Are these 3 reasons good enough to delay your cloud adoption?

If you keep up-to-date with industry news, you’ve probably noticed that there’s often a disconnect between what companies aspire to be doing and what the reality is.

There’s always been a disconnect. The industry media focuses on the shiny and new things. That’s why it’s called ‘news’. However the industry itself has other priorities, like keeping the lights on.

You’re probably tired of all the think-pieces about the value of cloud by experts who make a strong argument to move you to the cloud. And you may agree in theory. The cloud is indeed a huge shift in how financial services firms across the world do business, and the benefits are very clear.

My colleagues, especially Jigyasa Singh in 2019, have written extensively about the cloud’s many benefits. Let’s assume we can agree that moving operations to the cloud is a good thing.

And yet, in South Africa, there are some good reasons on the ground that are delaying the financial services industry’s wholesale move to cloud. They may be good reasons, but are they good enough reasons?

For background I have, for the last few years, been dealing with many of the large banks, as well as insurance companies, payments processors and other players in the South African financial services industry.

Bear in mind these reasons don’t hold for all companies, and some companies may have to consider one or more of these items at the same time. But still, in general, here’s what I’ve seen.

  1. Technology may be ready, but the business still sees cloud as risky.

IT departments, aware of the benefits of cloud adoption, have rightly welcomed the news that Amazon and Microsoft have both opened datacenter regions in South Africa. (Full disclosure: Accenture is a business partner to both those excellent companies.)

But while IT is usually optimistic about the benefits of technology, the security, governance, and risk teams are much more cautious. They believe that being the first to move to the cloud is risky.

Their stance is: how do they mitigate risk and enforce security in an environment they don’t own? (There are in fact airtight answers to these questions, but more about that in another blog post.)

  1. Cloud may mean tying part of the opex to the exchange rate.

We got a double whammy in March 2020. We got a pandemic which drove the declaration of a State of Disaster. About a week later, our country rating was downgraded to ’junk’. And predictably, our already volatile currency took a 25% hit. Sorry — that’s a triple whammy. If the cloud were universally adopted and billed for in USD, that would mean a 25% increase in operating expenditure, in a climate that certainly doesn’t need a 25% increase in operating expenditure. It’s all very well saying that moving to the cloud is more cost effective, but volatile input costs can seem riskier than higher fixed costs.

  1. Some FS companies have just spent a large chunk of change investing in their on-site IT infrastructures.

It seems idiotic to ignore that investment just because other solutions are now available in the cloud. It just looks like a waste of money. Isn’t it better to sweat the assets first and move to the cloud later?

I’m interested to hear from you. Do you think this is a fair summary of where we are as a South African industry? Which bits do you think I’ve got wrong?

With this as a background, what can financial services companies do in South Africa in particular? Do we really want to sit out the largest shift in the IT industry since client computing replaced the mainframe? I don’t think we have to. We can answer these objections and still reap the enormous, proven benefits of the cloud. I’ll write about that in my next post.