Public Cloud as key enabler for innovation

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  • Already today, 19 percent of German companies are in active public cloud operation, 55 percent are preparing their deployment at full speed
  • Over two-thirds of companies plan to spend at least 10 to 20 percent of their annual infrastructure budget on public cloud issues by 2020
  • The public cloud market leaders AWS and Microsoft Azure share the majority of the current public cloud budget in German companies with 60 percent
  • 79 percent of companies make use of the services and know-how of external partners both in consulting and in operations

Nordcloud and the external IT research company Crisp Research have conducted a recent study to examine the strategies and mindset for public clouds in the German midmarket and to analyze the demands on managed public cloud providers. German companies are increasingly focusing on the public cloud and are dependent on the external expertise of IT service and consulting providers.

The study, which surveyed a total of 160 IT, digitization and business decision-makers, shows that the majority of German companies are already involved with the public cloud today. 19 percent are already actively using the public cloud in the form of Infrastructure as a Service (IaaS) and Platform as a Service (PaaS), while a full 55 percent are in the implementation or active preparation phase. Half of the companies prefer a phased relocation of their application and infrastructure portfolios, 33 percent design the cloud migration “all in”, i.e. the entire application portfolio is planned as a large-scale transformation project.

 

Trend towards dual and multi vendor strategy

Since the functional scope, complexity and speed of innovation of public cloud platforms are now very high, more than half (53 percent) of the companies surveyed specifically rely on two strategic cloud providers. In addition, a total of 18 percent stated that they used more than two providers. As reasons for a dual or multi vendor strategy, 34 percent cited the minimization of the risk of a vendor lock-in as the reason, 41 percent also estimated the possibility of global coverage of the data center locations as enablers for international rollouts of their new digital services.

 

Investment in the public cloud on the rise

In addition, more than two-thirds (72 percent) of respondents said they would invest at least 10 to 20 percent of their infrastructure budget for IaaS and PaaS in the public cloud by 2020. Around a quarter (26 percent) even plan to shift between 20 and 50 percent of their infrastructure budget to public clouds. On average, 27 percent of the cloud budget is allocated to pure cloud operation. At 60 percent, the public cloud majors AWS and Microsoft Azure share the majority of the current public cloud budget for IaaS and PaaS in companies, although providers such as Google Cloud Platform, IBM and Alibaba also play an important role in German-speaking countries.

 

Managed Public Cloud Providers in Demand as Experts

Since both the transformation into the public cloud and the operation of these systems are in part highly complex, the vast majority of the companies surveyed (79 percent) rely on the support of external service providers. 52 percent said they worked with one, 19 percent with two managed public cloud providers. The external expertise is used in almost all areas, from the cloud strategy (64 percent), monitoring and management (54 percent) and the development of the API strategy (51 percent) to the development of DevOps operating concepts (51 percent). Managed Public Cloud Providers thus have a high strategic relevance.

“In order to remain competitive in times of digital transformation, companies should increasingly rely on cloud computing technologies,” comments Uli Baur, Country Manager Nordcloud DACH. “Our study results make it clear that more and more German companies are aware of this necessary step and are therefore already preparing the implementation and planning to use more resources for cloud operation and all associated processes in the future. Through partners like Nordcloud, the numerous changes can also be mastered by companies that themselves lack the necessary specialist staff and know-how.”

Download the Nordcloud study in German here

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    Building operational resilience for FSI businesses

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    A lot has been discussed and written about the recent TSB bank fiasco that saw its customers unable to access their banking services. The interesting thing is the planned downtime was supposed to last only 4 hours but instead went on for almost 48 hours (12 times more) for many of it’s customers, and left them ranting and raving about how helpless they felt while the bank took its (long), sweet time to sort out their mess!

    There are few fundamental issues here, but the one I want to focus on is the fact that this isn’t the first time it happened with TSB (it also occurred in April 2018) or within Financial Services & Insurance (FSI) vertical – there already have been occasions when an IT systems meltdown happened unplanned, or a planned maintenance lasted 12 times longer than expected. At the same time in a world where we talk about Robotic Process Automation (RPA) & Artificial Intelligence (AI) taking over everything that’s mundane, repeatable and quick to learn, do we really understand the problem fully enough to find a solution to building an enterprise business that’s operationally resilient?

    Firstly, let’s understand why Operational Resilience (OpR) is important in FSI:

    • Threatens the viability of firms within FSI and causes instability in financial systems.
    • Introduces significant reputational & business risk within the ecosystem, hampering growth and confidence for all participants involved.
    • Hinders the ability of firms to prevent and respond to operational disruption.

    One way to get a grip on the OpR problem is to look at these incidents and happenings from the perspective of other participants, (apart from Banks and Financial Institutions (FI)) in the Financial Services ecosystem, i.e. Customers & Regulators. There have been numerous questions and concerns from both these participants but to keep it simple, the top three that we hear the most are:

    1. How can you not get it right after you have failed many times?
    2. How long is long enough to be unexpected?
    3. How do we reward for failures?

    How can you not get it right after you have failed many times?

     “The true sign of intelligence is not knowledge but imagination” – Albert Einstein

    The point being, we need to apply new age design thinking into age old processes and do some right brain activities to come up with out-of-the-box ideas. You might think it’s easier said than done but going back to the principle of design thinking – empathising with the user- is a great place to start.

    Since FSI is such heavily regulated sector, it needs to develop focus areas based on an end-to-end lifecycle of business services (i.e. inception, delivery & maintenance) that impacts its market participants, profitability and risks directly. In the diagram below, I look at an example of a business service – “Retail Mortgages”.

    Looking specifically at this service, the FIs need to think how they can break it down (for OpR) into three key pillars – Focused Services, Technical Enhancement & Risk Management, followed by a framework that identifies, maps, assesses, tests & governs the whole mechanism in a periodic way.

    This is exactly where public clouds are such key enablers for this new world design thinking due to the flexibility, security, standardisation and resiliency they provide. As you introduce new business services into this framework the communication and governance should be standardised and in-line with your internal audit policies, only then will you be able to achieve true OpR by investing in all the aspects of that service. This also helps you answer questions like ‘should we buy more capacity and IT staff for testing a CRM system or should we improve the OpR of business-critical mortgage services?’

    retail mortgages

    Business Architecture for OpR Framework in public clouds

    How long is long enough to be unexpected?

    When I ask this question to some of my colleagues in financial services, their response is typically synonymous to the answer you might get if you ask someone ‘how long is a piece of string?’ which frustrates me. Ultimately, you don’t know until you measure it. Once you have applied some design thinking on your business services the next step is to measure & communicate them. With public cloud there are numerous ways to develop an automated process or introduce new tooling that can help set-up impact tolerances specific to your business service. You can run stress testing and simulate numerous operational scenarios and report back on a management dashboard, (without significant capital expenditures) present it to your company board, internal audit teams (to match alignment) and keep it ready for your external auditors when they ask for it. You can therefore measure your OpR and predict the expected downtimes in a much more accurate way rather than running into long and unexpected downtimes.

    How can we reward failures?

    This is a bit of a grey area hence it is important to get straight to the point – financial institutions put aside a lot of money for paying fines to regulators, compensating customers for loss of service and confidence, and at the same time, giving big pay-outs to staff for achieving irrelevant goals that are not in line with business focus areas. To fix this, the overall governance framework needs to set goals specific to selected business services, empower staff with set of right tools that helps run & manage the operations and have board level oversight to measure goals through open, fair and transparent metrics that not only looks at internal participants but include the interest of market participants like customers & regulators. By having this mind-shift and moving to the public cloud, financial institutions can lower compensation towards failures and invest where they really need to.

    In a nutshell

    to build an operationally resilient public cloud infrastructure:

    1. Focus on business services in the order of highest priority based on your organisational goals, you will notice that by doing so the investments are going to the right places, in the right detail, in a timely and systematic way and failures are only going to make you better, not miserable.
    2. Set-up operational metrics and impact tolerances that will be collected and reported to measure your operational resiliency. Use tooling and automation offered within the public cloud to improve governance & actionability within your organisation.
    3. Manage business risk through goal setting and empower your teams with the right tools and transparent processes.

    It’s high time the financial institutions stop ‘putting the cart in front of the horse’ or doing the same thing over and over again expecting a different result. It’s time to re-think, to re-imagine, to re-invent and to re-organise the mess by embracing the public cloud and delivering what your customers really expect by working with market leaders like Nordcloud.

    FSI ready high grade offering from Nordcloud

    Nordcloud offers a full stack cloud offerings, starting from enablement, governance, migration to business service operations. Within FSI we have designed specific frameworks that comply with regulatory standards and can be adopted out-of-the-box with bespoke configuration. Letting you focus on your core business while we take care of everything else.

    Contact us here to learn more about how to build an operationally resilient business.

    Cloud computing is on the rise in the financial services – are you ready?

    Download our free white paper Compliance in the cloud: How to embrace the cloud with confidence, where we outline some of the many benefits that the cloud can offer, such as:

    • Lowered costs
    • Scalability and agility
    • Better customer insights
    • Tighter security

    Download white paper

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    Let’s discuss how we can help with your cloud journey. Our experts are standing by to talk about your migration, modernisation, development and skills challenges.