Hybrid IT: The Digital Transformation Pathway for Financial Services

April 26, 2018
Cloud, Financial Services, Hybrid IT

Path to Digital Transformation

To the average consumer, banks and other financial services companies appear to be successfully embracing digital transformation. After all, many now offer the services of “virtual tellers” and the ability to handle transactions such as check cashing and deposits via mobile devices.

The financial services IT staffs behind the scenes know the real story: their industry lags behind many other industries in terms of adopting emerging technologies or even the cloud.

The Struggle is Real

Like companies in most industries, those in financial services struggle with aging legacy systems that cost too much to toss out but also too much to maintain. Then there’s the issue of all the applications that only work on those systems, making it difficult to just migrate everything to the cloud.

The shortage of qualified IT professionals, particularly in IT security, is rampant in financial services as it is across most market sectors.  And IT staffs at financial services companies struggle like their counterparts in healthcare, manufacturing, and other industries to keep pace with new software rollouts and upgrades, patch deployment, and just keeping “the lights on.”

Complicating matters are the regulatory and industry-specific compliance requirements that financial services organizations must meet, such as the Payment Card Industry Data Security Standard (PCI-DSS). Security — and all the highly publicized data breaches — also make companies in the financial sector reticent to venture too far with new technologies. It’s hard enough battling cyber threats. Adopting the Internet of Things and other newer technologies introduces more endpoints and more opportunities for cyber thieves to wreak havoc.

The Customer Experience Challenge

According to a 2017 retail banking research report, however, there may be a bigger threat to financial services industry going forward. That’s keeping up with increasingly demanding consumers.

Financial organizations must innovate their offerings to remain competitive and enhance their customers’ experiences. If they can’t keep customers happy, other companies will. Digital disruption is creating numerous cross-industry competitors, digital aggregators, and challenger banks, as well as new areas of service from Amazon, Apple, Facebook and Google.

The Success Stories

Some financial institutions have succeeded in embracing new technologies. For example, Mastercard is getting ready to launch a new contactless card with an embedded fingerprint sensor to help make transactions more secure.

Barclays is one of the first financial services organizations to test out beacon technology to improve accessibility to customers with disabilities. Meanwhile, Wells Fargo has been testing the use of Oculus Rift virtual reality headsets so that its customers will have the ability to ‘virtually’ enter a branch and speak to a teller face to face.

In addition to the “wow” factor, these kinds of innovations will likely lower costs and provide better experiences for customers. The companies deploying them are proving that digital transformation can happen in the financial services industry. But most of them are also large enough to have the budgets for digital transformation. What about the companies that still must contend with their legacy infrastructure and can’t afford just to adopt the latest and greatest?

Some have tried to apply a ‘digital veneer’ to their business rather than going through an actual digital transformation. The problem is that the new parts don’t necessarily align well with the other existing parts of the organization, and that causes more problems — particularly for the IT staffs charged with maintaining everything.

The Benefits of a Hybrid IT Approach

There’s no single fix for the situation, particularly since each organization has its own unique challenges and issues. However, employing a hybrid IT strategy can help many companies phase in their digital transformation and bridge the gap between old and new ways of working.

Rather than an all cloud or all legacy system framework, hybrid IT allows for both sets of technologies and infrastructures to work together to meet an organization’s needs. The idea is to gradually integrate new technologies and infrastructure into the existing IT mix while still getting use out of legacy systems. This allows time to rewrite or replace applications that are dependent on those systems, while getting the most value out of investments in them.

It also enables older systems to be used in ways that weren’t previously possible. For example, historical data can be kept on on-site mainframes while seamlessly combining those systems with new digital services that run securely in the cloud. This enables organizations to benefit from the cloud’s agility without the need for a large-scale migration from legacy systems.

In addition, the cloud and other new technologies can be tested out using an OpEx model instead of CapEx model. Cost savings and other benefits can be immediately realized. As more workloads migrate to cloud environments, legacy systems can eventually be retired once they reach the end of their lifespan. The associated maintenance costs also then disappear.

As organizations employ more cloud technologies, they also have the scalable compute and other resources to power advanced automation, artificial intelligence, the Internet of Things, and other technologies. These in turn enable new applications and services such as bots for “no humans required” personalized customer assistance. Cloud-inclusive hybrid IT also makes it possible, via data analytics, to make sense of all the data generated along the way.

A Better Way of Doing Business

With the right technologies, expertise, and company vision, hybrid IT offers financial services organizations a way to get the best of all worlds: traditional, cloud and digital. To learn how your company can benefit from a hybrid IT approach, call 866.2. SIGNAL or email [email protected] , A good first step toward digital transformation may be a technology assessment to help determine what you need and what it will take to get you to where you want to go.