When it comes to discussing cloud adoption by capital markets, the conversation largely has been focused on whether public cloud is ready for financial services. But the real question is whether the capital markets are ready for the cloud. It is now up to financial firms to work through the logistics of integrating cloud into their infrastructures.
Adoption of cloud technology by capital markets firms is at a tipping point; it is now a question of when and how, rather than if. Senior executives on both the technology and business sides, in the front and back office, understand the cloud’s benefits and are excited about the potential for innovation. But there is still a lack of agreement on definitions, a lack of consensus on migration approaches, and continued consternation concerning public cloud.
Capital markets have depended on self-contained, proprietary infrastructure, with applications and services running on-premises, for a long time. But that traditional operating structure is now unsustainable. The cost model of financial services is broken. Due to regulatory changes, banks are no longer able to leverage their balance sheets in a dynamic manner, leaving them unable to grow their revenue back to pre-crash return-on-equity levels. Add to this the massive cost of regulatory compliance, and you see an industry under duress. As a result, banks must cut costs and improve efficiencies by reducing outdated and overly expensive infrastructure, processes, and application support.
The industry knows that it must achieve a fundamental transformation of how its operations are run and how innovation is achieved. But this transformation will require a step change in thinking and an openness that may not have been present before. The answer, at least partially, lies in cloud adoption – but for once, capital markets is behind the technology curve.
Today’s public cloud meets the security requirements of financial services organizations; it is now up to those organizations to work through the logistics of integrating it into their infrastructures. Overcoming these challenges may be nontrivial, but the business benefits justify the effort – especially as firms progress from using cloud for utility computing to the game-changing innovation offered by machine learning and artificial intelligence (AI).
Cloud adoption by the capital markets is happening, with wide spread adoption of public cloud expected within two to five years. A handful of firms are already on their way to becoming cloud native, but the majority have yet to finalize road maps for cloud adoption. The question is: Can those firms, the laggards, afford to be hundreds of millions of dollars less efficient than their competitors?