There are a number of key challenges that are facing the financial services industry, which present companies in this sector with a ‘burning platform’ with which can help to drive transformational change within their IT organisations. These challenges can
be summarised as:
- The need to effectively respond to the increasing pressures of regulation
- The need to reduce costs and improve efficiency
- The need for digital innovation to compete with the new market challengers
The companies that are disrupting the financial services sector are those that have been able to master technology, accelerate their delivery processes, optimise their operational practices and are able to effectively balance regulation and efficiency with
constant innovation. These companies are also, for the most part, unencumbered by the legacy of technical debt which most of the large financial institutions carry.
The fifth ‘State of DevOps Report’published in 2016 by Puppet & Dora followed a survey of 25,000 IT, software development, quality control and management professionals
globally. It confirmed that “improving the software delivery cycle at every stage can improve software quality, stability, and business outcomes”. This is also reflected by the growing view from a number of the established financial services organisations
that they need to operate more like technology companies – a recent example of this thinking being the comments made by John Cryan, the Deutsche Bank Chief Executive when he said that staff working for the bank need to change their way of thinking as “we want
to see ourselves increasingly as a technology company”.
From a technology perspective, there are a number of trends which go some way to enable financial institutions to address these challenges.
Firstly, there is the adoption of what are now increasingly mainstream and mature Cloud-based services and technologies. These provide organisations with opportunities to significantly reduce physical infrastructure costs from both a capital and operational
perspective and allow them to make more efficient use of the compute capacity available to them by only utilising what they need, when they need it. Cloud services also provide the opportunity to significantly reduce provisioning timescales and also put this
more directly in the hands of software development teams. Infrastructure provisioning timescales are one of the key contributors to the often unmeasured ‘cost of delay’ which many organisations incur throughout their software delivery lifecycle.
Secondly, the adoption of a DevOps culture within organisations, and the associated enabling technologies, is increasingly becoming a mainstream strategy. The penetration of cloud services provides a powerful opportunity for the development lifecycle to
now include the automated orchestration of provisioning of both infrastructure and platforms as a service. In doing so, DevOps extends Agile software development practices, such as Continuous Integration, Build Automation and Test Automation all the way into
production, enabling efficiencies in the end-to-end delivery of software, from concept to realised value. The ability to rapidly release, and if necessarily roll back software versions, in order to gain rapid feedback on new features and functionality, supports
and drives innovation. This ethos and approach is at the heart of the success of companies such as Google and Amazon.
From a regulatory and compliance perspective the adoption of the tooling associated with DevOps also provides the opportunity to have a high degree of ‘auditability’ and compliance in the software development lifecycle. The biggest challenge faced by many
organisations adopting DevOps is the need to embed the culture beyond the traditional area of IT, and ensuring it extends into areas such as audit, compliance and information security. These areas typically take a more risk averse and considered stance, compared
with the greater frequency of software releases into production that is afforded by DevOps.
Finally, Agile and Lean software development is now very much accepted as best practice across the industry, with many teams now running projects ‘using’ an Agile approach. However, there remains the question of whether they are truly ‘being’ Agile,
and whether the organisation is really reaping the benefits of Agile and Lean practices. In many organisations a walk around the software development teams will see a great deal of evidence of Agile processes and practices, but when you scratch beneath the
surface you discover that the real benefit is perhaps not being realised. If working software actually in production is the real measure of progress, to what extent is this being achieved? The next stage of the Agile evolution is a renewed focus on incremental
value delivery and using the power of Agile and Lean techniques to move beyond planning an execution of software development, to truly highlighting areas of waste and inefficiency in the process and fixing this in the spirit of continuous improvement.
The introduction and improvement of Cloud, DevOps, Agile and Lean cannot be considered as individual, independent initiatives within an organisation – they need to be considered in concert to begin to fully realise the benefits they will enable.
The adoption of these trends alone is not enough to enable the transformation required in many large financial institutions. The need to address the simplification of the application landscape is also vital. Prior to investing in Cloud migration or significant
investment in some aspects of DevOps, real consideration also needs to be given to whether there is an opportunity to remove duplication and reduce the technical debt at an enterprise level which has been accumulated during the organic growth of technology.
In addition, the challenges of cultural change associated with this kind of transformation should not be under-estimated, in what can be very silo’d and often tribal organisations. No matter how much new technology, new tooling, new structure and new process
is put in place, not addressing the cultural dimension will result in a failure to fully realise the benefits. For companies such as Google, Apple, and Amazon this has been key to their phenomenal growth and success, driven by their natural
ability to rapidly innovate and pivot around new opportunities and insights.
Digital transformation and regulation in financial services is driving the need for operational excellence. Customer expectations and technology are changing, and the need for constant innovation and rapid ‘time-to-market’ of new solutions are key to responding
to both industry demand and competitive pressures. For many financial services organisations, current technology architecture and data practices are inefficient and actually hinder innovation. In order for them to succeed and compete with the new market entrants,
these organisations need to change the way technology, and its associated value, is delivered and focus on removing the legacy of technical debt and waste from delivery.
Embracing trends within the industry such as Cloud, DevOps, Agile and Lean are key to the transformation journey that many financial services organisations need to undertake in order to prosper and compete in the future.