The four imperatives \of successful cloud-based transformation

The four imperatives of successful cloud-based transformation

The true potential of cloud unlocks all of this and more: business transformation, cost reduction and new sources of revenue, etc. But a comprehensive, cloud-based transformation program needs to do four things well to be successful.

The four imperatives of successful cloud-based transformation (Figure 13)

The four imperatives of successful cloud-based transformation (Figure 13)

1. Align with business on transformation goals

Alignment with the business on cloud-enabled transformation goals starts with a clear understanding of the value case, the contribution to the business target state and the future operating model. Then it’s time to define the integrated (business and technology) roadmap including transformation goals.

Value case – Too often, the initial value case is purely focused on the direct technology cost. Though the commonly quoted 20 to 30 percent savings potential on IT cost is interesting, the business-wide benefits are multiple times higher and more strategic (e.g., speed of innovation).

The value case will need to look at three benefit lenses:

Enhanced performance – examples include a faster speed of technology change and the potential of improved security
Lower and variable cost – examples include a lower IT run/change cost, increased automation of manual customer and operations processes, improved risk assessment by using unified data (and AI/ML) and more variable cost by shifting from capex to opex
Revenue generation – examples include data-led customization of pricing/experiences, offering new products/services and reaching more clients with partner-channels

Strategic business-led transformation initiatives are both a blessing and a curse for cloud adoption. If the timing is right, the business-led transformation will become a key value case and accelerate the cloud adoption and business benefits. If the business transformation initiative has progressed materially without the cloud, it might create an extra hurdle in the years to come, until the investments have been fully depreciated.

2. Build enduring capabilities

Cloud-enabled business transformation requires a step change in four key capability areas: (1) modern engineering, (2) agile at scale, (3) people & organization and (4) governance.

Modern engineering – It is paramount that the more traditional engineering approaches are replaced with modern engineering principles and tooling. Key elements include end-to-end automation, self-services within guardrails, focus on speed/quality/value and end-to-end responsibilities. Read the deep dive on the following page.

Agile at scale - We have seen multiple challenges when adopting agile in organizations that need to be resolved to reap the agile-at-scale benefits. The most common challenges include being agile in name only, the complexity in scaling agility to hundreds of teams and the disconnect between senior executives and the rest of the organization.

People & Organization – Many banks have realized that they not only need to upskill existing staff but also need to expand the number of engineers and data technologists. The scale of the challenge is immense for many banks. Things are complicated by the fact that upskilling people is more than certifying people; they also need to learn the new platforms/languages, and how to work in a different way with agile at scale and modern engineering approaches.

Governance – Many banks struggle with deciding whether the business transformation should be governed within or outside the existing company. Separating out the new build might be preferable because it brings in new approaches and ideas while avoiding business-as-usual beliefs that conflict with longer-term transformation.

Modern engineering deep dive

Banks that have made the greatest progress in migrating applications to the cloud are more likely to "strongly agree" that they have implemented modern engineering approaches. Migrating applications to the cloud gives banks a particular advantage in giving developers end-to-end responsibility across the solution development and operations lifecycle.

Figure 14 shows that Cloud Leaders—banks that have made the greatest progress in migrating applications to the cloud—are more likely to “strongly agree” that they have implemented modern engineering approaches. Migrating applications to the cloud gives banks a particular advantage in giving developers end-to-end responsibility across the solution development and operations lifecycle.

Migrating applications to the cloud gives banks a particular advantage in giving developers end-to-end responsibility across the solution development and operations lifecycle.

Q: To what extent do you agree with the following statements regarding the product and application development process at your bank? A. Strongly agree. Answers segmented by % of applications in the cloud today. (Figure 14)

3. Rationalize, migrate and modernize apps, data and business

To modernize the applications and associated data, we see four key building blocks, including target architecture, 6R (or any treatment strategy), integration hub and migration hub.

Defining the target architecture starts with the alignment to the future business and operating model. A key first step in complex businesses like banks is the creation of logical domains, utilizing domain driven design principles. It sidesteps many legacy boundaries that could complicate the future modernization efforts, bringing technical and business design together and creating a common language for collaboration.

Next, we need to agree on what needs to happen with the existing applications and data stores. Common methodologies include the 6R* or TIME** strategies. The cost of a full modernization is most often prohibitive, hence smart choices on the application treatment strategies and roadmap are required to balance the investments with the benefits. In all instances, it is key to build a plan with a clear and recognizable short term business benefit.

As the modernization gets underway, the bank will need to create both an integration hub and a migration hub to support a gradual and controlled migration and support a multi-year effort.

The integration hub connects the new applications with the existing applications/feeds, enabling a gradual modernization of various applications, including the ability to roll back to using the legacy system. The migration hub enables the migration of data to the new architecture with guardrails for data quality, reconciliation and security compliance—and with repeatable/reusable assets to simplify migration efforts.

*6R: Rehosting, Replatforming, Re-Architecting, Retire, Retain, Repurchasing. Source: Gartner
**TIME: Tolerate, Innovate, Migrate, Eliminate. Source: Gartner

4. Develop and scale enabling platforms

As part of the new technology stack that supports the productization of the back-end systems, there will be a strong need to create enabling platforms. Examples include the IAM (identification & authentication management) platform, API/integration platform, unified data platform and cloud platform.

The benefits of the enabling platforms lie in the simplification for the customer-facing engineers, who need to create products and customer experiences, and the economies of scale in technology, control and compliance on the back-end.

Customer-facing engineers no longer will be held up by cumbersome control processes, delaying and complicating their work.

Instead, they can use standard patterns, and as long as they operate within the guardrails, they can operate at speed.

The challenge is to embed a customer centric product mindset in the back-end/platform systems—offering maximum self-service through automation, while ensuring compliance by design. Typically, during the transition to a unified platform, there is a need to rationalize existing solutions and untangle these solutions from customer-facing solutions (e.g., many banks have multiple, poorly connected data platforms, some of which are hardwired with solutions that all need to move to a unified data platform).