Why Enterprises Should Have an Evolving Hybrid Cloud Strategy | HCLTech

Why Enterprises Should Have an Evolving Hybrid Cloud Strategy
December 07, 2020

A critical aspect of running a successful enterprise is the ability of the management to sustain and enhance the value created by the firm for its stakeholders. It can be achieved by adopting a business model that follows a customer-centric approach. This includes (re)designing a scalable and flexible IT ecosystem to adapt to the needs of customers and the industry.

An evolving hybrid cloud strategy needs to incorporate design thinking, efficiency and cross-platform mobility as key factors.

To improve growth and reduce costs banks are looking at redesigning products/services based on the customer journey by simplifying business processes, business outcome driven modernization of the IT landscape, and adoption of digital and hybrid cloud at scale.

Adoption of a hybrid cloud platform is one of the key priorities that most enterprises have on their ‘To Do’ list and track progress on an ongoing basis. It depends on the organization’s business model/KPI, customer’s digital adoption, IT maturity, application landscape, and strategic alignment etc. While enterprises must continuously try to find a right balance between the on-premise and cloud-hosted applications, they are extremely dependent on several underlying factors.

The objective of this blog is to highlight the key business drivers that are crucial for enterprises to have an evolving hybrid cloud strategy.

Differentiated offerings for customers

Customers have varied expectations in today’s digital age. It is increasingly important for enterprises to have a flexible cloud strategy to meet the customer’s expanding needs. Customers must be offered products/services as a ‘partner’ by improving the well-being instead of pushing products/services in the traditional way. This requires analyzing customer data from the information available within the organization and from public resources such as social media, for which a hybrid cloud analytics platform could be very critical.

By adopting a static cloud strategy, it would be difficult for enterprises to onboard and service customers quickly as the digital enablers are constantly on the rise. In addition, in banks, customers need a unified experience across all channels through which they access the products/services. It will be possible to provide such a unified experience only if the CRM functionalities resting on cloud are able to seamlessly integrate with the on-premise transaction processing systems. Hence, hybrid cloud adoption is important.

Natural disasters such as floods and pandemic events such as COVID-19 could put an enterprise’s ‘business availability’ strategy to test. By being flexible in adoption of cloud, organizations would be able to provide uninterrupted service.

The new technology-savvy customer is hyper digital. In a banking scenario, this could be visualized through the customer journey. Applying for a loan using a mobile, upload digital documents to the cloud, get real time loan status updates on SMS, complete personal interactions with relationship manager through a video call, loan processing, approval, and getting the loan credited into the account in hours if not days. The entire journey from loan application to fund disbursement requires a combination of high-performance cloud applications coupled with best in class on-premise lending systems. This necessitates a hybrid cloud adoption model to drive synergies across the lending landscape.

Banks are increasingly adopting advanced statistical models to analyze customer data from internal sources, social media, and other publicly available information to derive meaningful insights and provide customized offers for products such as credit cards. This will be possible only by adopting a flexible cloud strategy through collaborative data ingestion and reporting.

There are businesses that need access to real time/near real time information for accurate decision making, e.g. securities and trading. Customers are also looking for customized and relevant offers from financial institutions. For instance, calculation of insurance premium based on health and claim history. Hence, it is important for organizations to capture and process near real-time information through a hybrid cloud strategy to acquire and retain customers, and improve wallet share.

Value optimization for stakeholders

All enterprises have an end objective of optimizing value for their shareholders through increased returns and capital appreciation. This would be possible only by adopting a strategy that is flexible with the needs of the business. While enterprises are keen to move most of applications to the cloud to be competitive and responsive to customer’s needs, the cost value proposition also needs to be taken into consideration. Moving applications to cloud would require strategic planning that drives integrated decisions across business units. Organizations would must plan for the right hybrid cloud strategy as it would involve a huge outlay of capital expenditure and to keep up with the principle “if it’s not broken don’t fix it.”

Enterprises should adopt a business outcome driven approach to hybrid cloud strategy. One of the major reasons why businesses are unable to realize the expected outcome from hybrid cloud strategy is because the cloud initiatives are undertaken within business units. There is a lack of enterprise-level approach.

Within the business units such as product divisions in banks, the cloud adoption initiatives could range from deployment of SaaS packages from vendors to cloud native development, and migration to cloud etc. There is a need for coherent planning between business and IT for migration to the cloud without creating more debt that is technical. Organizations must complete the proper groundwork for a hybrid cloud strategy before engaging with service providers. This involves analyzing the key priorities of business units for cloud migration, applications that need to be on-premise, options available from service providers, vendor lock-in restrictions, utilization-based pricing options, cost spread out over multiple years, and value measurement techniques etc.

Enterprises should also realize that the hybrid cloud strategy must align with the other ongoing initiatives. In organizations such as banks, there could be several parallel initiatives such as legacy modernization, Straight Through Processing (STP), automation initiatives such as RPA adoption, and decommission plans, etc. This would provide a more unified view for the banks to plan for the right investments at the right time. The outcome from the hybrid cloud strategy needs to be published to the key stakeholders. This would ensure that the stakeholders are aware of the progress and the business units are not deprived of funds when required. Also, the benefits realized from adopting the hybrid cloud strategy should be published as success stories in the website/annual reports to improve customer and investor confidence.

Industry/marketplace driven

The last two decades have seen intense market disruption from startups/fintech/digital only enterprises who are successful in gaining a sizeable market share from the traditional organizations. This would not have been possible without a hybrid cloud strategy that enabled ease of business setup and accessibility to customers. The right cloud strategy enables organizations such as banks to launch new products/services quickly. It also helps in understanding customer needs through proper analysis of their behavioral data using cloud analytics platforms and provides right products/services such as chatbot-based loan origination thereby increasing competitive presence.

Today’s marketplace is driven by niche set of players who bring in expertise by offering focused services to customers. Organizations are looking at increased strategic partnerships through an evolving business model by retaining the core services and leveraging partnerships with startups/Regtechs for specialized services such as regulatory reporting in banking. This Go-to-Market (GTM) strategy is the new normal, enabling organizations to realize improved customer satisfaction. Organizations have also realized that the ability to respond to unexpected crisis/pandemic situations is highly dependent on the flexibility of the cloud strategy being adopted.

There could be industry-wide initiatives that organizations would need to adopt to improve time to market, offer tailored products and services to customers, improve efficiency, and profitability. This would be possible only if organizations have a clearly charted portfolio monitoring mechanism of the applications that need to be retained on premise and those that need to be cloud hosted. There should be quarterly reviews of the application portfolio to assess and modify the cloud strategy with the industry view.

Regulatory considerations

All organizations are required to adhere to regulatory compliance as and when they are due. With increasing data privacy issues, ransomware attacks, and fraud incidents, it becomes increasingly important to implement rigorous security controls and data protection measures. Hybrid cloud adoption will empower organizations to classify data based on the criticality and provide enough remedial measures for access and retrieval, and prevent unauthorized usage or security lapses. In certain banking instances, regulators have also mandated that critical information such as customer data should reside within the data centers of the country. By enforcing the balanced adoption of cloud platforms, organizations will be able to meet the compliance requirements.

One of the constant challenges that organizations are gearing up for is the increasing complexity of regulations such as Basel compliance in banking. This requires huge volume of data such as customer data, facility, and collateral information to be analyzed from multiple data sources that could take weeks to process in the absence of a hybrid cloud model. There are Regtechs that offer services for regulatory compliance through As-a-Service model. This could be combined with the bank’s systems to provide a consolidated regulatory reporting through a hybrid cloud model.

To increase competition and provide better products/services to customers, regulators also come up with several industry wide initiatives such as Open Banking/Open Finance. This requires organizations to share customer and account information with each other to enable quicker onboarding, offer customized products/services, and provide relevant offers. By adopting a hybrid cloud model, organizations will be able to embrace the first mover advantage and stay ahead of the curve.

Financial institutions such as banks are adopting decision analytics capabilities using ‘Fuzzy Logic’ for credit risk modeling to predict the probability of default of prospects before lending. This requires analysis of information about prospects from a variety of sources including information provided by prospect, data from credit bureau, information from other banks, and data from publicly available sources. A hybrid cloud model could provide the much-needed scale at which information from multiple sources can be analyzed in seconds and provide a lending decision.

Efficiency enabled

Being a cloud only organization could be the vision for many enterprises but the pragmatic movement toward the same is not without its pitfalls. There are critical offerings such as core and mission critical services (e.g. transaction processing in banking) to an organization that are fine to be retained on premise and a movement toward cloud should be carefully planned and executed with a fall back option. Migration toward cloud is an expenditure intensive exercise as firms would still need to support the on-premise applications as a fall back option. Hence, a carefully devised hybrid cloud strategy would enable enterprises to be efficient.How can HCLTech help?

HCLTech has been rated as a “Leader” in the Everest Application Modernization PEAK Matrix. With more than two decades of experience in providing cloud consulting services, HCLTech has the relevant expertise and deep domain experience to fast track hybrid cloud adoption in the client landscape. HCLTech has been the strategic partner of choice for organizations in enterprise wide cloud adoption programs across multiple geographies.

HCLTech has strategic partnerships with leading cloud service providers such as Microsoft Azure, AWS, Google Cloud, Oracle Cloud, Cloud Foundry, Pivotal, IBM Cloud etc.

HCLTech scope of services include the following(not exhaustive)

  • Cloud consulting for hybrid cloud strategy design, ROI definition/measurement, and roadmap for phased approach etc.
  • Cloud native application architecture design, build, and support
  • Application runtime platform design, integration, and build
  • Application migration to target cloud platform
  • SaaS
  • Platform services such as cloud platform setup, infrastructure automation, service management, and service orchestration
  • IP’s and frameworks

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