In brief
- Digital transformation is not an end in itself but a means to achieve business transformation, enabling organizations to evolve and succeed in a changing market
- Mainframe hybrid cloud enablement offers superior market agility, operational flexibility, and data security, making it an attractive option for banks seeking to transform their business
- Adopting a mainframe hybrid cloud model comes with challenges but the advantages include cost savings, improved data storage, personalized customer experiences, enhanced collaboration, and increased business agility
You can hardly fire up a device these days without some self-appointed influencer telling you that, along with rising interest rates and a balanced vegan diet, digital transformation could be an essential factor in your future success.
It’s digital transformation this and digital transformation that, while the core argument is tightly focused on keeping up with new or emerging technologies. But by concentrating on technology, we miss the real purpose and benefits of transformation.
Digital transformation is a means to an end, not an end in itself. It’s a series of stops along the road to business transformation. Look at massively transformed businesses like Virgin (from vinyl to Wi-Fi and space exploration) and Amazon (simple bookseller to streaming content and cloud services provider). Spectacular economic successes whose visions were (and are still) being enabled by things like tech modernization and cloud migration.
The same is true for all organizations — global or local — to differing degrees. And adopting a mainframe hybrid cloud model could transform your business with superior market agility, operational flexibility and data security. That’s the real transformation story.
Best of both worlds
The banking industry relies on operational resilience and can’t afford to lose a single piece of the terabytes of sensitive data they hold. Data is the meat in the business/technology sandwich, and data privacy is a major concern for customers as well as the lifeblood of GDPR and compliance. Of course, there are tools available — homomorphic encryption, secure multiparty computation, trusted execution environment (TEE), etc. — for securing personal data while using it for business purposes.
However, to comprehensively safeguard their data, banks need to transform outmoded legacy systems in line with market changes, world events and emerging technology. It’s not cheap. But neither is maintaining an inefficient legacy core banking platform — a significant business handicap with inherent skill gaps (COBOL, MATLAB, etc.), limited scalability and cyber vulnerability — or regulatory sanctions.
Mainframe hybrid cloud enablement
Mainframe hybrid cloud enablement is becoming a great favorite of banks keen to boost speed, scalability and revenue growth. On-premise data centers can store very sensitive, encrypted data. Then, by shifting mission-critical applications and data and analytics activities to a careful mix of private and public clouds, banks are able to enjoy mainframe hybrid cloud benefits.
That’s not to say that it’s all plain sailing. There can be hitches and blockers to negotiate before banks access the full range of innovative and cost-saving hybrid cloud advantages. In fact, organizational maneuvering is one of the least understood (yet most significant) obstacles to adopting a cloud-driven business model.
Challenges
The thought of unraveling convoluted legacy core banking systems is bound to cause even the most determined reformer sleepless nights.
Zero failures and completion on time and within budget when internal teams have adapted the vintage systems several times in an impromptu manner (especially if nobody can recall precisely what was changed) is a tough ask. Particularly when sensitive data is kept in silos right across the organization. The risk and knock-on effects of data loss during migration can be daunting. Here are some more transformational challenges:
Compliance: Constant regulatory changes hinder workload migration in some areas. For example, North America leads Europe thanks to the slowing effect EU’s stringent data privacy rules.
Core migration: Bank leaders share little appetite for risk and often view core migration as high risk. So, transitioning old and new systems and applications has the potential to be problematic. The threat of downtime, a loss of business continuity and the inability to secure external core banking system functions are also major considerations. Besides, most banks find recruiting employees with the right cloud and core-function management experience difficult.
Competition: Neo-banks, fintech and other digitally mature financial organizations are providing intense competition. Any lost ground traditional banks can claw back (via hybrid cloud benefits) to stop branchless challengers cherry-picking lucrative sectors or offering the same services for a fraction of the price is crucial for their survival.
Team building: Fishing in the same shallow talent pool as financial services competitors and big hitters from other industries is rough. If you can’t offer desirable candidates significantly better incentives and working conditions, you’ll need to pay over the odds for their services.
Advantages
Value for money: Running legacy systems with low straight through processing (STP) rates, cumbersome manual upgrades etc., swallows most of the available IT resources. But applying further patches instead of a more comprehensive solution is a false economy. Sticking with ancient monoliths plus inherent code and manual delivery issues impedes the shipment of new products and services. Mainframe hybrid cloud enablement utilizes public, private and community clouds harmoniously to drive operational efficiency while reducing TCO.
Storage
Handling massive amounts of data is a prime headache for financial institutions. As well as on-prem, banks can secure sensitive data in a fully customizable, firewall-protected, private cloud infrastructure and shift less-sensitive assets and workloads to one or more highly flexible, less involved, low-entry-cost public cloud resources. You can also spin up and spin down development and testing as rapidly as necessary.
Personalized experiences
Keeping customer data in product-associated silos curbs the elevation of customer experiences. Without modernizing and committing to ultra-personalization, even basic services like allowing customers a 360-degree view across their deposit, saving and investment accounts are out of scope. Mainframe hybrid cloud for banking provides the speed and agility required to enhance user engagement.
Collaboration
Transparent partnerships and best-of-breed solutions are at the heart of profitable innovation and development. In addition, meaningful third-party collaboration relies upon a modern core architecture, the latest technologies and cloud-enabled hyper-connectivity. A hybrid cloud approach encourages agility, experimentation and engaging collaboration.
Business agility
Fail fast, succeed faster. Financial institutions must establish a workforce mindset of agility, openness and staged change, valuing people and interactions over processes and tools. Those that prioritize the adoption of Agile methodology react quicker to obstacles and opportunities, market volatility and evolving customer preferences.
Making banks more resilient
Zoreza Global regards cloud migration and progressive, mainframe-based, core-application modernization as two sides of the same transformational coin. We develop and invest in talented people who keep the on-premises infrastructure operationally resilient, maintaining the core and innovating around it. Our experts possess the right skills and experience in Hogan core banking applications to take control and modernize this vital part of client architecture.
Hogan, a safe pair of hands
Hogan has been serving the banking sector for more than 4 decades. Over 40 banks and card processors use Hogan as their primary core banking application. Today that means processing over $5 trillion in deposits, which makes it one of the largest core banking systems in the world.
Advancing the cloud revolution
More than 80% of decision-makers surveyed by the American Bankers Association (ABA) said they were in the cloud adoption (or early adoption) stage, with just 5% claiming to be mature users. Of those banks, no more than 30% had a formal cloud strategy, and less than 25% had appointed a cloud-specific leader or similar. Most replied that increased cloud usage would be to enhance the customer experience. That said, almost 60% said that cloud spending would be under $250k in the coming year. So, there’s still work to do.
Let’s touch base
If you’d like to learn more about mainframe hybrid cloud benefits and what Zoreza Global’s cloud innovation and unrivaled domain knowledge can do for your bank, visit Hogan hybrid cloud solution page or contact us.
Duncan Alexander
Duncan leads several existing and new core banking products and services within DXC Zoreza Global’s Global Banking Division. He has over three decades’ experience in the application of business technology to achieve strategic goals across multiple industries, including banking, insurance, retail, travel and logistics. Duncan has provided strategic advisory services and delivered mission-critical systems as a strategic partner to clients and held senior positions within several large enterprises. His main area of focus is the realization of business benefits for our clients from digital transformation.
