Cloud adoption by investment banks? The jury is still out

Investment banks have been cautious in their adoption of cloud technology, but that's starting to change

Cloud adoption varies dramatically from industry to industry. Global data from TCS ranks the manufacturing sector as the biggest adopter of cloud technology by some way. Financial services rank second, but there is little to determine how much of this is within investment banking, a sector that has historically shown more caution in implementing cloud in comparison to other areas within financial services.

Research commissioned by GFT earlier this year with senior IT executives of leading investment banks delves into this specific area, and reveals some interesting insights into how investment banks are using cloud to drive innovative capabilities.

Public versus private cloud

When it comes to cloud functionality, most investment banks are making use of private cloud as opposed to public cloud. This is predominantly because it is perceived to provide a more secure environment for them to explore and understand potential cloud use cases.

Once the technology and use cases are better understood, public cloud will become more widely adopted. Our research shows that both large and smaller investment banks have strong growth plans for public cloud adoption over the next five years. More broadly, we believe that the adoption of public cloud is set to expand rapidly as banks overcome their reticence and embrace the benefits which public cloud delivers, such as scale, speed and efficiency, without impacting security.

Drivers of adoption

The key drivers behind cloud adoption in investment banks are the ability to provide greater flexibility, capacity and agility in business operations; plus, the ability to rapidly add computational power and scale, a particularly useful feature that was mentioned in the context of driving transformative business innovation, particularly with AI and machine learning. An ‘elastic' cloud that can scale up but also scale down when not required was highlighted as a key benefit.

For once, efficiency was not the main driver for adoption: cost reduction was not highlighted as the primary goal.

Regulatory uncertainty was identified as another major driver of cloud adoption. The arrival of new data protection and accountability measures such as GDPR, MIFID II and FRTB, means there is an immediate requirement to process greater volumes of complex data more effectively. However, there is also a need for banks to ‘future proof' themselves against any further incoming regulatory measures, which historically have served as huge cost and resource black holes.

Encouraging cloud adoption

In the majority of cases, banks have insufficient cloud knowledge in-house to drive the most value from the new technology. In order to do so they must either seek outside expertise or look to bolster the following capabilities:

• Evolving skill sets to deliver wide scale technology estate transformation
• Addressing the lack of experienced people on cloud projects
• Dealing with changes in operating models (including internal billing and service management)
• Managing security and environment design
• Understanding the public cloud adoption framework and related operating model
• Understanding general public cloud (knowledge) capacity
• Identifying where to obtain cloud knowledge from (cloud vendor, local consulting, offshore)
• Approaching regulators with their cloud based strategy
• Understanding containerisation and delivery
• Fully understanding the security / compliance requirements of cloud matched to differing regulatory environments
• Fully understanding the process for migrating large vendor apps to the cloud (e.g. Murex)

Is it time to go public?

The answer for most firms is a resounding ‘yes'. The move to public cloud in investment banking has been slow to start, but we now see firms that are willing to embrace the transformation and reap the significant benefits of becoming truly ‘cloud native', with modern, efficient applications built in the cloud using native technologies.

Respondents were surprised to find such widespread agreement amongst their peers to embrace the challenge of transforming their technology estate to become a truly digital business. Whilst some regulatory and security issues around cloud still remain, banks have taken great strides to overcome these and are advancing their technology transformation plans at a rapid pace. Firms that are not moving rapidly to the cloud risk being left behind by those who are, whilst the ‘war for talent' to achieve this has only just begun.

Andrew Rossiter is head of technology services at global banking technology engineering firm GFT

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