A recently released Refinitiv survey revealed that financial firms across the globe plan to ramp up use of cloud for financial data. However, while successful cloud projects deliver immediate cost reduction and faster innovation, the complexity of implementing the technology successfully means timelines slip for broader rollout.
Financial institutions across the globe will allocate almost half (48%) of their IT budget to spending on public cloud services in 2020, up from 41% this year and 34% in 2018, according to the research. The findings are based on a survey of 300 global financial firms across the financial community.
Banks and asset managers are looking to the cloud as an enabling technology to move away from expensive legacy data infrastructure and improve their ability to innovate by applying sophisticated AI-based analytics to large and disparate datasets on demand.
The industry’s plans to increase investment in public cloud follows in the wake of successful projects being completed, with three quarters (76%) saying that previous public cloud projects performed better than expected when it came to delivering an immediate cost reduction. No projects performed worse than expected. Hedge funds reported particularly high success rates in achieving immediate cost savings, with 91% saying that their projects had performed better than expected.
More than half of the industry’s completed cloud projects also delivered better than expected results when it came to speed of implementation and low cost of experimentation, highlighting the innovation dividend the cloud can unlock.
When asked how transformational cloud would be for the sector over the next 5 -10 years, a quarter of respondents (24%) said that the cloud will be transformational, while a further 40% said it would be significant. Only around a third (36%) described the transformational impact of the technology as minor and none said that it was not at all transformational.
While the survey found firms to be positive about the benefits of the cloud, the journey to the cloud will take longer than expected for many firms as they grapple with the challenges of implementing cloud technology effectively. Estimates for the time to migrate key workloads across front, middle and back office functions increased compared to the responses from a year earlier.
With many banks and asset managers operating globally, the biggest challenge identified by respondents was managing data privacy controls across multiple datasets in different locations, cited by 51% of respondents. 94% of firms also said they thought their business was limiting their use of the cloud in some way because of regulatory concerns.
Marion Leslie, global head of enterprise front-office propositions at Refinitiv, said in a statement: “We’re entering a more mature phase for cloud adoption in the financial sector, as the industry has completed many successful projects that justify increased investment. Blockers are falling away as the technology evolves and the transformational impact of big data, analytics and artificial intelligence enabled by cloud becomes real and generates increased interest.”
“Challenges remain in using the technology and our research found that the journey to the cloud is taking the industry longer than expected. Using the technology effectively requires new ways of working and new commercial models in order to harness cloud economics effectively. As a heavily regulated sector, the industry is also working through complex data control and compliance issues, which are very different in the cloud to firms’ own infrastructure.”