Financial institutions that let go of non-core IT, gain market-beating agility
Transformation to digital is more than a technology turning point for financial institutions. It’s a business model make-over. You have to quite literally put yourself in the hands of your customers by servicing them in real-time through their digital devices of choice.
You can’t do that using the industry’s thirty year-old operational structures built around product design, acquiring and owning hardware, developing proprietary and complex software, and employing large teams of specialists to run it in your own data centres. The only way to modernise fast enough and then maintain agility on an ongoing basis is to exploit third-party owned and operated platforms. Their economies of scale, cutting edge technology, and consumption-based, on demand billing inherently position you to focus all your attention on redefining your customers’ experience.
The writing is on the wall
According to Gartner’s 2015 Banking and Financial Services report, the financial services industry spends 6.5% on IT as a percentage of revenue and 8.5% as a percentage of operating expenses. No other sector spends as much. Most (64%) of the industry’s IT spend goes to IT operations, with only 22% and 14% going towards growth and transformation respectively.
There’s immense pressure on reducing the 64% “run” cost. However, because they’re ageing, extant systems are becoming progressively more expensive and complex to run while delivering less and less value to the business and the end customer. Also, along with infrastructure and licenses, operational and people costs are continuing to rise. So, the incumbent cost model itself prohibits growth and transformation.
With cost-to-income ratios of the top 50 global banks in Europe sitting between 42% to over 102%*, it’s imperative that institutions go back to their knitting – which is the development and delivery of relevant products and services. In a digitising world, this needs to happen in a flexible and agile manner that supports continuous innovation. So, all you need is access to the necessary platforms and supporting operations. Ownership of the technology and related services is irrelevant.
Save up to 50% and fundamentally change the business
Access versus ownership brings significant cost benefits. By moving to an opex or consumption-based model – via the cloud, outsourcing, and managed services, many leading banks have slashed their operating costs by as much as 50%. They’ve then used the freed-up capital and reduced ongoing operational costs to fund growth and transformation.
So, using a third-party platform doesn’t just put savings back on the bottom line. It enables you to reshape your business, your customers’ lives, and the entire market.
The quickest way
The optimal ‘as-a-service’ model is a hybrid one. Business productivity and supported workloads, such as Microsoft Active Directory or Exchange, are moved to consumption-based models directly out of the cloud. Custom-built applications are managed on-premise or in a private cloud, under a single outsource or managed service contract, and the public cloud is used to rapidly evolve the front end.