Executing a cloud migration strategy for banks: addressing 3 key challenges

September 20, 2021

Market and consumer demands for new digital solutions, along with the accelerated pace of digital transformation over the last few years, means that banks and other large financial institutions can’t slow down on innovation. Now more than ever, your organization’s systems and applications must be flexible, scalable, and cloud-ready.

In our previous article, we described how to envision your cloud migration strategy. Now it’s time to execute on that plan.

Execution can be the most challenging phase of any large-scale cloud migration initiative. It’s critical for banks to get it right, but without a suitable strategy and level of expertise, barriers within existing legacy systems can impede innovation and growth. A poorly executed migration can have any number of consequences, including financial impacts, reputational damage, regulatory issues, and even cyber or privacy risks.

In part two of our three-part series on large-scale application migration for banks, we examine the challenges banks face with executing a cloud migration strategy, and how to overcome them to move forward with confidence.

What makes large-scale application migration so difficult for large organizations?

The viability and benefits of moving enterprise IT systems to the cloud are well recognized, but how to do so at scale is where many large organizations run into difficulty.

“This conversation is happening within every bank. They’re asking many of the same questions,” says Mike Gelesz, Industry Leader for BDO Consulting’s Banking & Financial Services practice. Banks have “massive and diverse portfolios of enterprise applications,” he explains, which makes large-scale migration extremely complex.

Visit our Banking Resource Hub for more insights that can help banks accelerate digital innovation

Banks face three major roadblocks when executing an application migration strategy.

Lack of agility

Outdated waterfall processes and multiple layers of decision-making can impact an organization’s ability to adapt and respond quickly to change. While banks often rely on traditional waterfall methodologies to approach change, these can slow down cloud migration and other digital transformation projects with long lead times, delays, and inefficiencies. The old way of doing things doesn’t align with the new and innovative capabilities offered by the cloud’s modern technology tools and platforms.

“The larger the scale—if you’re talking about hundreds or even thousands of enterprise applications—the bigger the impact a lack of agility will have,” says Iryna Aliakseyeva, Business Analysis and Quality Assurance Manager at BDO.

What’s the solution? Banks must be deliberate in adopting a more flexible approach that allows them to adapt to change effectively. This means having the right people, processes, and technology in place to help drive innovation forward, and change course when absolutely necessary.

Legacy technologies and high technical debt

How much legacy technology debt is your organization carrying? Every bank has aging technology infrastructure and disconnected systems deployed over time—often customized, upgraded, and patched through years of expansion and organizational change, and frequently supported with poor documentation.

To add to the problem, the original business and technical owners may have moved on to other roles or organizations. Critical information about the application’s architecture, functionality, design, and source code is often limited or even lost entirely.

What’s the solution? Reverse engineering of the logic and functionality can determine an application’s intended purpose and how it works, but that alone doesn’t complete the picture. In many situations, banks need to combine reverse engineering with a top-down approach that prioritizes new business requirements and capabilities, as well as identifies applications that are no longer needed.

Performing an options analysis can also determine the best cost- and value-efficient scenario for an application, whether it’s repurchasing a software as a service (SaaS) solution to replace it, developing a modernization/refactoring plan, etc.

Operational silos

Applications and their owners frequently operate in silos, with limited standardization when it comes to processes and methodology. As a result, the modernization and cloud migration process is difficult and overly complicated.

“Systems often duplicate tasks,” says Kedar Kulkarni, a Practice Leader with BDO’s Data and Analytics Advisory team. This duplication leaves banks with considerable overlap in some areas and gaps in others. “The same task is performed by one or more applications, but then there’s a lack of certain activities being performed as well. The organization needs to take a holistic view to ensure all these systems are aligned.”

What’s the solution? Perform a detailed application assessment and rationalization exercise. Having inventoried and categorized your portfolio of applications during the envision stage of your cloud journey, the next step is conducting a more detailed assessment that includes mapping applications to enterprise capability models. This clears the path to perform the detailed options analysis mentioned above, which will prepare the organization for large-scale application migration to the cloud.

By addressing the challenges above and incorporating them into your strategy from the beginning, your organization will be better positioned for a successful cloud migration.

Successfully executing a large-scale cloud migration strategy

“Transforming the entire ecosystem all at once is too ambitious,” says Kulkarni. The strategy that makes sense for banks, he explains, is to focus on quick wins and pilot projects, which will help garner support for subsequent phases of migration.

Executing a successful application migration includes the following steps:

1. Group applications in packages by theme and migrate in waves

  • Identify the specific technology, business capability, or scenario for migration. Establishing a repeatable approach will allow the project team to develop efficiencies and save costs.
  • For each application, decide on the correct strategy—one of the 6 Rs of application migration, which are rehost, replatform, refactor, repurchase, retire, or retain. This will determine the migration plan and processes to follow.

2. Design and review the cloud architecture

  • Leverage the know-how of an experienced cloud migration partner to establish a tailored design and architecture that aligns with your migration strategy.
  • Perform a gap analysis to identify any governance, risk, or compliance issues.

3. Develop the application migration plan

  • Assess and confirm the strategy, plan, and processes identified in step one, giving close consideration to any additional analysis or new data. Does the information require you to change or adjust your initial strategy?
  • Identify the elements of your technology stack that require modernizing. Modernization is a prerequisite for any cloud migration—your bank cannot succeed without it.

4. Modernize and migrate

  • Implement your migration plan.
  • Document and test results for optimization and future projects.

Throughout execution, one of the most important things to be aware of is the need to be flexible and course-correct as required.

“Your initial plan could change as you map out your execution or even as you execute,” says Aliakseyeva. “You may have to make a decision to change from rehost to replatform or refactor, for example. Don’t hesitate to revisit your strategy, given new findings and considerations.”

Finding the right cloud migration partner

Cloud migration is complex, with a myriad of challenges (often unexpected) at all points of the journey. The value of seeking assistance from a qualified cloud migration partner can’t be overstated—no organization has all of the internal capabilities to do it alone.

With BDO, you get a professional, experienced team with defined approaches and processes for every step of a large-scale cloud migration, from initial consultation, assessment, and planning, to IT delivery and cloud optimization. Your business will be able to leverage the frameworks, accelerators, and tools we’ve developed through our work on other large-scale migrations, as well as our partnerships with leading cloud providers.

“We bring a knowledge base, industry and technical expertise, and experience, but also repeatability,” says Gelesz. “We know the best practices—what works and what doesn’t.”

Learn more about our cloud solutions for banks, or contact us to get started with a consultation:

Mike Gelesz, National Industry Leader, Banking & Financial Services, Consulting

Rishan Lye, Partner, Advisory Services, Technology

Denis Repin, Director, Consulting, Technology Services

This site uses cookies to provide you with a more responsive and personalised service. By using this site you agree to our use of cookies. Please read our privacy statement for more information on the cookies we use and how to delete or block them.