A 2023 report from Forrester about the state of cloud in financial services found the most important factor for the global financial services employees it surveyed in adopting public cloud, albeit by a thin margin, was to lower the total cost of ownership for servers and storage. (Respondents also named business continuity, fast and easy resources for testing and development, the ability to scale globally, and improved agility to meet compliance regulations as important factors.) Meanwhile, a 2023 report from Accenture about the realizing the value of cloud found that one in three banks and capital markets firms report that they have fully achieved their expected cost savings from their cloud investments. That suggests for two-thirds, the anticipated savings have not been met.
"The jury is out whether there is truly a cost benefit," said BJ Losch, president of
Live Oak, which has $11.9 billion of assets, was built to be cloud-native from its founding 16 years ago. Its cloud provider is Amazon Web Services, or AWS. But Losch spent time at a previous bank evaluating whether it should move to the cloud. He said a decision based purely on cost is flawed.
"It's got to be broader than current cost," Losch said. "It's got to be for scalability, security, and for the innovation that I believe will come with cloud computing and the ability to access data from a wide variety of sources versus captive sources like data centers."
On the
For many banks, transitioning applications to the cloud is not about saving in the narrowest sense of the word. It's about other factors, such as scaling capacity up or down to meet demand and for the ability to run complex models and analysis more easily when deploying artificial intelligence and generative AI.
The Minneapolis-based bank announced it would partner with Microsoft Azure as its cloud provider early last year. Now it's getting its tech team cloud-ready.
Will Thomas, who leads consulting firm Protiviti's Cloud Optimize practice, recalls a chief financial officer of a financial services company telling him he wanted to save a flat $5 million on cloud spend. Some clients, he finds, simply want to cut costs. But another priority — optimizing the use of cloud — could mean using money more wisely and reinvesting it elsewhere in the business.
Those clients want to "be informed or have observability of what's going on," said Thomas, meaning they want to be aware of the company's cloud spend and how they can take advantage of different pricing models for cloud usage, such as savings plans or reserved instances.
Michael Abbott, who leads Accenture's banking and capital markets industry group, finds banks adopting the cloud may have expected that they would save money on compute, but instead the benefit comes in the form of using modern, open-source applications to speed up development and cycle times.
"Cost savings come through productivity on the development side and ability to get at capacity on demand," Abbott said.
In fact,
Banks typically move operations to the cloud in four progressive stages, Abbott said: enterprise applications, such as customer relationship management systems or video meeting capabilities; data; channels, including online banking, mobile banking and call center capabilities; and the core system.
Most banks he sees are in the data stage, and very few have moved their core systems and mainframe applications to the cloud.
"Almost everyone is engaged but almost no one is fully there," Abbott said.
Arvest Bank in Fayetteville, Arkansas, is midway through its journey. The $26.3 billion-asset bank has spent two and a half years migrating to Google Cloud and other providers; the project is slated to end in 2027, when Arvest will predominantly operate in the cloud.
Already, "we are seeing that return," said Mark Chastain, executive director of information technology at Arvest. "When you have an on-prem data center there is a lot of care and feeding of the data center and underlying infrastructure," which includes updating firmware and hardware and conducting preventative maintenance on equipment. "That allows us to take those engineers and use them to do other things."
Moreover, Chastain finds that Arvest can test new technology faster in the cloud and provision storage, networking and compute within minutes. He has observed a mindset in the bank that it can adopt technology at a faster pace than before.
To optimize its spending, Arvest has autoscaled within its compute environment, meaning it has automated the way it increases or decreases its compute, memory or networking resources to align with traffic spikes or use patterns. It also only runs its development and test environments when needed, and powers them down when not in use.
A bank will reap the most benefits if it has a team in place to optimize the use of cloud, Thomas said. This includes a FinOps, or financial operations, practitioner, which could mean taking a technical financial analyst, certifying them in FinOps, and training them on cloud services.
Arvest has set up a Cloud Center of Excellence, or cross-functional team responsible for cloud adoption, governance and best practices. It also has a FinOps practice to monitor cloud expenses and ensure the bank stays within budget.
For Tracy Woo, a principal analyst at Forrester, it has long been understood among North American banks that the cloud does not save money per se but affords access to high-performance computing or unusual infrastructure.
"It is getting you to market sooner and quicker with access to services you wouldn't necessarily want to [invest in] within your own data center" she said.
