Cloud Computing: Transformation Accelerant
May 12, 2022
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The cloud acts as an accelerant for digital transformation. That is one inescapable conclusion from the results of a new study on how financial services firms are using next-gen technology to reimagine their businesses. Broadridge’s 2022 Digital Transformation and Next-Gen Technology Report surveyed C-suite executives from 750 firms on the buy side and sell side on their progress in key areas of digital transformation. Respondents were asked about their adoption of three next-gen technologies—AI, blockchain and the cloud—as well as their performance on other strategic and organizational building blocks that support digital transformation. Based on their responses, Broadridge ranked participating firms on their level of progress, from beginners to leaders. Across the full universe of study respondents, about 1 in 5 firms ranked as digital transformation leaders. If there is one thing separating these digital transformation leaders from the rest of the pack, it is their full embrace of the cloud. Every one of the firms ranked as a leader has achieved mid-to-advanced levels of cloud implementation, scaling cloud usage and workflows across the enterprise. While non-leaders had made some progress, they were significantly behind the leaders in cloud adoption. Migrating to the cloud makes it much easier for financial service firms to digitize and modernize basic business functions. Digital transformation leaders are taking full advantage of this ability. For example, when it comes to the most basic step of shifting from paper to digital communications, nearly three-quarters of leaders have achieved the most advanced stages, compared to just 19% of non-leaders. Not only is the cloud helping leaders make that transition, but it also provides access to tools that enhance the value of digital communications, like the ability to personalize client communications and make documents interactive. MORE FOR YOU
Leaders are also far ahead of other firms when it comes to the use of robotic process automation (RPA) to improve internal process efficiency. Technology consulting firm Gartner estimates that a single RPA “bot” can do the work of up to 30 full-time finance employees. Leaders have been able to reap rapid efficiencies from RPA due in part to their early adoption of the cloud, which facilitates the integration of artificial intelligence, machine learning and other digital tools for intelligent automation. The cloud is also helping leaders harness the power of data. One of the biggest technology challenges for financial service firms today is creating centralized data platforms that can support data reliability and consistency across business units and functions. Even among digital transformation leaders, only 28% have reached the advanced stage in this effort. A robust cloud platform can speed this development by eliminating the need to build physical data centers and maintain servers. Even more importantly, the cloud also provides access to tools that help integrate data sources and process and analyze data, as well as predictive analytics and AI applications that help firms anticipate client needs and otherwise extract more value from data. The payoffs from that level of innovation could be astounding. Consulting group McKinsey estimates that AI has the potential to unlock $1 trillion of incremental value in the banking sector alone. Because many of those AI tools can be accessed via services offered by the major cloud providers, returns on cloud investments will compound for leaders and non-leaders alike. Building an IT platform integrating cloud-enabled microservices and APIs opens the door to an entirely new tool set of customizable and modular applications. That tool set will make firms more agile, making it easier to scale, adapt to change and move quickly take advantage of new business opportunities. The cloud can help firms achieve all these benefits while also minimizing IT costs. To be clear, cost reductions are not the primary motivation for leaders’ cloud investments. To the contrary, these firms are shifting to the cloud because it is a primary vehicle for transforming their organizations into digital businesses. But the potential for cost reductions should not be overlooked—and it could actually be crucial for smaller firms. To date, progress in digital transformation has been highly correlated with firm size. Firms with more than $250 billion in assets or assets under management were much more likely to be categorized as digital transformation leaders. Among firms with less than $50 billion in assets/AUM that share is just 2%-3%. The cloud could provide smaller firms with a means of catching up—or at least keeping pace. To take advantage of that opportunity, smaller firms need look no further than the major public cloud providers. To set themselves apart and win business, public cloud providers are offering a host of platform services integrating AI, ML and software development tools. Because clients can utilize these offerings without much of their own infrastructure support expertise, smaller firms with limited technology budgets have the opportunity to employ many of the same innovative tools available to their larger competitors. Inside these smaller firms, business and technology leaders looking to secure buy-in from key internal stakeholders should point to the fact that the consumption-based model used by all reputable public cloud providers will keep overall costs of ownership low. By prioritizing cloud migration now, firms of all sizes can turbocharge their digital transformation. In so doing, they will also start realizing faster returns on their technology investments. Seventy-one percent of digital transformation leaders say their transformation initiatives have already increased revenues, and half say transformation has increased profitability. For other firms, the path to similar results will run through the cloud, and firms of all sizes should think about how the cloud fits into and underpins their wider digital transformation strategy.