Driven by agility, efficiency, and, thanks to 2020, resiliency.
In IDC’s Worldwide Industry CloudPath Survey (May 2020), 57 per cent of banks responding to the survey said they already run in hybrid environments, with another 31 per cent moving to hybrid models in 12 months, and a further 9 per cent moving to hybrid in 24 months.
Before COVID-19 the banking industry had been heading down the path to digital transformation, driven by a hyperfocus on customer experience and innovation. Many banks emerged as leaders in transformation, modernizing not only the technologies necessary to achieve these goals, but also restructuring the organizations themselves, as well as their partner ecosystems. API development, using agile methodologies, microservices and containers, and cloud as a deployment model all gained traction leading up to 2020. Being a risk-based business, many bank executives still had concerns about challenges in security, internal skills and governance, but by and large the industry was advancing to a modern technology framework.
However in a blog by Jerry Silva program vice president at IDC Financial Insights noted that during the COVID-19 pandemic, weaknesses were exposed in the bank’s technology environments. Critical business platforms, like digital banking and lending, for example, experienced demands that overwhelmed them.
Doubling Down on Infrastructure Transformation
One of the heroes of 2020 was the availability of software platforms that could be delivered on cloud. Looking again at lending as an example, many software providers were able to deliver solutions to implement functionality like PPP in days, as opposed to the months it could have taken on legacy platforms. In addition, because these solutions were deployed on cloud, they inherently benefited from scalability (and more importantly, elasticity of scale), consumption-based pricing, improved security, and business continuity and disaster recovery capabilities characteristic of major cloud platforms.
What made 2020 different from previous years is that, although technologies like cloud were available prior to the pandemic, the crisis put cloud and associated technologies and methodologies in in the broader context of being a critical component of the institution’s technology architecture. At the same time, some workloads are still seen as too critical (or competitively important) to integrate into a cloud environment.
Hybrid infrastructures of on-premise and cloud workloads and multi-cloud environments are now seen as the modern, de facto infrastructures that will not only drive innovation and agility for the bank, but improve resiliency and scalability as well.
In IDC’s Worldwide Industry CloudPath Survey (May 2020), 57 per cent of banks responding to the survey told us that they already run in hybrid environments, with another 31 per cent moving to hybrid models in 12 months, and a further 9 per cent moving to hybrid in 24 months.
Clearly, the banking industry has recognized the need to operate outside its own datacenter walls, where it makes sense, to leverage the strengths of its technology partners and deployment models like cloud.
Based on IDC’s latest Worldwide Banking IT Spending Guide estimate (March 2021), overall technology spending in the banking industry will grow 6.2 per cent annually through 2024. But growth in public cloud spending specifically, (both cloud infrastructure and software) is at twice that pace, 16 per cent growth annually through the same period.
