The second edition of the “Cloud in Financial Services” report re-examines the research conducted by Reply with financial institution, and addresses the unique challenges facing financial institutions in the EU, Switzerland, and UK.
The latest report on cloud adoption in the financial services sector highlights significant changes since the 2021 edition. Financial institutions are now more discerning in their approach to cloud technology, emphasising hybrid and multi-cloud environments for a strategic use. While asset management leads in adoption, most institutions still use the cloud primarily for non-critical applications. The perception of cloud benefits has evolved, shifting from cost reduction to system resilience as the top priority. Challenges such as regulatory compliance and data sovereignty persist, but security concerns have diminished. This reflects a maturing understanding of cloud technology. Our report emphasises the need for a tailored approach, incorporating multi-cloud and hybrid cloud strategies, and a strategic understanding of cloud technology to maximise its benefits and navigate regulatory complexities.
Aligning cloud with business strategy is complex but critical. Forward-thinking organisations assess constraints and strategically leverage cloud, including the integration of SaaS applications. Exploring the synergy between business and cloud strategies, our findings indicate a significant shift in organisational approach.
Strategic cloud integration
Successful organizations align cloud strategy with core business goals for competitive advantages in existing operations and new areas. Our research shows a drop from 59% to 36% in respondents believing their cloud strategy aligns with their business strategy, indicating challenges in harmonising cloud technology with business goals.
As organizations progress with cloud implementation, the initial cost advantage over on-premise infrastructure often diminishes due to various factors. While about 50% of organizations initially experience cost reductions, practical observations from most surveyed organizations indicate that cloud expenses often increase more than on-premise cost reductions.
Our survey underscores cloud's role in driving innovation and supporting new initiatives, highlighting its potential to fuel business growth. 20% of respondents chose on-demand scalability as the most important benefit of using the cloud, while 14% valued enhancing system resilience and business strategy implementation the most.
Leveraging the full potential of cloud technology in finance extends beyond technology itself, it's a strategic shift. Our findings underscore the vital role of cloud governance. While 38% of the respondents express confidence in their cloud governance, there are noticeable gaps, particularly among the 35% of respondents who only have a moderate level of confidence. Institutions adapt to the dynamic cloud landscape, prioritising cybersecurity, automation, and risk management.
Managing cloud costs through FinOps presents challenges and opportunities, offering transparency and control. A Cloud Centre of Excellence (CCoE) emerges as a strategic hub for consolidating expertise and governance. Embracing these shifts is the key to unlocking cloud's true potential in finance.
Within the dynamic landscape of cloud technology adoption, we consistently encounter a set of challenges and regulatory intricacies that have endured over time. These hurdles, which have persisted since our previous report, continue to exert a profound influence on financial institutions.
The intricate web of regulatory requirements presents an ongoing challenge, with institutions navigating complex frameworks and compliance obligations.
Data Sovereignty Concerns
Concerns regarding where data is stored and processed continue to be a central issue, impacting the global adoption of cloud solutions.
Provider Roles and Oversight
The evolving roles and oversight of cloud service providers add complexity to the regulatory landscape, necessitating a nuanced approach to compliance.
Ensuring operational resilience in the face of regulatory changes and data migration complexities is a crucial aspect of successful cloud adoption.