Sixty percent of capital market institutions say cloud-based entrants will challenge traditional business models. How to compete then when saddled with costly in-house IT estates?
Moving to cloud-based models could help to improve cost ratios. Investment banks need to respond quickly or their cloud native competitors could become the new industry leaders.
Infrastructure-as-a-Service (IaaS) and Platform-as-a-Service (PaaS) cloud solutions could reduce banks’ costs, as well as simplify and standardize IT estates. The adoption rates are now accelerating across capital markets for both private and public solutions.
According to a recent Accenture survey, one-third of capital markets institutions expect to be using hybrid PaaS and IaaS solutions within three years. J.P.Morgan has stated clear directions for the use of public cloud solutions in a hybrid model with private solutions.1
Candidate application workloads for public cloud have extended beyond commodity back office services. Some banks are now exploring the viability of public cloud across their value chain.
Software-as-a-Service (SaaS) and Business-Process-as-a-Service (BPaaS) solutions could present opportunities for banks to create entirely new cloud-enabled operating models, moving traditionally in-house delivered technology and processes to as-a-Service models.
The ecosystem is currently dominated by industry consortia style utilities and traditional market infrastructure. Horizontal business processes, e.g. know-your-customer, were some of the first to be offered. These are now being followed by vertical business process offerings, e.g. post-trade operations. As fintech providers continue to collaborate, and increasingly compete with banks, the range of such SaaS and BPaaS solutions is poised to grow.
Capital market companies and service providers still need to work to define how financial accountability and liability should be assigned in the event of service issues or security breaches.
With the emergence of fintech and regtech providers, an increasingly collaborative stance is starting to arise between financial institutions, which is gradually changing as well the posture of regulators; they now see cloud as a help to re-thinking the process of regulation and compliance.2
External, public cloud will bring an increased need to balance the demands for speed, agility, and autonomy with security requirements, resulting in a renewed focus on encryption and obfuscation.
including a portfolio assessment of the processes, applications and data for transition to a BPaaS/SaaS solution. Define the hybrid PaaS/IaaS strategies for all remaining in-house solutions.
Decide on private platform and hyper-scale cloud partners for your cloud ecosystem. Establish appropriate hybrid cloud brokerage/orchestration.
by migrating strategic proprietary apps from legacy architectures to PaaS containers. Redeploy IT solutions to public IaaS and PaaS services as they mature.
addressing the organizational, architectural, governance and business engagement needs that might arise when introducing as-a-Service models alongside traditional, in house and bespoke delivery methods.
They could recognize that the current era of capital market companies attempting to independently build and operate their complete, own information supply chain is likely to be over. Banks could still compete by creating differentiating value with proprietary products, processes, algorithms and data.
However, those who succeed and flourish could be those companies that rapidly adopt their operating models and IT systems with a pragmatic, value-driven “Everything-as-a-Service” orientation.