Most finserv execs dissatisfied with their cloud deployments: Report

Expectations that cloud will drive a productivity and efficiency boon and provide a springboard for front-line innovation have fallen flat for many, with just two out of every five senior financial services leaders expressing overwhelming satisfaction with their cloud deployments.

Capgemini’s 2024 World Cloud Report, which details the findings from a global survey of around 600 financial services sector executives and 120 fintechs and insurtechs, found fewer than 40% of respondents were highly satisfied with cloud outcomes.

Specifically, just one in three (33%) surveyed leaders expressed high satisfaction that cloud had sufficiently reduced operating costs, while only a quarter saw enhanced scalability (27%), accelerated innovation (26%), and advanced data and analytics (24%) capabilities from their deployments.

As well, just over one in five (21%) reported a material improvement in security and compliance.

Many felt that their cloud deployments simply did not deliver on promised efficiency dividends and cost savings.

“Among recent cloud investments, approximately 30% yielded little benefit: as a result, two in three banks and capital markets organisations said cloud didn’t help them achieve their cost savings goals,” the survey authors reported.

Moreover, three out of five identified the transition to cloud as a major hurdle for their business (on par with meeting regulatory requirements), demanding considerable time and investment to deploy.

The report authors identified three major reasons why cloud is likely failing to live up to adoptees’ expectations:

• A lift-and-shift approach: Organisations migrated existing applications from on-premises to cloud without redesigning for cloud efficiency, leading to performance bottlenecks.
• Rapid scaling: Firms scaled cloud operations very fast, resulting in higher-than-anticipated costs.
• Complicated pricing models: Complex cloud pricing models with varying costs associated with computing, storage, data transfer, and other services require more scrutiny of pricing elements.
• Inefficient governance and management practice: Stringent internal governance is necessary to optimise cloud use, including utilising reserved instances (public cloud resources committed to or purchased in advance in exchange for a reduced price), demand-based resource scaling, and the shutting down of unused resources.

Ultimately, the fault lies not in the technology itself, but organisations’ approach to its adoption and ways of working within this new ecosystem.

Indeed, the report observed that notably few financial services firms have built a dedicated, cloud-native digital subsidiary, where the greatest material benefits of cloud are being realised. Of those that have, 75% reported increased agility and innovation, while 60% observed improved customer experience.

The report singled out ANZ’s digital-only spin-off, ANZ Plus, as a prime example of an organisation benefiting from an all-cloud ecosystem.

Launched in 2022, the modular and scalable platform supports a fully iterative development approach, enabling, Capgemini wrote, “flexible service quality improvement while adding new features and functionalities”.

Since its launch, ANZ Plus has attracted 500,000 customers (about 40% new to ANZ) and $15.5 billion in deposits.

The report notes that traditional firms see cloud primarily as a cost-saving measure; innovative disruptors, however,  are leveraging it to redefine their businesses, with Capgemini suggesting only 12% of financial services organisations can be considered ‘cloud innovators’ with “a well-defined cloud transformation vision”.

“Some of their features include highly scalable platforms, cloud-native mentality, mature and strategic ecosystem partnerships, substantial technology maturity, and high customer centricity.”

Cloud innovators in the FSI space, for instance, saw a 2.2-fold improvement in their up-selling and cross-selling opportunities, three-fold improvement in data monetisation, and a more than doubling of new innovative products and subscription bundles over cloud laggards, Capgemini research data revealed.