There’s big value potential in the cloud, but financial institutions with a piecemeal migration strategy may be missing out on capturing its full value.
Most financial institutions today have a presence in the cloud, but adoption in the financial-services sector is still at a relatively early stage. Among the financial-services leaders who took part in a recent McKinsey survey, only 13 percent had half or more of their IT footprint in the cloud. But migration to the cloud is gathering momentum. More than half of the survey respondents—54 percent—said they expect to shift at least half of their workloads to the public cloud over the next five years.1
Given the value at stake, this sense of urgency is hardly surprising. A McKinsey analysis found that Fortune 500 financial institutions alone could generate as much as $60 billion to $80 billion in run-rate EBITDA in 2030 by making the most of the cost-optimization levers and business use cases unlocked by cloud.
Some early adopters are already making inroads into this pool of value. One European bank was able to deliver the same output with 20 to 30 percent smaller teams, after onboarding them on DevSecOps and cloud. Another bank in Asia that migrated more than half of its workloads to the cloud can now develop and launch multiple new products rapidly and at scale in international markets. And another European bank has partnered with a leading cloud service provider (CSP) to develop AI-based cyber-defense capabilities to improve security for its customers.
These examples are still outliers in the financial sector, where most companies have been tentative about moving to cloud at scale. There is good reason for this hesitancy, since cloud migration is uniquely complex for financial institutions. Furthermore, the IT landscape at financial institutions is particularly varied, with 40-year-old applications running alongside more modern systems.
These challenges and others have led financial institutions to move in a more incremental fashion when it comes to cloud, running limited experiments, for example, or targeting a subset of applications based on the ease of migrating them, or phasing their efforts to coincide with a planned exit from a particular data center. Focusing on a few of these kinds of high-impact “lighthouses” can be effective in creating early momentum. However, institutions that do not define an overall aspiration and put in place the right success factors to achieve it often fail to capture value from the cloud.
Three shifts to accelerate your cloud migration
Working with dozens of financial institutions on their cloud migrations, we have found that those seeking to evolve beyond nascent cloud programs need to make critical shifts across three dimensions: strategy and management, business-domain adoption, and foundational capabilities (exhibit). Which dimensions they choose to prioritize or emphasize will depend on their particular needs and the stage they have reached in their cloud journey.
