By Sam Marland, Manager, FSI Solution Architect Team, Red Hat UK
The financial services industry (FSI) has been shifting towards a decentralised technology operating model. This is driven by a pressing need to deliver robust platforms that address ever-evolving stakeholder requirements and has been further accelerated by the advent of public cloud technologies. The rapid digitalisation of financial services means having access to public clouds’ benefits, including scalability, cost efficiency, and faster time to market, has been increasingly valuable to firms.
The desired outcome for organisations is that teams are empowered to independently build, manage, and support their applications’ complete infrastructure and operational lifecycle. This can enable them to deliver software faster and scale at will, bringing greater value for the business and customers. However, decentralisation is costing organisations significant time and money as environments become scattered and challenging to manage in a secure and effective manner. This phenomenon is known as environment sprawl.
This article will look at some key considerations for cloud, application, engineering, transformation and enterprise architecture teams when building robust and scalable centralised strategies for resilient modernisation.
Why is FSI IT decentralising?
The financial services sector is an IT innovation leader because customers are increasingly demanding more from their banks, while challenger banks drive market disruption and increase competition. In the UK alone it accounts for 8% of the country’s GDP, and 2.3 million jobs. Customers and consumers expect constant technology updates enhancing convenience, usability, and security.
This need for continuous growth has seen organisations work to start dismantling internal silos, including those created by decentralised platforms. Tech and business teams are increasingly understanding that true innovation requires collaboration. However, central IT functions, slowed down by legacy processes and technologies, have struggled to deliver platforms with the right capabilities fast enough for the development teams enabling this transformation.
Alongside this, as public cloud technologies from global hyperscalers have grown in sophistication and safety, it has become easier and normalised for developer teams across the organisation to take building and managing application technology stacks into their own hands. This means teams are able to quickly either release applications or adopt technologies that support the organisation’s success, but it is also duplicating effort, hindering productivity, creating risk and causing fragmentation in how technology is used.
What challenges does IT decentralisation bring for FSI companies?
Tackling productivity
Working across disparate IT environments can enhance collaboration, but without visibility into what other teams are doing, environment sprawl can create new silos. Environment sprawl is also a productivity risk as efforts can be duplicated across platform development, operations and security controls.
Furthermore, there are significant challenges associated with teams operating across numerous cloud infrastructure providers. Imagine getting in a new car you’ve not driven before. You know how to drive, but you don’t know how the lights, wipers or cruise control works. Now imagine you drive a few cars for work but they’re constantly being updated with new capabilities and functionality. Every time you drive, you must relearn. This is the constant context-switching and cognitive load that teams must manage when working in a decentralised environment.
The platforms that developers and operational teams work on should also feel the same, in order to better empower effective collaboration, enable concentration on core competencies, and bring laser-focus on adding distinct value to the business.
Exposure to vulnerabilities and risk
Environment sprawl often means IT’s operational visibility is hindered, making it difficult for organisations to understand their exposure to vulnerabilities, attacks and failures, changing the firm’s risk profile.
As more organisations move into different kinds of cloud environments, the NCSC has reported seeing cybercriminals move away from traditional attack methods to directly exploiting weaknesses in cloud services. Due to the sensitivity of the data they hold, FSI companies are under particular risk – with 28% of UK cyberattacks targeting FSI in 2022. In short, visibility is more important than ever, so must be prioritised.
Compliance complexity
Finally, there is an increased regulatory focus, and scrutiny, on operational resilience in FSI globally. This demands rigorous standards for IT system failure response and recovery, and harmonisation among all varied business lines, control and audit functions.
For example, the EU’s MiFID II came into play in 2018 and requires organisations to report on massive volumes of transaction data. This data must also be stored in a secure environment. FSI organisations in the EU, or that have EU-based customers or partners, are also preparing for DORA, which will apply as of January 2025. This requires businesses to have stringent internal and third-party risk management frameworks and advanced operational resilience testing, as well as other requirements.
An organisation with environment sprawl, and without a centralised view, means compliance can be challenging for organisations.
A centralised view over a hybrid cloud environment
Financial services cloud, application, engineering, transformation and enterprise architecture team leaders looking for a single-pane view over their entire environment of multiple public clouds, private clouds and data centres can consider hosted and managed hybrid cloud platforms. These are purpose-built to support disparate cloud environments, helping to provide a centralised consistent experience for users. This simplifies security and compliance, while giving teams access to the tools they need to build USP-defining solutions.
This also supports the drive towards removing silos and managing environment sprawl. One user-friendly view means all key business and tech teams can easily collaborate with each other, without having to constantly learn how to use different platforms. Duplication of work and the focus on manual tasks is reduced, meaning time can be funnelled into building solutions that internal and external customers really need, giving FSI organisations the edge they need in a highly competitive environment.
It’s important to recognise that the complexity of user needs across a platform can make this challenging to get right. Strategic organisations adopt a product mindset to ensure success, taking into consideration the requirements of all distinct user groups. The platform must also be built with flexibility in mind, to ensure it can evolve as users’ needs change.
This ‘platform as a product’ approach, where internal platform teams treat customers (engineers within the bank in this case) with care also helps organisations attract the best talent. FSI is competitive for developers, so giving them access to a secure sandbox-style environment enabling innovation, flexibility, and scale can be a drawcard.
FSI productivity, innovation and resilience
Creating a centralised IT environment that can evolve alongside the organisation’s needs, and work across the hybrid cloud in a consistent manner, is essential to the FSI industry’s ongoing success.
With the rise in AI-enabled technology, and the likes of quantum computing appearing on the horizon, a consistent application foundation positions a business to efficiently bring new capabilities into the organisation while supporting security and compliance requirements.