In the World Cloud Report 2023, an impressive 91% of banking and insurance executives surveyed recognized the pivotal role of cloud technology in driving business growth.
This surge underscores the strategic adoption of cloud capabilities to enhance operational flexibility and boost efficiency in the banking sector. The allure of the cloud lies in its promise to streamline processes and reduce costs, offering banks a competitive edge.
However, migrating deeply entrenched legacy systems introduces significant challenges. These systems, built on outdated technologies, complicate transitions due to their complex dependencies and extensive historical data.
Addressing these challenges requires robust migration strategies, stringent data security, and effective cost management. Forming strategic partnerships with experienced cloud migration service providers can alleviate these difficulties.
This article will explore the top six challenges banks face during cloud transformation and discuss strategic solutions to ensure a secure and efficient shift to the cloud.
So, without further ado, let’s look at each of the challenges one by one.
1. Performance Diagnosis Dilemmas
Legacy banking systems, deeply intertwined with regulatory compliance, stringent security requirements, and massive transaction volumes, add layers of complexity to the cloud migration process. This complexity can result in performance issues that are difficult to diagnose. Identifying the root cause of these issues can be challenging, as they could originate from the cloud service provider’s infrastructure or the bank’s implementation strategy.
A recent Forrester study for Google highlights this concern, with 38% of respondents agreeing that performance issues with workloads migrating to the cloud pose a major challenge. Not promptly addressing these issues can adversely impact system performance and degrade customer experience (CX). For instance, an issue such as delayed transactions is sufficient enough to ruin a customer’s trust in the bank.
To avoid or address such issues, it is essential to establish a practical migration roadmap. Banks should develop a cloud architecture compatible with their legacy systems, minimizing inconsistencies.
Additionally, working with a team of experts in application performance management can be invaluable. These specialists use cloud-based monitoring tools to track application performance metrics, identify bottlenecks, and optimize crucial components, thereby enhancing overall system performance.
2. Application Adaptation Barriers
Migrating legacy systems to the cloud presents application adaptation barriers, primarily due to architectural differences, hardware dependencies, and interoperability issues. These can prevent applications from functioning optimally or not at all, plus expose the system to external attacks.
To overcome these challenges, banks need to modify their application stacks for the cloud. This includes refactoring, which adjusts the code to leverage cloud benefits such as scalability and access to managed services. Implementing microservices instead of monolithic architectures allows for independent scaling of services, enhancing flexibility and efficiency.
Each bank’s system varies in complexity, requiring a tailored evaluation of the legacy ecosystem to identify compatibility issues and determine the best migration strategy. Given the complexity, collaborating with a cloud engineering vendor can streamline this transition. These experts assess the bank’s readiness for the cloud, review architectural and code aspects, and recommend effective migration strategies.
3. Hybrid Cloud Environment Challenges
Hybrid cloud environments, which integrate on-premise legacy systems with cloud solutions, present significant challenges, such as integration complexity and the management of disparate systems. This complexity explains why 30% of IT leaders consider robust support for hybrid clouds non-negotiable when selecting a cloud provider.
Let’s consider the risks involved in moving large volumes of data between on-premise and cloud systems—it’s a minefield! Even the smallest errors can lead to significant issues such as security vulnerabilities, data inconsistencies, and compliance problems.
Managing these dual environments isn’t easy. It requires additional tools and processes, naturally increasing operational complexities. For instance, pinpointing the source of an unplanned outage can be extremely challenging in a hybrid setup.
To tackle such issues, banks need rigorous data validation, testing, and backup processes to ensure data consistency and synchronization. Implementing observability tools for comprehensive monitoring of applications can help manage operational complexities.
4. Multi-Cloud Coordination Complexities
The financial services sector may have initially been slow to adopt cloud technology, but it is now catching up by increasingly using multi-cloud strategies. According to the Cloud Security Alliance, 57% of financial services organizations are already using multiple cloud providers. This is significant as using multiple cloud providers increases system reliability by reducing dependence on a single provider, enhances data security by distributing data across several platforms, and ensures compliance with regional regulations by allowing data to be stored in specific jurisdictions as required by law.
However, managing multiple cloud platforms presents considerable challenges. Synchronizing data, maintaining security standards, and ensuring consistency across various clouds can be daunting due to different storage formats, APIs, and data protocols. Monitoring security and identifying threats across different clouds can also be cumbersome without comprehensive tools.
Banks must ensure compliance with industry-specific, regional, and financial regulations for each cloud provider, often requiring thorough auditing and reporting mechanisms. And to precisely address such issues, banks should implement standardized API and integration frameworks, rigorous data validation, synchronization processes, and comprehensive monitoring tools.
5. Migration Execution Obstacles
Considering the complexity of banking systems, an incorrect migration approach can lead to slow data transfer, cutover complexities, and downtime. These issues can adversely impact a bank’s performance and reputation. Slow data transfer risks data integrity due to timeouts, interruptions, and partial transfers. Downtime can damage our customer experience and lead to revenue loss.
To avoid slow data transfer, banks should use dedicated high-bandwidth connections and multiple parallel transfers, prioritizing critical data sets to ensure integrity. A detailed cutover plan covering infrastructure, configuration, change management, project management, code migrations, and data conversions is essential to minimize customer downtime.
A cloud migration consultant can assess the system’s complexity and bank requirements, recommend the optimal migration approach, select appropriate high-bandwidth solutions, and design a comprehensive cutover plan for a seamless migration.
6. Cost Escalation Risks
Cloud service providers offer banks an operational expenditure model with pay-as-you-go pricing. However, cloud migration can be costly if not managed properly, as underutilized resources and unoptimized applications can escalate expenses—32% of cloud spend is often wasted.
To control costs, banks should use cloud migration planning tools to set scenarios for different use cases, generating plans that identify cost-saving opportunities. Cost optimization should be considered at every SDLC stage: planning, development, testing, deployment, monitoring, and maintenance.
Managing underutilized resources involves downsizing or removing them based on future requirements. Methods like autoscaling, rightsizing, and spot instances help optimize expenditures. Deploying real-time monitoring and analytics enables banks to track usage metrics and adjust costs accordingly.
Addressing these challenges requires experience, expertise, and a tailored approach to cloud migration.
Why Banks Choose Avekshaa Technologies for Cloud Migration
The banking industry operates under high stakes concerning security, customer experience, and compliance. Any disruption in these areas can have cascading effects on the entire system. With cloud migration challenges, partnering with an experienced cloud migration service provider is crucial.
That’s where Avekshaa steps in! With over 60 enterprise customers and a 70% repeat business rate, Avekshaa leads in cloud engineering solutions. We offer comprehensive Performance, Availability, and Scalability (P-A-S) readiness assessments to ensure seamless cloud migration for banks.
Our offerings include:
- Cloud migration
- Performance monitoring and optimization
- Database scaling and optimization
- Application performance testing
- Microservice architecture on the cloud
Our P-A-S-S™ (Performance, Availability, Scalability, and Security) Assurance Platform is built on the company’s core IP and methodologies and sets us up to deliver consistent, top-notch results.
Don’t just take our word for it; here’s a case study on how we helped a prominent rural banking service company offering financial services scale a bank’s transactions from 29,000/day to 300,000/day without any stoppages—a whopping 10x growth within a span of just eight weeks!
Discover the key benefits that Avekshaa offers:
- 2x-10x RoI on IT investments
- 150%+ average improvement across projects
- Excellent customer experience and employee productivity
- Proven track record of solving 5000+ complex problems, predicting and mitigating technology failures
Ready to unlock your banking application’s full potential in the cloud and improve profitability, customer service, and operational efficiency? Get in touch with the experts at Avekshaa Technologies and see how you can get a competitive edge in the industry.
FAQs
1. What is the core banking data migration strategy?
A core banking data migration strategy includes system assessment, data mapping, cleansing, migration approach, pilot testing, cutover plan, validation, performance monitoring, user training, compliance, and documentation to transfer data with minimal disruptions.
2. Which cloud deployment model is suitable for banks?
The suitable cloud deployment model (public, private, hybrid, or multi-cloud) depends on the bank’s specific requirements for security, performance, and costs. Consulting a cloud migration provider like Avekshaa can help determine the best fit.
3. What are the costs of cloud migration?
Cloud migration costs vary widely, ranging from $5,000 to over $500,000, influenced by factors such as infrastructure setup, provider fees, data transfer, refactoring, and post-migration expenses.
4. Which is the best cloud migration services company for banks in India?
Avekshaa Technologies is a leading cloud migration service provider for banks in India, with over 60 enterprise clients and 12+ years of experience, offering solutions for performance, availability, and scalability.