The cloud journey: From Decision to Implementation

Migrating to the Cloud is undeniably a controversial area of discussion.

In the realm of asset management, the discourse on the use of cloud technology has gained significance.  However, migration to a cloud-based platform is not viewed without a certain amount of ambivalence.

The 2022 study by PWC ("Asset Managers Increasingly Embrace Cloud Solutions" in German language) indicates that 75% of experts in various asset management firms currently consider the importance of the cloud to be rather high. And the relevance is rising, looking ahead to the potential significance of the cloud in five years, 88% of experts predict its importance to be high.

This inevitably raises the question of why a substantial portion of asset managers still hesitate or only partially adopt a cloud strategy. Practice reveals that the majority of financial service providers operate hybrid environments, utilizing both on-premise and cloud solutions.

Approximately one-third, or 33%, exclusively work on-premise, while "only" 10% exclusively leverage cloud solutions.

The Significance of the Target Operating Model

Admittedly, the use of the cloud is not a decision that can be made overnight. It is a strategic decision that requires careful consideration in advance as it affects all areas of the business. The Target Operating Model holds a central role in this decision-making process. With the goal operating model and a successful transformation process, the bridge is built from vision and strategy to practical utilization.

An other reason for the ambivalence may be that the cloud is no longer just the cloud. In recent years, various providers have developed highly differentiated offerings. The competition for the most suitable concepts is ongoing. While there were many generalists a few years ago, individual specialists now focus on specific aspects of the value chain (see graphic below) of an asset manager.

Cloud Terminology is Evolving

Furthermore, terminologies have also evolved steadily in recent years. In addition to the three main service types of SaaS, PaaS, and IaaS, other service types such as BPaaS orXaaS are increasingly in focus. However, other designations show once again that technical understanding is essential when venturing into the cloud. The former separation between business departments and IT departments is dissolving further. Business and IT-related questions are hardly separate from each other. Understanding what each term means and how they differ is crucial to making the right decision for or against the cloud. Along the decision-making path, there are other terminologies to consider, where understanding the technical aspects is crucial: What is the exact difference between hyper scalers and cloud vendors, for example? What aligns better with my defined business and IT strategy?

It is also important to consider the reasons for transitioning to the cloud. While there are countless advantages to a cloud strategy, there are also some pitfalls that should be carefully considered. Even though improved scalability, increased flexibility, and cost savings are undeniable, the cloud is not a one-size-fits-all solution. Nevertheless, the cloud can open a multitude of doors for asset managers, especially in light of current challenges such as rising interest rates, increased cost consciousness, growing financial regulations, and the ongoing effort to mitigate operational risks, through improved time to delivery compared to many traditional on-premise solutions.

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In conclusion, there is much to consider. Even if the general trend towards the cloud has been recognized, business strategy has been modified, technical understanding is present, and the benefits of the cloud are clear, the final implementation is still lacking. Concrete, predefined questions and parameters for self-assessment are needed, from the number of IT interfaces to the amount of managed assets and much more. Because one thing is clear: the increased offering in the cloud sector illustrates that there is no standardized solution that is equally suitable for every asset manager. Even less so, a single cloud provider is sufficient to cover all parts of the value chain at the highest level. The crucial aspect here is, first and foremost, a clear overview. To assist you in this journey, we have created the article series 'Cloud Journey,' serving as a guide and companion in the consideration for or against a move to the cloud.

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Author: Boris Brosche