U.S. Bancorp has decided to move most of its software applications to Microsoft’s Azure cloud over the next few years.
The two companies announced the deal on Tuesday. The bank declined to say how much it is spending on this migration or the cost savings or revenue increases it anticipates.
“This is a major investment,” said Dilip Venkatachari, U.S. Bank’s global chief information and technology officer. “We are a financially disciplined organization. So we have structured every step of that to be as thoughtful and as efficient as possible. And we do plot as part of this cloud migration to further simplify and consolidate our data center footprint, and that will lead to efficiency gains.”
With this move, the Minneapolis bank is joining many of its peers. Accenture published research last week that found that 82% of bank executives intend to move 50% or more of their mainframe software to the cloud.
“That is a significant shift from the data that we had collected prior,” said Nichole Lanza, managing director – technology strategy and advisory for banking cloud at Accenture. “What surprised us even more was that more than 75% of the workloads were expected to go [to the cloud] over the next five years.”
Over the past year, many of the security, risk and compliance challenges have been solved for banks around cloud computing, she said.
“And the technology has matured,” Lanza said. “We have the technology to automate the migration of the workloads.”
Why Azure
The bank chose Microsoft Azure after going through a rigorous evaluation process with all three major cloud providers — Amazon, Google and Microsoft — over the course of several months, according to Venkatachari.
“We considered a variety of technology issues, what's best from a risk and compliance perspective and security aspects as well,” he said. “And we concluded that Microsoft Azure would meet our needs the best, in terms of their approach to partnering and working together. And frankly, it also helps us further a deeper business partnership that we have with Microsoft.” Bank staffers already use the software giant’s Office 365 and Teams, for instance.
Security and resilience were big topics in the talks between U.S. Bank and Microsoft, said Bill Borden, corporate vice president of Microsoft’s Worldwide Financial Services.
“A lot of those conversations were about how we continue to engineer and invest in resiliency,” Borden said. “How do you recover [from a data breach or an outage] and what protections do you put in place around that? I don't think anybody's going to stand up and say they’re 1000% sure that it won't happen.“
The partnership between U.S. Bank and Microsoft also goes the other way: The companies will look for further opportunities to embed U.S. Bank's payment capabilities in the Microsoft platforms that businesses use to generate invoices and to send and receive payments. Some of these are already functional and others will go live in 2022 and 2023. For example, today, some heavy machinery dealers that use Microsoft Dynamics 365 can accept and process payments through U.S. Bank’s merchant processing business, Elavon.
What will go to the cloud first
The bank plans to move the “vast majority” of its applications to Microsoft’s hosted environment over a few years, Venkatachari said.
It will start with customer-facing applications in consumer banking, small business banking and wealth management, he said. It will migrate several application programming interfaces that will enable partners to have better, real-time data access.
And the bank plans to move what it calls its “unified data platform” to the cloud in the first phase. This is a single data platform that most of the bank’s applications read from and write to, and that should help integrate process silos and make real-time data more easily available.
It is hoped that by moving customer-facing applications to the cloud alongside that trove of real-time data at the outset, the bank will be able to deliver a more tailored, personalized experience to customers.
“We'll push those first because we'll be able to better leverage AI and machine learning in the cloud,” Venkatachari said. “We also want to migrate as quickly as possible the applications that service many of our large partners, like Fidelity and State Farm.” U.S. Bank issues credit cards for Fidelity. It offers consumer and small business products that State Farm agents can sell to their customers, which gives the bank a way to sell products in the 24 states where it doesn’t have a retail banking presence.
As it moves software to the cloud, U.S. Bank is also adopting modern development tools and processes, Venkatachari said. And it’s reengineering processes to make them simpler and to reduce administrative burdens on developers. This, it is hoped, will make the bank nimbler and able to bring new products to market faster.
“We are refactoring quite a few of the critical applications to be more API-enabled and more services-enabled,” Venkatachari said. “And along the way, we are also trying to get this new development pipeline pushed to them. So we are not simply lifting and shifting the applications to the cloud, we are actually refactoring them along the way to extract benefits.”
The bank’s mainframe-based core systems will continue to live in its data centers.
“But in terms of workloads and number of servers, that's a much smaller portion of the overall puzzle,” Venkatachari said.
U.S. Bank is investing heavily in retraining its technology staff to work with cloud technology and more modern devops, he said.
“In my long career in technology, the technologies that we all have to learn have changed so many times,” Venkatachari said. In prior jobs he worked at Google, PayPal, Fiserv and other tech companies. “This is just one more.”
The bank has also been hiring new staffers who are proficient with modern and cloud technologies, he said.
“As you look ahead, all banks will have to be investing a lot in change, in learning and in skill development, because the pace of change is increasing,” Venkatachari said
Borden said that companies that adopt cloud computing will attract the best and brightest talent.
“It kind of starts to feed on itself in terms of the efficiencies that you gain from the technology of taking out core costs from infrastructure, but also the efficiency gain on the talent, with regards to actually attracting talent to come work on your digital transformation efforts,” Borden said.
