IBS Journal February 2018
23
in complexity. Functionalities, features and all sorts of add-ons have resulted in a Jenga tower of different legacy systems, all piled on top of each other. This prevents banks from truly innovating and catching up with modern times. This could be the year that banks use to become future-proof by leaping into a cloud-based era to support an increasingly more digital customer.”
Silver linings
Back in 2012 and 2013, cloud was a buzzword much like Bitcoin and blockchain are today – they were new, exciting and confusing. Now, six years down the line, where almost everything in the B2B tech space is cloud-optimised, have bankers finally lumbered into some form of understanding? Would your average CEO be able to tell you the difference between SaaS, PaaS and IaaS?
“Terms such as SaaS, IaaS, PaaS and DRaaS cause some confusion, but I’m not too concerned,” says George. “To many, the cloud is just the cloud; bank CEOs don’t care what letters we attach to something. They just want to know that they’re getting a complete solution that does what it needs to do. Today’s CIOs and CTOs understand the differences, and that is what’s important.”
It’s ‘second nature’ for more IT-savvy executives to outsource software and hardware and accept that ‘as-a-Service’ is here to stay, adds Schouten. To truly encourage “getting with the times”, IT understanding and expertise needs to be added at the board level of banks.
“Executives will either have the vision to acknowledge that their world is changing, or they’ll fight it for as long as they can by refusing to change,” she says. “But it is inevitable that moving to these service models such as SaaS, IaaS and PaaS is the future.”
For Sanchez, the cloud isn’t just moving things from in-house bare metal to an off-site server farm; it’s automation of an entire ecosystem: “This is a critical point because the building blocks making up a cloud environment are different from hosted/ managed environments. It’s not just about shared cost savings; it’s the automated systems and higher-level tools that make SaaS an advantageous starting point for banks to consume core services. Using the cloud as a hosting environment for legacy code is not the same as acquiring expertly packaged and maintained services with transparent costs, scope and service levels.”
George adds: “The cloud isn’t just about fixing old problems. It’s about creating new opportunities.” A bank without servers is a
Functionalities, features and all sorts of add-ons have resulted in a Jenga tower of different legacy systems, all piled on top of each other
“
bank that’s agile, nimble and can respond “with lightning speed to ever-changing market conditions”, he says. There is simply no way, he says, that a bank running old software on old hardware can possibly keep up.
The sick man of banking
So, old dogs need to start learning new tricks. What about the newcomers? Challenger banks such as Tandem, Starling and Monzo in the UK and N26 in Germany are arriving on the scene ready to embrace cloud-based systems from the get-go.
“Challenger banks generally do have a strong IT culture in the boardroom,” says Schouten. “The complexity at larger banks is usually higher compared with smaller institutions. So it is understandable that they are warier. Most of the time it really comes down to education about the cloud and its core benefits.”
Sanchez adds: “Larger banks suffer from legacy issues as much or more than the smaller banks. They have physical plants stocked with equipment that is increasingly difficult to acquire, maintain and operate. They have to solve very expensive DR and business continuity issues on their own, and they are deploying large amounts of capital on highly depreciating assets.”
People are afraid of change, and CEOs in particular can be terrified of change. Tier 1 and Tier 2 banks around the world must surely be considering their options, yet wide-scale transformation is a risk that few are happy to undertake. Concerns over time to go- live, security, cost and more are likely to hold back full adoption. So how can those at the top be convinced of the need to switch into the cloud?
“A modern, cloud-based, SaaS core system can be easily stood up in minutes and configured in days,” argues Sanchez. “The legacy process of infrastructure procurement, installation, implementation and so on is eliminated.”
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