Migration to cloud has been spoken about greatly in the banking arena. However with the migration of cloud in banking, come several benefits and challenges. While it is important to innovate and change, it is also extremely important to weigh the benefits versus the challenges and look at avenues to mitigate the risks involved in moving to cloud.  Jothi Rengarajan speaks with Ashish Cherian on what banks can do and what they need to be careful about while shifting base to cloud. Here is a transcript of the podcast episode.

Ashish: Migration to cloud by banks and even other companies are currently underway. However behind the curtains, banks are a little skeptical about the migration to cloud, especially as the wrong approach could lead to the crash of the entire business. So it is important to highlight the benefits, the challenges and risks and also the approaches to migrate efficiently to cloud. In the banking industry, in the midst of a lot of conversation about cloud, it is clearly evident that the enthusiasm is mixed. There are all kinds of ad peddlers of cloud platforms, those who urge immediate movement, those who suggest partial migration and those who ask to hold still before making major decisions. There are certain companies and particularly banks that have moved a part of their system or application to cloud.

Ashish: Now, the adoption rates that we see of companies migrating to cloud, is pretty stable. According to experts 50% of enterprises would have had moved into cloud during the start of this year. According to BizTalk, 29% claim that they are thinking about migrating to cloud while another 50% are unsure, while the remaining does not have it in their plans. Now that is positive news as that means, around 80% have the thought of moving to cloud at the back of their minds! There is a feeling that a majority of the banks are exploring cloud as a business building asset but are not making use of the complete potential that cloud has to offer. Now there are a lot of complications that arise due to cloud migration, but before we come to that, there are so many benefits which impact companies in terms of speed, agility and so many other performance parameters.

What are some of the immediate and long term benefits that banks can achieve by moving their core banking system to cloud?

Jothi: Banks generally deal with huge IT Infrastructures. They operate with vast amount of data on daily basis. This incurs a lot of cost and management overhead. Cloud is born to solve such problems. There are many advantages of moving to cloud. One of which is the cost savings. Cloud offers economy of scale. The pay-as-you-go model of cloud leads to huge cost savings. The huge capital investment on hardware, software, dedicated servers can be all cut down significantly when you adopt cloud. Cloud also offers great agility such as auto shut down and auto scale mechanism which allows you to optimize to a great extent on resource usage resulting in lower costs. Solutions for data storage offered by cloud such as s3 in AWS, Blob storage in azure are highly efficient and offer huge cost savings. Banks deal with huge volumes of digital assets such as documents and images and these solutions provide extreme cost efficient ways to store them. Cloud not just cuts down on the resource cost; it also slashes the management and monitoring cost significantly. The second major advantage would be Agility. Banks need not wait for weeks or sometimes even month to scale and expand. The resources are obtained in a cloud by a click of a button and believe me this is a complete game changer. Agility would help the banks stay ahead of the competition curve. The third major advantage would the ability to embrace modern and right technologies. Banks is the sector which needs major innovations such as AI, ML and NLP but they always are left behind by the several compute resources. Cloud offers so many PaaS solutions in the space of AI, ML that lets bank leverage these solutions in weeks instead of months. For example, AWS forecast allows banks to build forecast scenarios right out of box without even needing ML expertise. Like these there are plethora of services that financial institutions can start adopting to make them excel.

Ashish: Now along with the benefits, the drawback is that there are a lot of internal and external challenges which banks need to counter. There is also a lot of market pressure in a highly competitive environment. Digital transformation is at its finest with worldwide spending on digital transformation set to reach 1.7 trillion dollars by the end of 2019. However the money spent on digital transformation in the digital age would only come to full effect with proper implementation of 2 pillars – Agile methodologies and Cloud Platforms.

While moving to cloud platforms, it is critical to account for any data dependencies that might emerge between different applications and their data. In the event of an application migrating to cloud without its necessary data, it could lead to a shutdown of your business. What are some steps that banks should take to mitigate the risks involved?

Jothi: Cloud acts as an extension for the in-house data center. Cloud offers various connectivity options between the data center and cloud such as VPN gateway, express route or direct connect that enables seamless to and fro data transfer between the applications in data center and cloud. This ensures that when you migrate only a fraction of application migrates to cloud, and integration with other applications is intact. Depending on the nature of data transfer and integration we can chose a solution that could either be synchronous integration of asynchronous integration.

Ashish: Concerning migrating to cloud, security challenges have always been a concern. Is this a major potential set back to those banks which haven’t moved their core banking system to cloud?

Jothi: It is a myth that cloud is not secure. When it comes to cloud, security is a shared responsibility. Cloud provides security at multiple layers that you can configure easily to attain rock solid security. When you embrace cloud services, you will notice that cloud is built with security as its core, be it network security, data at rest security, data transfer security, management of secrets.  Of course, if one is careless, the possibility of a breach is higher in cloud, but when the right measures are taken, cloud is more secure than the self-run data centers. In addition to that, cloud is constantly upgrading and certifying itself for the compliances required by financial institutions.

Ashish: Most banks have moved certain applications of their business to cloud. However banks are hesitant about moving their critical banking processes to cloud. Will that trend change in 2019?

Jothi: Aspire Systems works with some leading financial institution that operate out of cloud completely for their core offerings. Following the market, it is easy to see that the cloud adoptions in these core areas are drastically increasing. Testimonials of such adopters would convince the rest who are reluctant to take that step and push them in that direction.

As stated earlier, it is vital for banks to take the enormous benefit that cloud has to offer. If the right measures and approaches are taken, then security is assured. However moving to cloud requires a step by step process where applications are migrated along with the data such that no dependencies exist. It is also extremely vital to move your critical banking applications to cloud as it is not as appreciable in terms of benefits when only certain business applications are migrated to cloud. With the onset of 2019, it can be safely said that a lot of banks and financial companies will be looking eagerly to shift their businesses to cloud and reap its enormous benefits.

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Ashish Ninan Cherian

Ashish Cherian is a marketing enthusiast who has an extreme interest in analytics and in studying customer behaviour. He wants to progress deeply in these areas and is keen on learning something new every day. He also loves to read, travel, and debate and is a huge foodie.
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