In recent era, Banking and Financial organizations are now embracing cloud, the question has changed from “Should we go to cloud?” to “How to embrace cloud?”. This article will focus on cloud modernization basics such as what and why of cloud-enabled digital transformation first and then provide insights on how to approach cloud modernization.

What is Cloud modernization?

Cloud migration is the (pre-cursor to Cloud modernization) process to migrating a legacy system that involves taking old infrastructure and transferring it to the cloud. This does provide potential cost and efficiency benefits. However, it fails to give Fintech application a growth perspective.

Cloud Modernization (often coupled with or starts after initial cloud migration phase completion) can enhance overall operations and give technology a fresh perspective that empowers financial sector.

Cloud Modernization is the key to reaping the full long-term value and benefits of running applications and IT infrastructure in the cloud, which means continuing to evaluate cloud applications, infrastructure, and services to ensure they are optimized to achieve business and IT goals. It helps to quickly transform existing systems into cloud-native apps and transition team to a modern DevOps approach to gain, and sustain, competitive advantage.

Why it is essential for staying relevant in Digital disruption?

With Forrester reporting Fintech companies are investing billions to complete their end-to-end digital transformations, the competitive imperatives are clear. If organization is capable of rapidly transitioning entire software stack from monolithic systems to app-based solutions, they have gained advantage. If not, the organization will be left behind.

Whether organization replaces the entire enterprise application system, replaces one application/component at a time, applies localized fixes in one application or modernizes underlying infrastructure, any approach is typically better than none at all.

Market forces demand a response from Fintech companies in every corner of the world seeking to maintain a modern and effective enterprise information environment. Whether it is retail banking solution or mobile-analytics-cloud or payments platform, Fintech organizations that run business IT systems must be agile enough to respond to market demands in better–faster– cheaper ways.

Cloud helps organizations to leverage the continuous innovation and agility of cloud-native applications, which is essential to bring new products to market in short duration and having a skin in the game during this disruptive era of digital transformation.

The Cloud modernization challenge

The cloud is a powerful enabler of business transformation and innovation. Indeed, the question for many enterprises is not whether to shift to the cloud to realize its many benefits, but how to make the transition. The cloud ecosystem is complex, and the adoption journey can be difficult to navigate.

There is no single path to the cloud—no one-size-fits-all solution. Each path is context-driven, and choices abound for those looking to migrate.

First up is the choice of service model: Infrastructure as a Service (IaaS), Platform as a Service (PaaS), Software as a Service (SaaS) and/or Function as a Service (FaaS).

Then there are the deployment options: public, private or hybrid.

There are additional considerations, including the need for data privacy and security for regulatory compliance. The type of workload being moved to the cloud is another important variable.

How to approach journey to cloud-enabled digital transformation?

The complexity of migrating applications varies, depending on the architecture and existing arrangements. It would be good to start with something on the low-complexity end of the spectrum for the obvious reason that it will be easier to complete. This initial success will provide some immediate positive quick wins.

The 6 most common application migration strategies are,

• Rehosting - Popularly known as “lift-and-shift”

This is good starting point for large legacy migration scenario, where organization is looking to quickly complete cloud migration. It saves roughly 30% of the costs by rehosting. There are lots of automated migration tools that public cloud providers offer such as database migration service or server migration service to jump start this journey.

Once application are hosted in cloud, it lays foundation for future optimization as application and data are already running in cloud. It will be easier in future to modernize them with full-scale refactoring or strangler based iterative modernization approach.

• Replatforming - Easier to refer this as “lift-tinker-and-shift”

Here the approach is to grab “low hanging fruit” to achieve some tangible benefits, but no change in core architecture of application. For example, move from self-managed database to fully managed database or moving from licence based web server to open-source web server such as apache tomcat.

• Repurchasing - Buy another Commercial-off-the-shelf (COTS) product from market

Here the approach is to go towards Software as a Service (SaaS) approach. Rather than building solution in-house, find suitable products available in market and use them straight away (Build vs buy).

• Refactoring / Re-architecting - Full scale re-architecture, re-design and re-factoring using modern cloud-native principles

Here the approach is to go towards large scale digital transformation, which is driven by strong business need to add new features, scale and performance requirements that would otherwise be difficult to achieve in existing environment.  

Typically whole application is re-factored and moved from monolithic architecture to modern cloud-native, micro-services based architecture. Another good idea is to tap onto strangler pattern to iteratively move from old architecture to new architecture – the starting point here could be a current application pain-area and then enhance / re-architect the same using modern cloud-native architecture, iteratively. Re-architecting tends to be the most expensive, but if there is a strong product-market fit, it can also be the most beneficial.

• Retire - Decommission the application

Here the approach is to revisit the enterprise scale application portfolio and gather how relevant application is in current context. If the application is no longer useful, then simply decommission the application. It can help to align team’s effort and energy in right direction.

• Retain - Keep it as it is, basically do nothing (for now).

Here the approach is to retain application as it is. There could be multiple drivers for retaining application, such as it was recently upgraded or otherwise going to be replaced by another system in future.

Next Steps after Cloud migration

Once the cloud migration and modernization is achieved, it requires cloud-first mindset for all future change software development of new product and services. Think of what is already available in cloud & can be leveraged in best possible way to achieve successful outcome, in shorted possible time, rather than re-inventing the wheel.  

• Cloud first mindset
• Change org-wide culture and processes to be more Agile
• Cloud economics

Cloud modernization also requires to effectively change org-wide culture and processes to be more agile in all aspects. If a server can be provisioned by just a click of a button, but the pre-approval process takes a week, then it is not actually helping reduce friction and gain agility for developing software.

Last but not the least, Give prime attention to cloud economics – optimize, refine and reduce cost continuously. Establish and setup automated way to gain insights of usage patterns and feedback loop to make data-driven decision for scaling up / down cloud resources as needed.

Measuring success and simplifying the journey to cloud

Modernizing enterprise IT without measuring the risks and rewards of each step in the journey may not be the best approach. What are the potential benefits and pitfalls of change versus the status quo? What tools and techniques should be deployed to measure results? These all are essential questions that IT and business decision-makers should consider.

Cloud-based modernization of enterprise IT requires detailed planning and collaboration. All facets of modernization should be in sync to achieve meaningful digital transformation. Enterprises should tread lightly on the road to cloud adoption. Each cloud journey is unique, and while there are best practices, organizations should learn as they go and adapt as needed.

Risk-reward assessments can be a helpful tool for measuring the success of cloud modernization — and for mitigating failure.

Conclusion

How Banking and Financial organizations approach digital transformation depends on factors such as their organizational culture, scope, urgency, risk appetite, existing technology stack, technical expertise, program management maturity, funding availability and other factors. But, in whatever small or large way, Starting journey to cloud and embracing cloud modernization is essential to stay relevant in digital transformation era.

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By Dhruvesh Patel - Cloud Solution Architect