure to plan for a cloud exit strategy
• Data loss and security issues due to overlooking concerns around data sovereignty and regulations
• Lack of necessary cloud skills to operate in the cloud environment

A cohesive cloud strategy prioritises business and technology needs, enables businesses to operate at speed, enhance transparency and auditability, improve responsiveness, foster innovation, achieve financial effectiveness and flexibility, while ensuring security, compliance, and resilience.

• Vision and Principles:

Clearly articulate the organisation's vision for cloud adoption and align it with broader business objectives. Establish guiding principles that outline the desired outcomes, risk appetite, and governance framework.

• Opportunities prioritisation:

Identify and evaluate key opportunities for cloud hosting and technology outsourcing in accordance with business and IT strategic objectives and emerging business priorities. Prioritise opportunities based on factors such as business value, technical feasibility, and complexity.

• Business Case and Roadmap:

Create a comprehensive business case for the top priority opportunity that outlines the anticipated benefits, costs, and return on investment (ROI). Prioritise and sequence strategic initiatives into a realistic roadmap with clear timelines, resource requirements, dependencies, and governance structure.

A crucial point to consider while shaping a cloud strategy is an exit strategy from the inception to ensure flexibility and mitigate vendor lock-in risks - Why a Cloud Exit Strategy is essential to enable the future. This is especially underscored by the UK regulator highlighting how the market for cloud services is highly concentrated among a few cloud service providers (CSPs), which could pose risks to financial stability. 

While a number of organisations have already started their cloud adoption journey, many have stalled, stopped or got stuck on their modernisation journey to cloud. The need to reimagine the cloud journey to explore cloud-native use cases becomes imperative, which we define as Cloud Strategy 2.0.

Cloud Strategy 2.0 represents the next phase of cloud adoption, where organisations build upon their initial foundational wins and embrace the cloud as a catalyst for innovation. Key tenets of the reimagined Cloud Strategy 2.0 include:

• Workload modernisation: Breaking down monoliths and creating portable workloads through the adoption of cloud-native architectures and technologies like containers and serverless computing to drive innovation, enhance agility, and reduce time to market.
• Modern App Development: Leveraging cloud collaboration tools, managed databases, DevOps practices, and agile methodologies to accelerate development cycles and foster a culture of innovation.
• Cloud FinOps: Maturing cloud financial management capabilities to optimise costs, establish financial governance, allocate resources efficiently, and promote cost transparency and accountability. This helps to align with the organisation's innovation-driven goals, thereby maximising the value derived from the cloud and driving sustainable business growth.

Cloud strategy has become an essential component of success for financial service organisations. By defining a clear vision, prioritising opportunities, and developing a robust business case and roadmap, organisations can embrace the cloud and reap its numerous benefits.

For more information or support on embarking on your cloud journey or refreshing your cloud strategy to start innovating, please get in touch with our KPMG Cloud Transformation practice.