In brief
- The banking industry relies on operational resilience and the secure transformation of legacy systems to adapt to market changes and emerging technology
- Progressive, mainframe-based core-application modernization is a preferred approach for digital transformation in banking, providing operational resilience and innovation around the core
- Hogan, a trusted core banking application, offers platform flexibility and is a popular choice for banks looking to secure sensitive data in customizable private cloud infrastructure while leveraging the benefits of public cloud resources
In today’s disruptive financial environment, who on earth would put all their data eggs in one on-prem basket unless there was a conclusive reason?
Banks cannot afford to lose a single piece of the terabytes of sensitive data they hold. To safeguard against this, the banking industry relies on operational resilience, which means moving with the times. And the only way to do that securely is by transforming outmoded legacy systems in line with market changes, world events and emerging technology.
This is a major challenge for both individual firms and the industry as a whole. It’s not a petty cash project. But neither is maintaining an inefficient legacy core banking platform — a significant business handicap with inherent skill gaps (COBOL, MATLAB, etc.), narrow scalability and cyber vulnerability.
Modernize or start from scratch?
So, how do financial institutions undergo comprehensive digital transformation with minimum disruption, maximum effectiveness and ultimate affordability? Do they go greenfield, setting up systems on new technologies from the outset? Or opt for progressive change, modernizing what they have, maintaining and optimizing the core while selecting elements for cloud deployment to take advantage of new technologies?
Zoreza Global regards progressive, mainframe-based core-application modernization as part of a bank’s digital transformation journey. We develop and invest in the 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 is still the fail-safe option
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.
Hogan core banking applications provide a range of platform choices, including z/OS, Linux, Linux for System Z, Windows, or a hybrid of these operating systems. This platform flexibility lets you select a cost effective environment that best meets your needs for high availability, scalability, data security and other prime characteristics.
Head in the clouds, feet on the ground
Lockdown accelerated the move from the high street to online services. Faced with the need for a technological rethink, many traditional banks prefer to hedge their bets and tackle ever-increasing digital workloads with a hybrid cloud approach. That way, they keep their core system of record — which runs well on a mainframe — but open it up. This is achieved by ensuring optimal alignment between core and new systems with improved customer experiences and making judicious use of public and private clouds.
Digital modernization eases cloud deployment, but all-out commitment is both risky and costly for a large-scale operation. You need to move at least half of your systems to cloud providers to fully realize even the primary benefits of cloud services. And while a private cloud can address the fear of losing control and dealing with compliance challenges, firewalls hinder teamwork and innovation.
Consequently, the Hogan-powered, mainframe hybrid cloud concept is a popular choice for banks. They can secure sensitive data in a fully customizable private cloud infrastructure and shift less sensitive assets to one or more highly flexible, low-entry-cost public cloud resources.
Six benefits of hybrid cloud in banking
Here are just some of the benefits of hybrid cloud. It enables you to:
- Increase business agility: Fail fast, succeed faster
- Release locked-in funds from inactive capital equipment, switching CapEx to OpEX
- Expand scalability
- Improve productivity via user-friendly dashboards
- Upgrade the user experience: Enhance customer communication
- Deepen partner relationships: Collaborate more productively
As our clients continue to change up to hybrid cloud models, DevOps becomes a central driver, extending agility and controlling the life cycle. Also, it promotes stability, greater automation (particularly of things like testing) and impact-free implementation.
Automation itself is a moving target, as evidenced by the development of cognitive systems. Cognitive systems that intuit, understand, execute and learn on the job, so to speak, are now being brought in to iron out wrinkles in the financial customer experience.
Sounds relatively straightforward. But is it?
What are the hybrid cloud challenges?
The thorny question of unraveling convoluted legacy core banking systems is bound to cause even the most determined decision-maker to pause. Completing the project with zero failures, on time and within budget, when the tottering tower of ancient technologies has been adapted several times in an ad hoc manner and sensitive data is held blindly in silos right across the organization, is a tough ask. The risk and knock-on effects of data loss during migration can be daunting.
Skill shortages and the flexible recruitment of the right caliber of talent can delay integration and the widespread assimilation of new technologies, leading to a lack of business continuity and the potential breakdown of the whole enterprise.
Building a premier league team is tough
Fishing in the same shallow talent pool as financial services competitors and big hitters from other industries is like negotiating the European football transfer window. If you can’t offer desirable candidates significantly better incentives and working conditions; Champion’s League competition; and smarter teammates, tactics and strategies, you’re forced to compromise your wage structure and pay over the odds for their services.
Modern competition requires a sharper digital edge
In a similar vein, neobanks, fintech and other digitally mature financial organizations with massive customer databases are providing fierce competition. Any lost ground traditional banks can claw back (via hybrid cloud benefits) to stop branchless challengers cherry-picking lucrative sectors or to help them compete against disruptors offering the same services for a fraction of the price is crucial for their survival.
Ten years ago, traditional banks were rightly concerned about the glacial pace of change in the industry and the restrictions of their core systems and data architectures. Since then, the onset of technology-driven market disruption and the evolution of customer demands (particularly during the pandemic lockdown) has been nothing short of astonishing. Light-on-their-feet disruptors with greenfield core systems and hybrid cloud advantages were able to outstrip existing firms with a more innovative approach and aggressive customer acquisition.
Hybrid cloud enablement gives real value for money
As we’ve seen, running legacy systems and outdated technologies is expensive. With slow STP rates and cumbersome manual upgrades etc., it eats up most of the available IT resources. But choosing to solve major issues with further reworking instead of opting for a more comprehensive solution is a false economy. If technical debt is unpaid, the “interest” makes it more challenging to afford modernization when possibility becomes a necessity.
Biting the bullet and transforming operations get you to the final product quicker, generating weightier influence, greater cost savings and deeper market reach for your organization in an overcrowded environment. However, sticking with ancient monoliths and their inherent code and manual delivery issues inhibits the shipment of new products and services. Mainframe hybrid cloud enablement utilizes standalone community, public and private clouds in concert, offering bespoke solutions that drive operational efficiency and revenue growth while reducing the total cost of tech ownership (TCO).
Customers crave a personalized experience
Keeping customer data in product-associated silos short-circuits any genuine attempt at delivering an exceptional customer experience. Without modernizing and committing to ultra-personalization, even simple things like giving each customer a 360-degree view across their deposit, saving and investment accounts are beyond reach. Mainframe hybrid cloud for banking can provide the speed and agility required to enhance user engagement.
All together now
Creating a transparent partnership ecosystem with access to best-of-breed solutions is central to the future of profitable product innovation and development. That said, meaningful third-party collaboration will rely on cloud-enabled hyper-connectivity, which requires a modern core architecture with the latest technologies to flourish. A hybrid cloud approach enhances experimentation, awareness and speed, taking collaboration to an entirely new level.
Continue the conversation
Hybrid cloud is the future. So, if you’d like to learn more about how Zoreza Global can help you leverage mainframe hybrid cloud benefits and create even better business outcomes for your organization, visit luxoft.com/industries/banking/hogan-hybrid-cloud-solution or contact financialservices@luxoft.com
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.
