By Chinmoy Banerjee
Most retail banks have begun migrating applications to the cloud as part of a digital transformation journey, but when it comes to business-critical legacy applications, some have decided it’s too risky. But is doing nothing riskier than taking the plunge? At this point, the answer is yes.
Retail banks are facing a whole new generation of customers with new expectations and preferences. For these customers, it won’t be enough to digitize current applications. Instead, they must deliver new digital experiences that integrate financial activities seamlessly and are easy to use on mobile devices.
Banks that don’t deliver these types of experiences, or wait too long, risk losing ownership of their customers to progressive banks as well as a whole new generation of fintech companies that, like the young customers they serve, were born digital.
Big tech companies such as Amazon, Google, and Apple are also growing threats: They already provide seamless digital experiences to their customers and increasingly are adding financial services to their list of offerings. The stakes are high. If today’s banks that lose their customers to more agile, digitally savvy competitors—as McKinsey recently noted in its annual review of the banking industry—they will be relegated to the role of “balance-sheet operators.”
Still, banks’ “cloud hesitancy” is understandable. The typical retail bank has hundreds or even thousands of applications that have been running in on-premise data centers for decades. The analysts and developers who originally wrote the applications left the banks ages ago and there is little or no documentation to help banks understand the business logic, infrastructure and interdependencies of the applications—essential elements of successful cloud migrations. This lack of visibility and understanding make it difficult if not impossible to assess which applications can be moved safely as they are, which ones should be modernized before they are moved and which ones should not be moved at all.
While the risk of migrating legacy applications to the cloud can never be eliminated entirely, here are four steps banks can take to pave the way for smooth transitions:
1. Create a detailed plan
This is a statement of the obvious. But the key to successfully migrating legacy applications to the cloud is to create a detailed plan. The plan should include an evaluation of all legacy applications and their myriad dependencies, including data sources. A checklist that identifies all data sources, and which sources must be connected to each migrated application that depends on them, is essential.
It’s also important to set aside a time block during which on-premises and cloud versions of migrated applications run side by side, so, if anything goes wrong, a backup is still in active operation. An on-prem application should not be decommissioned until you can verify that the migrated application is running well in the cloud, based on a set of criteria developed in advance.
2. Know that most of your legacy applications will need to be modified for the cloud
Legacy applications that sit on legacy operating systems or proprietary hardware systems will need to be modified to run in the cloud. Examples include applications currently running on mainframes or engineered systems that can’t be rehosted and those that require a load balancer to distribute network or application traffic across a number of servers. These applications will need to be re-platformed before being moved to the cloud. With re-platforming, the applications remain essentially the same, but changes are made to ensure they can function well on the cloud platform.
In addition, the design of some applications or the infrastructure they depend on might prevent them from being able to comply with security policies and protocols in a cloud environment. These applications will need to be refactored or rebuilt before being moved. Refactoring involves making changes to applications that make them better suited for the cloud. Rebuilding might involve rebuilding the entire application.
3. Accept that some applications cannot be moved to the cloud
Applications that depend on high performance and low latencies to function well likely cannot be migrated to the cloud. They can perhaps be modernized, but they should remain in the on-prem data center or shifted out to the network edge.
4. Start small and simple
No matter how well planned a migration project is, things still can go wrong. Starting small and simple allows your staff to practice, learn, become battle-tested and build confidence before tackling the larger, more complex business-critical applications. At least two rounds of migrating relatively simple workloads are recommended. Examples of simple workloads include email, collaboration programs and applications where data has been decoupled from main servers.
Bottom line: The clock is ticking for retail banks to move to the cloud. And while the first steps of legacy application cloud migrations are the hardest to take, the good news is that none of the challenges are without solutions.
Chinmoy Banerjee is corporate vice president and global head of banking and business process services at Hexaware Technologies.
