Ever heard the saying, “The Cloud is just someone else’s computer”? This is one of the many arguments I encountered as I became an early adopter in 2010. While it is technically true, it misses the point: the inherent flexibility and benefits of the “Cloud” maximize the chances of differentiating your company from its competitors, especially in financial services.
One might assume that being an early adopter in 2010 means I worked for a small startup with minimal regulation, but it was actually quite the opposite. I faced opposition as the CIO of a subsidiary business within a publicly traded financial services company. We eventually received approval because our business case was solid, and we were able to prove the Cloud was mature enough to protect our client information. That was eight years ago. I will unpack this personal experience later (See “My Experience – Scenario 4”) as we talk through a few scenarios for which Cloud should be a major consideration.
It’s important to start by addressing the inherent benefits of the underlying technology behind the Cloud, built to shorten the time and reduce the upfront costs to set up a usable environment if implemented correctly. This innate ability gives businesses the power to:
- Reduce test and learn investment
- Access an ever-growing library of tools for solving the business’ most common problems
- Leverage native scalability and redundancy capabilities
- Transition to a flexible OpEx spending model
With that basic technical foundation in place, I have considered the Cloud for many different reasons, in multiple scenarios, and have included them below to help you think through all the possibilities.
Cloud Evaluation Scenarios Within Financial Services
Insurance – Scenario 1
Imagine an insurance company with minimal investable cash, burdened by past unsuccessful product launches. Compound that with the complexity of state filings and building products on legacy systems. The net result is a multi-million-dollar investment for testing and learning. This baggage has malformed the industry over the years to pump out commoditized products competing solely on rates – a race to the bottom. What if your company fully leveraged the technology by spinning up just the underwriting/suitability and policy administration modules in the cloud, and then transferred the issued policies in-house after proving out the product? Wouldn’t that cultivate innovation? Before you think I am crazy, think through today’s Cloud and admin platform capabilities, and TPA maturity – it can be done!
Marketing – Scenario 2
Your marketing department is seeking to maximize ROI by identifying the most profitable customer demographic with a high propensity to buy. In Insurance, that means the data resides across the underwriting, policy administration, and claims systems. Include the time dimension complexity and that could span 30 years. Your company could be operating sub-optimally while the PMO and IT teams are sizing up the business case to build a data warehouse and identify the right enterprise tools. What if, instead, the company banded together to test a cloud-based analytics platform? Migrating a slice of the data would require minimal time and money investments. If that doesn’t meet your needs, move on to the next tool and double down to scale the solution once you identify the right one.
Strategy – Scenario 3
My personal favorite is when you come out of a strategy meeting with certainty that the next big idea you just discussed will be the market differentiator for your company. In likely the same meeting, you had been challenged to stay within your current IT budget. However, every budget I’ve owned had a substantial number next to the line item called “depreciation,” or, as I like to call it, continuing to pay for your past sins. Since the Cloud provides the opportunity for minimal upfront investment, making the transition to categorizing costs as operating expenses could be more palatable. Imagine what you could accomplish with a more flexible budget. Would that give you more freedom to reassess and pivot spending as needed for the next big idea?
My Experience – Scenario 4
My first Cloud endeavor was a ground-up e-commerce build with lots of hooks into our enterprise applications. As I look back, it wasn’t the ideal scenario, but you’ll find very few that are. My primary rationale for the Cloud was to right-size the upfront investment because of unknown demand. We were building a B2C e-commerce solution offering an insurance service as the product. We didn’t have experience on which to base our traffic, since this was a first for the enterprise. So, the options I had were to either diminish the business case by paying upfront for idle capacity or lowball it and risk the user experience while taking weeks to fix it. The easier option was to advocate for a Cloud solution until we had a good baseline for the volume. We built this solution with less than $10K in operating costs over six months, as opposed to the $200K I would have been forced to pay for on-prem set up. After successfully launching, we saw yet another benefit: we learned how to forecast the volume per marketing campaign and scale the environment appropriately, ultimately optimizing our operating costs.
Pitfalls Many Companies Miss During Implementation
Before you jump into the Cloud car and hit the gas to catch up, have you checked to see if the seat belt works? How about the brakes? Don’t go barreling towards the Cloud at 100 miles per hour just yet; make sure you are adopting the cloud responsibly. I’ve listed a few pitfalls to watch out for below, including some I encountered during my cloud journey.
It is imperative to take your people along for the ride. I recently heard a CIO frustrated with his CTO because he was handed a five-year roadmap to the Cloud. When asked why five years, the CTO cited the time necessary to cycle out his existing team. There are four main problems with this approach:
- Your company’s long-term viability is in question if it can’t keep up with the pace of change;
- Your people are being undervalued if you assume they can’t change without being given a chance;
- You are depriving them of new, valuable, and marketable skills; and
- They will be your biggest obstacles if you don’t spend time with change management.
In every leadership role I’ve had, I am always amazed with my team’s ability to evolve when given the proper positive motivation.
Create policies and procedures relevant to your industry’s regulatory landscape. Otherwise, your attempt will be used as an example of why the cloud isn’t ready for the enterprise. Just this month, I sat down with a Cloud architect who had been recently hired by an online retailer and the frustration was palpable. Their Cloud transition was being artificially slowed because security, legal, and compliance didn’t have policies in place to match their desired speed, which is a common problem. In my experience I mentioned earlier, our Cloud endeavor was an e-commerce application, specifically around collecting credit card and health information. To ensure we were compliant, I worked with the networking, IT security, legal, and compliance teams to responsibly tailor existing policies to suit the Cloud. It turned out that we had to adhere to PCI, HIPAA, and SOX, to name a few. For financial services, one would have to consider GLB, CFPB, FDIC, and others. Taking the time to build a solid foundation accelerated our buildout.
Don’t forget the data! Unless you are a small startup, business processes will span across multiple systems within your organization. Architect the Cloud solution to factor in both the consumers and providers of the essential data, because there are two sub-optimal outcomes if you don’t. The first is that your ongoing costs to access and/or migrate the data will skyrocket. Secondly, and more importantly, you will lose track of all the places your sensitive data resides, which is a current problem for a mid-market L&A insurance carrier, according to their CISO.
At the end of the day the Cloud is literally someone else’s computer, but with nearly infinite scaling and redundancy potential. To act in the best interest of your company, you must, at the very least, evaluate what benefits, if any, you can leverage from Cloud. And once you decide Cloud is right for you, as I suspect you will, you must understand it and plan appropriately to maximize those benefits. For me, that was the key ingredient in creating an environment that reduced my time to failure and its associated costs. Like Uncle Ben said to Peter Parker in the Spiderman comics, “with great power comes great responsibility”.
About the Author:
As a Financial Services Architect at Impact Makers, Aditya Mehta is a seasoned executive who guides businesses to realize results by tailoring leading-edge technologies like cloud, factoring organizational culture as part of the transformation journey to ensure it sticks.