Unwilling banks, disregarding Platform-as-a-Service (PaaS), find themselves engulfed in the challenge of cloud migration.

In the rapidly evolving digital landscape, large financial institutions are navigating the complexities of cloud migration, with a growing number opting for a phased approach via Platform as a Service (PaaS). This strategy offers several significant benefits, providing greater control, reduced risk, cost efficiency, enhanced compliance, and fostering innovation.

PaaS serves as a stepping stone to Software as a Service (SaaS) implementation, offering financial institutions the flexibility to develop, customize, and integrate their applications more effectively than pre-built SaaS solutions. This is crucial for banks with complex legacy systems and stringent compliance requirements, enabling them to tailor solutions to their exact needs before fully committing to cloud-native SaaS products.

By migrating in stages, institutions can incrementally move services and applications, lowering the risk of disruptions to critical banking operations. This staged approach contributes to business continuity by ensuring data protection, redundancy, and operational resilience as the migration progresses.

Cost efficiency and operational flexibility are also key advantages of a multi-stage migration. PaaS reduces upfront capital expenditure by streamlining infrastructure setup and maintenance, while enabling scalability based on real-time needs. This gradual transition aligns well with traditional financial institutions’ cautious adoption of new technology and helps lower the total cost of ownership.

Large financial institutions are subject to stringent regulatory requirements. Using PaaS in stages allows them to implement and test compliance controls incrementally, reducing the risk of exposure during migration and enabling consistent policy enforcement. This is particularly important in light of the Digital Operational Resilience Act (DORA), which introduces new requirements for the digital resilience of financial companies.

Moreover, with AI-powered cloud migration and cloud-native platforms, institutions gain the ability to rapidly provision infrastructure and innovate. A staged approach via PaaS helps accelerate development cycles by shifting to a more agile model without the shock of a direct SaaS switch. It provides the infrastructure for advanced analytics, machine learning, and customer experience improvements while maintaining operational stability.

However, rapid and large-scale migrations without sufficient preparation can lead to costly adjustments and potential operational failures. A phased approach with agile milestones is recommended for a successful long-term cloud transition. Many financial institutions are starting cloud migrations without a coherent strategy, posing a risk.

Following a successful PaaS migration, institutions can then transition to full SaaS implementation using strategies like 'Reduce and Outsource', 'Lift and Shift', or 'Lift and Optimize'. The company Objectway, for instance, has now begun the full SaaS transition, following a "Shift-and-Optimize" strategy.

The benefits of a well-planned cloud migration are evident. Objectway, a company managing over 1 billion Euros in assets and supporting over 100,000 investment professionals in managing over 700 billion Euros in AUM for over 5 million clients, demonstrated success with a project that saw the frontend going live within six months and a digital usage rate increase from 20% to over 60%.

The cloud transition is not without its challenges, though. The average cost of a data breach for financial services is around 5.9 million USD per incident, underscoring the importance of robust security measures during migration. Furthermore, the cloud transition can take months or years, depending on the starting situation and internal processes.

Despite these challenges, the future of cloud adoption in the financial sector looks promising. IT spending in the European financial sector is projected to increase annually by almost 9% by 2028, above the global average of 5-6%. The cloud transition is not just about adopting the best platform; it's about ensuring that the operating model can keep up. This requires agile teams, a forward-thinking mindset, and a culture that allows for change.

Strategically using compliance, such as aligning IT architectures with the principles of resilience, transparency, and verifiability as mandated by DORA, can even provide a competitive advantage. As the financial sector continues to evolve, a well-planned and phased cloud migration strategy via PaaS is proving to be a powerful tool for large, regulated financial institutions seeking to balance innovation with stability, security, and cost efficiency.

[1] https://www.forbes.com/sites/forbestechcouncil/2021/05/24/why-platform-as-a-service-is-a-key-to-successful-cloud-adoption-for-financial-institutions/?sh=30c5645b4d28 [2] https://www.forbes.com/sites/forbestechcouncil/2021/05/24/why-platform-as-a-service-is-a-key-to-successful-cloud-adoption-for-financial-institutions/?sh=30c5645b4d28 [3] https://www.accenture.com/us-en/insight/cloud-20-era [4] https://www.mckinsey.com/business-functions/mckinsey-digital/our-insights/cloud-20-the-next-generation-of-cloud-services

1.The phased approach via Platform as a Service (PaaS) in cloud migration allows finance businesses to implement and test compliance controls incrementally, ensuring regulatory requirements are met with reduced risk during the migration process.

Technology such as AI-powered cloud migration and cloud-native platforms provide financial institutions with flexibility to develop, customize, and integrate their applications, fostering innovation and enabling advanced analytics, machine learning, and customer experience improvements.

Unwilling banks, disregarding Platform-as-a-Service (PaaS), find themselves engulfed in the challenge of cloud migration.