Becoming Digital Native | NTT DATA

Tue, 30 November 2021

Becoming Digital Native

And why it takes careful planning…

The main reason why large banks are moving to Cloud is financial. They want to get rid of their legacy technology debt as fast as possible. Who could be surprised at that?

Maintaining the legacy systems of a major banking group is a huge and costly problem. And we all know why. Core banking platforms have grown up over many decades, with new services requiring new platforms and applications. Most applications portfolios are now huge and dizzyingly complex. Some applications are so old no-one knows how to write code for them. Some hardware is responsible for tasks that may or may not be important: to be honest, nobody really knows.

Meanwhile, attention is focused on challenger banks, FinTechs and other newcomers to the market. They have no legacy debt. They are “born on the web”. They are “digital natives”. They have no weight to carry. They can move where they want, when they want, how they want.

Large banking groups want to be a bit more digital native, a bit less about legacy debt. So what is the most rational and practical way of getting what they want from Cloud?

Moving faster

Large banking groups have great strengths: millions of customers, omnichannel coverage of multiple market segments, extremely powerful brands and a great deal of expertise. They are ready, able and willing to lead evolutionary change in the financial marketplace, but they need to work in different ways to do this.

For a start, they understand how to work with ecosystem players, FinTechs and innovative start-ups, rather than laboriously develop every service they need in-house. They need to be more responsive to customer needs and faster into the market with new concepts.

But how are they to do all of this while still carrying the huge, dead weight of history on their backs, in the form of their existing infrastructures? Simple answer: they can’t. That’s why the move to Cloud is vital. It needs to be fast and financial benefits need to be realised at speed, freeing the business to seek new opportunity in a rapidly-changing market.

Trouble is, as we saw in our first blog post, “banking” those targeted Cloud-related savings takes time. Costs go up during transition, and that makes it harder to change, not easier. It’s a real Catch 22.

We think the solution is to go cloud native now, without waiting for the whole process to be complete. But how?

Off The Shelf Solutions

The move to Cloud allows banks to decommission large parts of their infrastructure. They can also emulate real “born on the web” businesses by acting in a Cloud Native manner:

  • Co-creating with ecosystem partners
  • Speeding development and testing through agile methods (DevSecOps)
  • Getting new concepts to market fast, at low cost and risk
  • Innovating to the point where “market of one” solutions are completely feasible.

The key to early monetization of Cloud is to use Commercial Off The Shelf (COTS) solutions. By taking ready-made, proven concepts, then customising them to suit their exact needs, banks can enter the market as cloud native players early in their strategic transition. We see three main benefits:

First, close legacy faster. Using an off the shelf banking platform for an increasing proportion of your go to market activities leads to earlier retirement of infrastructure and faster cost savings.

Second, launch new products faster. Digital native methods mean you can get services up and running at speed, enter multiple segments and geographies faster and compete better. That’s how you start to monetize Cloud early.

Third, transform at lower risk. Moving fast into the market as a digital native business makes it easier to attract different kinds of staff and to build relationships with technology and market innovators. This means the profile of your business will evolve relatively painlessly, without disruption.

The summary is simple: to accelerate time to profit, you need to become very comfortable with using standardised solutions, built from standards-based components. It’s a Cloud paradox.

 More accurate targeting, market of one approach, hyper-automation and ultra-customisation: these are the classic Cloud advantages. To maximise them all as fast as possible, you need to make best use possible of standard solutions. Can we give a real-world example or two? Yes, and we will do just that in our next blog post.

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