The cloud is not new, but it remains incredibly important. Yes, leaders at financial services institutions continue to worry about the cloud’s ability to meet their strict security and privacy requirements. However, threats like cyberattacks are not stopping them from moving to the cloud. There are simply too many more advantages to operating in the cloud compared to on-premises.
In Gartner’s The Financial Case for Moving to the Cloud, three positive financial aspects of leveraging the cloud were outlined:
- Greater cost agility with infrastructure as a service: Cloud services have a high degree of cost variability, so expenses can quickly go down if demand for services is reduced.
- Increased retained cash: With cloud/on-demand services, CIOs do not have to invest upfront to buy IT infrastructure via regular refresh cycles.
- Reduced opportunity costs: Opportunity costs are defined as the value foregone by pursuing a certain course of action. By choosing to use cloud/on-demand, a company can free up funds to invest in other aspects of the business.
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The benefits of moving to the cloud are fairly obvious. Operating in the cloud is less expensive than building out and maintaining a sophisticated and regulatory-compliant technical infrastructure on-site. By not having to purchase hardware and hire expert resources, leveraging technology in the cloud will continue to become the standard across all industries, albeit at slower pace in some financial services segments, such as insurance.
Gartner’s Digital Maturity Assessment indicates that more than 50% of insurers are running more than half of their core insurance applications, such as those relating to policy administration and billing, on mainframe systems. As companies scramble to simplify aging systems through consolidation and outsourcing, agility is a key driver for systems investment and renewal, making the cloud a great prospect.
A recent Wall Street Journal article outlined J.P. Morgan’s $9.4 billion technology spending plan, 40% of which will be allocated to new investments and technology. While new investments and technology are essential, part of the company’s plan is to also trim excess cost. For applications that need to be consolidated and replaced, you can bet those new solutions will be in the cloud.
To learn about other priorities financial services organizations must have in mind in order to spur and sustain growth, fill out the form below or click here.