Top Five pitfalls to avoid during cloud transformation by Asset and Wealth Managers

Abstract

Since the inception of the cloud infrastructure more and more organisations are riding the wave of cloud adoption to their IT applications landscape to bring in cost-efficiencies, scalability, flexibility. Asset and Wealth management organisations are looking at migrating their non-revenue generating functions as such middle office and operations to the more flexible cloud platform. However, taking advantage of cloud is not easy endeavour. If not properly managed it can take longer to implement and hence realise benefits or in some cases it will lead to complete failure.

What could be the reasons for such failures? What are the risks associated with cloud adoption that one should consider? Here we will look at top 5 such pitfalls/risks and how best to avoid them.

1. Not watching cost of the cloud infrastructure.

Most of the asset and wealth management companies are now strategically adopting cloud platforms either via SaaS (software as a Service), PaaS (Platform as a Service) or IaaS (Infrastructure as a Service). Whichever cloud adoption model you choose there is inherent danger of getting cost of migration out of hand and thus making whole cloud adoption non-viable solution.

Cloud migration is a complex undertaking, contrary to how it may have been portrayed, and managing its cost is very important aspect of the cloud migration journey.

Based on our vast experience in managing cloud migration we have identified few key considerations for establishing good governance on the cost.

Develop Cost Management Plan: From the inception of the migration program established a clear plan to cost management. The plan should include how cost will be calculated, how it will be tracked, monitored and control at every stage of the migration

Establish cost allocation mechanism: Define business stakeholders impacted by the migration, ensure they have buy in for the program, appropriate cost as allocated to the appropriate business units. This will ensure business also takes ownership of the cost they incur.

Set Budgets and Limits: Define clear budgets for the cloud migration, this should be broken down to the environment level i.e., Dev, Test and Production. This should ensure that cost do not spiral out of control specially during development stage when it may be tempted to spin up new instances as needed.

Implement cost optimisation strategy: Implement cost optimisation strategies such as right sizing, right level of instance provisioning, identifying no / low workload period for instance downtimes.

Monitor and analyse cost: Regularly monitor and analyse cost of the cloud usage

Ensure control on the provisioning: Create cloud infrastructure provisioning team who will be responsible for provisioning cloud infrastructure based on the need validated by right stakeholders. This should ensure that right level of governance is in place.

2. Underestimating impact of changes to the interfacing upstream and downstream systems

Transforming legacy applications which are tightly coupled have significant impact on both upstream and downstream applications. External interfaces to the market data providers, custodians etc. may need to be changed to make them cloud compatible. Some of the ways it can manifest into are listed below.

Data sources: Structure of the new application may mandate change in the format of the data. Considerations need to be given to the licencing agreement for the market data provides, mapping between new platform data to interfacing application data.

Integration: Latest technology used in the application being onboarded may mean changes to the interfaces i.e. API integrations, messaging format. Lot of consideration need to be given to the fact that integrating application being on the on-premise infrastructure while new application is hosted on the cloud. Performance implication of interfacing with on-premises application need to be considers.

Business processes: Changes to the way data is processed and workflows are managed in the new application, it most certainly has the impact on the way business processes are currently run. It is very easy to miss this aspect of the impact only later to realise that the new business process is either not efficient or is not acceptable to the business users.

3. Assuming cloud adaption can be done with the existing resources without having proper required skills

While adopting cloud services in many ways help reduce lot of overheads in managing infrastructure and make deploying, running applications easy, it is not the most easiest undertaking especially when you do not have resources with right skills.

Lack of cloud skills among the staff could be one of the primary reasons for the delays in cloud migration. While existing team may have very good understanding of business processes, technologies used for application development and hosting them on-premise, they may not have necessary skills to implement same on the cloud, they need to be trained on new tools, techniques and processes used in cloud setup.

While it can be argued that brining external talent with required skills will do the job, it may not be the silver bullet. Your existing resources still be needed to use new tools and processes post migration. I would recommend to use hybrid approach i.e. team of existing trained resources and external skilled resources for the successful migration.

Upscaling existing team with cloud skills is the most important step in planning for the transformation and is not where you can afford to cut corners.

4. Lack of proper organisation and governance around the program delivery

Cloud transformation is huge undertaking and having right level of governance is an essential aspect of the organisation’s cloud adoption journey. Having set of policies, procedures and controls for the transformation program is critical to the success of such programs. It has been observed that in many such transformations business vision and ownership is lacking. It is considered as purely as technology transformation and hence it is tempted to not have clear governance, cost control, business value delivery measurement in place.

Running such programs with proper governance and delivery frameworks such as iterative SAFe delivery model ensures success and sustainability of the cloud adoption. Following are some of the reasons why it is important.

Consistency and standardisation: Governance policies and procedures ensure that consistent process is followed by everyone which is standard, measurable and manageable. This helps avoid any ad-hoc approach to the migration ensuring that things like compliance, security and performance are not compromised.

Risk Management: There are lot of risks adopting new technologies. It is very important to manage these risks appropriately for success of the programs. Defining appropriate risk management framework helps mitigate those risks and help management take decisions.

Cost optimisation: If not properly governed cost of cloud transformation can spiral out of hand which may make whole adoption strategy non-viable. So it is very critical to closely monitor cost and identify ways to optimise it. This is only achievable with proper cost governance.

Agility and innovation: Adopting new technologies need fail-fast approach. With right governance in place can also enable organisations to be more agile and innovative in their use of the technology.

5. Testng as after thought - Not defining testing strategy and testing plan from the start of the transformation program

If you want to avoid cloud migration failure, one of the important things you should do is make sure testing is integral part of your strategy. Many organisations overlook this important aspect and only considers it as an afterthought i.e. testing when migration is about to complete. This is major pitfall you must avoid.

Testing should be considered at every stage of your migration journey, allowing you to spot any signs of issues early on and can take corrective action with minimal cost and efforts. This should start with defining your testing strategy while defining your overall cloud transformation strategy. This should include at what stage of the journey what kind of testing will be done, which applications will be tested, what will test considerations during cloud set up.

Once your strategy is in place, you should ensure test plans are in place identifying data sets needed, workflows/business processes to be tested, high level roadmap for testing, approach to testing.

Essentially testing should act as a risk assessment mechanism for your cloud adoption, allowing you to identify potential pitfalls in key areas such as data quality, security, compatibility. Ensure that test harness is built for both cloud and non-cloud systems.

Summary

Advantages of moving to the cloud are immense, however at the same time it is complex undertaking and should not be taken lightly. As you have seen in this article there are many potential pitfalls on the way. However, with proper planning and risk management you should be able to avoid those pitfalls and get over the line.

Augmenting your existing team with external resources with the right level of skills is critical success factor. Couple this with proper program governance and testing from the people who have done this day in day out and you have maximum chances of adding value from cloud adoption.