Innovate or die.
That’s the message financial services (FS) organizations are being told on a daily basis in the wake of agile Fintech start-ups disrupting the sector. Ex-Barclays CEO Antony Jenkins is one of many to suggest that Fintech is about to disrupt the FS sector permanently, with indications that new technology could shrink some areas of banks’ profitability by up to 60%. Yet even though 27 per cent of senior bankers suggest tech companies are the biggest threats to their business, many FS organisations are still continuing to operate at the same pace, with new technology facing a slower than anticipated uptake.
The tremors, however, are enough to have sparked change, and as Currency Cloud CEO Mike Laven notes: 'innovation is a domino effect. While these start-ups may not necessarily be a threat to FS organizations, the fact that their major competitors are ready to take on some of these tricks certainly is cause for concern.'
Out with the old and in with the new?
While some FS organizations are truly rising to the challenge, seeing this as an opportunity to grow and innovate through change, it often isn’t as simple as ‘out with the old and in with the new.' Being able to completely redesign an IT infrastructure isn’t a luxury most organizations can take on in one go, leaving many in an era of transition as they attempt to move away from traditional IT approaches and towards a cloud-based approach.
Committed to running much of their mission critical processes across a pre-existing IT estate, many FS organizations have built on their existing legacy IT infrastructure, adding cloud services as an extension or as a replacement for end-of-life solutions. Organizations are now building, against a long-term strategy, increasingly sophisticated estates using a variety of traditional on-premise solutions alongside external services – including public cloud, co-location, or managed hosting services. This is Hybrid IT.
For some, this approach has brought multiple benefits. Our recent research found that 38% of FS organizations felt Hybrid IT was essential for keeping on top of external regulations and compliance requirements, while 17% of FS businesses have enjoyed greater levels of availability as a consequence of their Hybrid IT deployment. Further still, around half (47%) of FS organizations found that Hybrid IT could increase business agility and 26% found it allowed for greater overall governance of data – a critical factor for such a heavily regulated industry. For these organizations, Hybrid IT is a step in the right direction on the road to staying competitive in the face of innovation.
The Dark Side of Hybrid IT
Despite over a third of FS organizations (37%) considering Hybrid IT as a necessity in staying competitive, it seems to be posing a threat. Ironically in a sector now so focused on keeping up with new technologies, a worrying 48% of respondents confessed that they are now struggling to innovate thanks to the complexity of their IT infrastructure.
Adding further insult to injury, this complexity has also added an £158,556 per year to the FS sector’s IT bill thanks to increased operating costs as businesses struggle to maintain IT security and data integrity (35%), keep all aspects of the infrastructure available (30%), and ensure all platforms are interoperable (30%).
While it’s clear that some FS organizations are missing the mark when it comes to managing their IT, as discussed, many are reaping the rewards. To keep the FS sector on the road to innovation, organizations must do the following:
Plan the route to innovation
You must know the steps you’re going to take with your IT to keep up with the industry – and proactively plan the IT you’re going to instate to drive innovation, rather than appearing to simply react to issues.
Recognize cloud isn’t a silver bullet for innovation
The cloud can be great for some projects, but not all applications are suited to this technology. Additionally there can often be interoperability issues when the wrong cloud solutions are deployed, and running incompatible applications can cause major problems. Thus while cloud may seem like a one-size-fits-all route to innovation, some processes will run more effectively on pre-existing systems: it’s vital to take all factors into account and not rushing into the cloud can save incompatibility problems down the line.
Familiarize yourself with your emergency exits
Tying yourself into a cloud provider without a get out clause is a dangerous game – what if they’re unreliable, have frequent outages or fail to meet pre-agreed expectation. CIOs must make sure their organization is protected and that doesn’t just mean adding another cloud supplier to the heap. The right provider, the right SLAs, the right KPIs and how to terminate in the event of any issues are imperative.
Stay in control of your IT estate
Having the right skills to manage your IT estate is integral to being able to innovate further. While some FS organizations will have the in house expertise to vanquish their demons without extra support, for others, bringing in the right expertise is fundamental (as 61% of our survey respondents revealed). Although having those specialists in-house might be the preferred option, the wide range of platforms and technologies which comprise a Hybrid IT estate can make this an expensive and near-impossible option. In this instance, a Managed Services partner – whether used just to advise or to offer full infrastructure support – can be an essential, providing the basis for innovation at all levels of the business.
While it’s clear that a successful IT estate doesn’t come overnight, and it’s important that FS organizations plan their attacks before they embark to maximize their innovation strategy. Casting a light into the darkest corners of the data centre can give a better understanding of each application and services’ importance to the business. Not all technologies or processes are equal, so getting to grips with the knowledge of these requirements will help encourage a successful Hybrid IT strategy, decreasing long term costs and most importantly, creating the right environment for innovation.