Financial Service Institutions Embark on Cloud Data Makeover as Legacy Solutions Sunset

The ability to analyze massive volumes of data in real time and at scale can provide organizations with a strategic advantage over their competition. However, for many financial institutions, business users and IT teams have faced significant challenges. As data volumes continue to rise, their historically on-prem solutions are unable to keep up. 

Data infrastructure modernization efforts have been slow to develop, making the financial services sector an outlier against more cloud-friendly industries. For example, North American banks only handle 12 percent of their workloads in the cloud, and in Europe, it's only 5 percent. Despite slow adoption and the industry’s unique data needs, there are steps IT leaders can take to avoid getting overwhelmed by their data, as well as processes to help modernize their data infrastructure to improve scalability as their data grows. 

The first step to addressing an organization’s unique data needs is an assessment of pain points. In my discussions with financial services organizations, I see these common threads:

• Data silos: In the last 10 years, we’ve seen an explosion of data silos as data platforms and solutions have evolved. Businesses have difficulties getting the right data to the right people and ensuring that the data is clean and usable. Oftentimes, these data silos are created because departments within an organization are using different tools to store and analyze their data.

• Hesitancy to modernize: Financial service institutions (FSIs) have gathered massive amounts of data across several legacy solutions, platforms, and data formats. With different data center tech stacks, APIs, and cloud solutions mixing together, data is all over the place. This chaos makes it difficult for organizations to digest their data, or even begin planning how to effectively transition to modern, cloud-based architectures.  

• Cloud roadblocks: Cloud-only solutions leave FSIs at a loss as they are forced to either go all-in on the cloud, which can be a costly proposition, or stay behind and risk being left behind on-prem. A drastic push to the cloud is not a viable option for highly regulated businesses dealing with loads of sensitive consumer and business data.

These pain points signal the need for financial service organizations to begin modernizing their technology stacks, starting with their data warehouse, as there are currently several solutions that are being phased out – namely SAP IQ and IBM Netezza. While these technologies have served their purpose, both miss the mark with providing enterprises with a highly scalable solution capable of running across multiple clouds and on-prem – a critical requirement in today’s advanced analytics era. 

Shifting toward a more modern data stack doesn’t mean that everything must go out the window. What works well is planning a gradual shift. A good starting point is an organization's data warehouse, as it is an essential tool to many business functions. IT leaders should identify 2-3 use cases that will improve business value as a result of modernization – such as speeding up end-of-month book closing – and secure executive buy-in. When making this transition, it will take time, and that is perfectly fine. 

The cloud will play a critical role in any transformation effort, but it is vital not to rush all in on the cloud as there are potential drawbacks to a cloud-only model, including cost and vendor lock-in. Organizational focus should be directed to on-prem modernization first, then move to the hybrid cloud deployment strategy, which should encompass multiple cloud vendors. 

As FSIs work to determine their next steps to achieve a modern data stack, here are some tips and best practices for ensuring that data remains flexible, accessible, and actionable to business decision makers:

• Pick your battles: Pick small, winnable proof points as you modernize and scale up your operations on-prem and in the cloud. Your approach should be iterative and always improving.

• Adopt the right solution: For many within the financial services industry, a hybrid approach to data warehousing will be the best approach, as it provides an organization with flexibility to keep workloads on-prem as well as across multiple clouds to get the best of both worlds. 

• Build a “Bank of the Future” mindset: Your data ecosystem is much more than your own business analysts and data stewards – it’s also your customers. Begin to think of data warehousing through a new lens where it directly delivers near real time insights to your customer base. This mindset will be key to unlocking new, scalable data opportunities.

• Establish common understanding: Agreed semantics and workflows are key to developing your organization’s own data culture. Align your data needs and goals with business leaders and data stewards for optimal success.

• Don’t wait for the cloud: You don't have to wait for the cloud in order to modernize. You can begin your modernization journey right here and now on-prem.

With the ensuing expansion of the cloud in the financial services industry, we are poised for a shift away from legacy data solutions toward a hybrid approach to data across FSIs. This shift toward the cloud will enable FSIs to refresh their data governance framework and develop data cultures of their own. In this new era, organizations must embrace new technologies that are flexible, dynamic, and resourceful to set themselves up for success.