As technology evolves, investment managers must stay ahead of the curve to remain competitive. Last month I wrote about the 10 most profitable outcomes of cloud adoption for investment managers. In this second of four articles, I highlight the challenges that cloud computing presents.

One of the biggest pitfalls is not understanding the various stages of cloud adoption, making it difficult to deliver clear business outcomes and value without boiling the ocean. Each stage of cloud adoption poses unique challenges; critical lessons must be learned, and challenges addressed, to ensure successful investments in the longer term.

Current landscape – where we are today

At Elgin White we see investments in the Cloud typically focused on keeping the lights on, rather than creating a future-ready state, and they center around the need to connect hybrid and cloud environments and solutions. Integration maturity for the Cloud is relatively low and one of the biggest challenges for all clients. This blocks opportunities to achieve the full benefits of cloud-based infrastructures, for example, cost scalability and flexibility, business partnerships with network openness, and better data security with cloud-native security by design.

Investment managers find themselves in an environment where they must deal with duplication across business units and regions, IT capabilities, infrastructures, and applications, making it harder to change. The market is now moving from mainly in-house deployed solutions and vendors to software vendors starting to offer only SaaS or cloud-native solutions as default.

In 2020 we saw the critical tipping point, with spending on the Cloud exceeding that of data centers. Applications spending on cloud-native solutions is already in the 40% range and, according to Gartner, by 2025 this figure is expected to pass 50%.

Top cloud challenges by stage of maturity

Investment managers must be proactive and have a well-thought-out strategy for success, with a clear set of cloud drivers for each stage of maturity. Typically, clients pass through three stages of adoption: Starting, Foundational, and Reinvention. They face different business challenges at each stage, as follows: 

Stage 1 – Starting

Initializing the cloud adoption process but unsure where to begin. 

Challenges faced when Starting include: 

• Security
  • Establishing a secure environment, which requires removing some of the blockers of the past.
  • Implementing ‘zero trust’ safeguards to protect clients, senior managers, and key stakeholders.
• Cost
  • Determining the costs and benefits of cloud adoption. Investment managers must ensure their cloud solution is cost-effective, and understand the cost structure of the provider they select.
  • Understanding the provider’s pricing model, including any additional fees or costs associated with using services in a particular way, e.g., single server usage has a price of x per day.
• Integration
  • Challenging existing systems with future cloud integration considerations.
  • Conducting a clear impact assessment of the implications of SaaS and cloud-native solutions is critical, with particular focus on integration with existing infrastructure.
• Process automation
  • Identifying a good use case baseline for automation, to ensure efficiency and scalability. A common mistake is to automate everything without knowing why, or understanding the value it will deliver.
  • Fostering a continuous automation mindset, to unlock current and future potential.

By anticipating and planning to overcome these challenges you will maximize your potential to facilitate innovation, accelerate product development, and attract and retain the right talent. 

Stage 2 – Foundational

Establishing the cloud-based infrastructure but unsure how to mitigate the risk of creating a white elephant, whose maintenance cost is disproportionate to its usefulness, and that is difficult to dispose of. 

Key challenges during the Foundational stage include:

• Governance
  • Establishing cloud governance policies and protocols to ensure you have the right team. When the need to adopt a fresh, cloud-oriented mindset is overlooked, teams that are reliant upon current staff members and skill sets struggle to deliver. Instead, a new cloud mindset should be applied, to challenge the past.
• Migration
  • Avoiding the temptation to simply lift and shift data and applications into the Cloud. This approach will fail to exploit the most valuable benefits of the cloud, due to complexities that will be uncovered during migration, and can lead to disappointing results.
• Integration
  • Challenging existing patterns and designing for the future. Consider the security patterns that will unlock open integration standards for your company.
• Process automation
  • Focusing on automating repeatable tasks and processes with high utilization of people and time spent.
  • Taking advantage of new cloud-native integration patterns that create benefits, to take your business to the next level. Make sure you have a clear set of goals for automation.

Tackling these challenges effectively enables you to improve investor experience, support the “fast fail” analysis, enable cross-discipline agility, and stabilize your business.

Stage 3 – Reinvention

Optimizing the Cloud for maximum performance, but unable to unlock business benefits consistently and repeatedly, to benefit partners and investors. 

Challenges to overcome during the Reinvention stage include:

• Monitoring
  • Assessing and managing cloud performance from a cost, security, and architecture perspective.
• Automation
  • Ensuring that every new system or process is viewed through an automation lens, and that repeatable processes are automated, wherever possible. For example, your SLDC process might need automation, so having a solid process and cloud framework for introducing new solutions will become critical.
• Security
  • Ensuring the security of cloud data and applications, and having a robust mix of options and approved security patterns for protecting your data. These security guardrails will be vital to allowing only production data in production tenants and having solid processes to manage exceptions with the proper approvals, where testing is required.
• Optimization
  • Optimizing cloud operations for maximum efficiency, with accurate and reliable cost insights. Ensuring appropriate architecture governance and principles is crucial to managing cost. Architects tend to over-architect solutions, which can become an expensive problem in the Cloud. Make sure you clearly understand the cost-to-income ratio of the solution, and select the technology that is best suited to servicing your business needs.

Overcoming these challenges enables you to gain a competitive edge, access real-time insights, and retain and acquire clients. 

Conclusion 

Undoubtedly, cloud computing presents both opportunities and challenges for investment managers. Each stage of cloud adoption poses unique challenges that must be addressed to ensure successful investments in the Cloud. 

Investment managers must have a well-thought-out strategy for success with a clear set of cloud drivers. It is imperative that you understand the cost structure of the provider you select. It is essential to establish cloud governance policies and protocols, migrate data and applications to the Cloud intelligently, integrate effectively with pre-existing systems, automate processes to ensure efficiency and scalability, and optimize cloud operations for maximum performance.

By understanding and pre-empting these challenges, investment managers can increase the likelihood of cloud adoption success.

To get more information on how Elgin White is helping investment management firms with cloud adoption or migration, or to connect with our Cloud subject matter experts contact us