The Infosys Labs research blog tracks trends in technology with a focus on applied research in Information and Communication Technology (ICT)

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Cloud Migration in Banking Industry

Cloud computing is the on-demand delivery of computing resources like processing power, data storage, applications, and other IT infrastructure through cloud platform via internet having pay-per-usage pricing model. Broadly cloud services can be classified under three categories service models (SaaS, PaaS, IaaS), deployment models (private cloud, public cloud, hybrid cloud, multi cloud), and cloud stack (facility, network, computer and storage, hypervisor, virtual machine, solution stack, applications, API/GUI). The major areas in cloud services across the industries are migration, security and privacy, regulatory adherence, cloud applications, cloud advisory, and testing.  With cloud migration gaining traction in banking industry in a major way.

According to marketsandmarkets survey cloud migration services market is expected to grow from USD 3.17 Billion in 2017 to USD 9.47 Billion by 2022, at a Compound Annual Growth Rate (CAGR) of 24.5%. Also, Gartner predicts by 2025, 80 % of organizations will migrate from on-premise infrastructure towards colocation, hosting and cloud. Major trends being containerizing applications, adoption of private cloud, cloud-to-edge processing, and a multi-cloud deployment strategy for organizational rollout.

Although there are multiple challenges faced by the organization on the road towards migration:

More than 56% CIOs claim the complexity of the exiting IT landscape can slow down migration for large organizations;  

Infrastructure-as-a-service( IaaS ) needs right mix of technological and people capabilities, as many as 44% of businesses experienced some kind of migration failure; 

Another big concern is estimation error, which can lead to heavy cost escalation, only 40% firms meet migration cost goals; 

Migrating the in-house security and privacy features and rules as-is to the Cloud is one of the major challenge faced by the businesses, as per IDCI, 74% of CIO's cite security as top challenge for cloud adoption;  

Connecting legacy systems with newer cloud-based applications is another challenge, solutions needs to operate hybrid environment, Forrester predicts more than 50% of enterprises will have at least one Cloud platform

But there are many opportunities as well for the cloud services providers. As per survey done by trustmarque 87% of CIOs plan to migrate applications and 70% IT leaders plan to migrate databases and infrastructure in the next 3-5 years. Managing software licensing is critical, multitude of software licensing agreements with different vendors and with shadow IT by individual business units buying software and services can give rise to major licensing issues. Also Re-architecting the application is vital as large number of the applications may not be compatible. refactoring process needs to be optimized for faster migration.

Major banks are considering hybrid model of operation where critical banking applications and processes will be migrated to private cloud, & non-critical applications to public cloud. Addressing security, cost as well as efficiency. Adoption of cloud solutions can enable banks to significantly cut IT infrastructure expenses, potentially helping the banking sector save up to US$15 billion by 2019. And cloud platforms will enable smooth digital collaboration and provide banks with the ability to partner or leverage innovations from FinTech cloud natives in this shared ecosystem.

Migration strategies of taken by the banks can be classified in below categories:

SaaS packaged solutions from vendors or service partners

Coud Native development via PaaS, Microservices, Containers and DevOps

Lifting existing applications to cloud via traditional migration methodologies

Re-architecture of applications and for making platform adaptable and cloud-ready

With major drivers for banks for cloud adoption remains cost factor for expense reduction, growth for expansion of infrastructure, agility of digital transformation, faster GTM, security assurance, and resilience of business continuity. Many industry players are already devising the implementation for cloud migrations of critical application and services. For example, DBS Bank is gradually introducing cloud to core banking platforms and applications; BBVA is targeting to build a cloud-based solution that is flexible, secure, and scalable; Metro Bank is moving core banking operations and digital offerings to bespoke cloud; Westpac is following a 'hybrid-PaaS', with aim of combining public and private cloud etc.

There is a huge opportunity in the cloud migration space for banking sector and early movers have already stared the adoption journey. So, for service integrators like Infosys possibilities are immense for multi-level collaboration and partnership around the cloud services ecosystem.

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