Banks need to unbundle legacy IT infrastructure if they’re to take advantage of the benefits the cloud and APIs can bring, according to Danny Healy, financial technology specialist at MuleSoft.
“Banks will typically layer new technology on top of what they’ve already built. This is why we refer to this bundle as a ‘ball of mud’: it’s difficult to really get your hands around and understand. There’s not been a plan behind it.” In banks, he adds, there are some “very obvious” domains that can be broken down around products, like cards and savings accounts. “Once you adopted this ‘divide and conquer’ approach, you can start to think about what can be on-premise and what could perhaps be provided by a third-party.”
“Two or three years ago the banks aimed to take the system they had and manage them in a way that they could shift them towards the cloud in the coming years. There’s a more pragmatic strategy than that, whereby they can recognize some systems won’t be migrating anytime soon to the cloud. There’s still immense value in those systems, and while they do need to be quick and agile in offering new services to customers, they still need to govern the information in a trusted way. Banks have been good at that, using their mainframe solutions.”
According a January survey from the Cloud Security Alliance, 69% of organizations are migrating data for popular ERP applications to the cloud, moving to major cloud infrastructure-as-a-service (IaaS) providers, with almost 90% stating that these applications are “business-critical”. On-premise models (61%) are employed most commonly, with cloud software-as-a-service (41%), infrastructure-as-a-service (23%) and platform-as-a-service (17%), following.
An ideal operation, says Healy, would involve “on-premises systems with strong competency, plugged into an application network via APIs”.
“If you’re a developer trying to create a new product, the network is a turnstile which allows you to operate at speed without worrying about the complexity of the technology where the data is held,” he says.
An Accenture report published in November revealed that 77% of bankers expect cloud to be crucial in their ability to scale, 63% cited application delivery as a key benefit and 49% see cost savings as a plus. “It wouldn’t surprise me if that figure said 100% of bankers see the cloud as crucial,” says Healy. “That doesn’t mean that everything they do will be cloud based, but it brings clear benefits when it comes to speed. A few years ago, projects would take multiple months just to put a development structure in place to build a solution. With cloud you can drastically reduce those times because the structure is available as a service.”
The Accenture survey also found that the two most common functions that banks have moved - or are in the process of moving - to the cloud are disaster recovery (cited by 80% of respondents) and data backup (74%). Yet 43% of those surveyed also indicated that their bank lacked a strategy for cloud adoption or have only started to implement basic principles.
“A few years ago, a number of banks were starting to think, ‘we should push ourselves to be different’, so they adopted this cloud-first mentality. That didn’t necessarily mean that everything they do would be in the cloud, but that everything would be examined. This is where a bank can start to think about implementing a hybrid strategy.”
Enterprise cloud firm Nutanix, in its Enterprise Cloud Index 2018 report, found that 91% of respondents marked hybrid cloud as the ideal IT model, though only 18% were currently deploying a model that classified as a hybrid. According to the survey, the number of companies planning to use more than one public cloud is set increase from 12% to 18% by 2020. During this time period, 41% of companies said they plan to adopt hybrid architecture.