Is the banking industry ready for IT disruption?

21 May 2020

Image: © chaiwat/

Avanade’s Peter Barrett discusses how the banking industry feels about impending digital transformation and whether or not banks are ready for IT disruption.

Based on Avanade’s latest research, banks are grappling with a variety of issues when it comes to transforming IT in their business. There is confidence when it comes to cloud adoption, lowering legacy spend and scaling up usage of AI and automation across the business.

However, this is balanced by a lack of in-house DevOps skills and concerns over security. Are banks ready for disruption?

Optimism around cloud, but not security

When it comes to sorting out legacy issues, banks believe microservices (78pc) and APIs (69pc) are a key strategy for unlocking value in the business. However, banks are struggling in this area: 43pc see legacy IT and the costs of integration as a major obstacle to an agile approach to disruption. Banks think legacy is a significant hindrance to retaining staff (39pc) and innovation (30pc).

But banks are optimistic about lowering their spend in this area. More than 40pc of banks currently spend between 10pc and 30pc of their IT budget on legacy issues, but in three years’ time, 31pc of banks reckon they will only spend between 5pc and 10pc.

There is a similar level of optimism around cloud adoption. Nearly one-fifth (17pc) of banks think they are currently ‘optimised’ and a third reckon they will be in that category in three years’ time. However, 36pc still experience security issues around the cloud.

In fact, security was a major reason for a delayed response to market disruption. Almost half (46pc) of all banks cited this as a factor, while 39pc said that the biggest challenge to IT transformation was security risks around legacy systems.

So there’s plenty of ambition. But the debate is over how quickly this will be delivered and particularly how security issues will be resolved.

Lack of DevOps skills is a major obstacle

Half of the banks felt they lacked in-house skills for handling market disruption. Specifically, acquiring DevOps skills is the biggest obstacle and banking was the top sector (out of 21 covered by Avanade’s research) with this issue.

Significantly, almost half of banks (47pc) reckon they can free up between 25pc and 50pc more time for other activities when they use a DevOps approach.

So, the logic for increased investment is strong, but it appears that the business case has yet to be made, given the lack of skills in this area.

Banks are using automation at scale

Banks are using AI at scale to modernise IT (53pc), improve employee experience (41pc) and optimise customer experience (50pc), rather than developing pilots.

The trend is even stronger when looking at automation. Banks are using automation at scale in the same three areas: modernising IT (66pc), improving employee experience (44pc) and optimising customer experience (53pc).

This resonates with Avanade’s research around digital transformation, which shows that automation and integration are the top banking priorities over the next five years.

Are banks ready for disruption?

The bottom line is that banks need to unlock value from legacy and get to grips with microservices, APIs and analytics in order to become more agile. This is not an option. Avanade’s research indicates that legacy issues are still present in many banks and that cloud adoption is low – despite the desire for lower legacy spend in future and greater cloud uptake. Security and the lack of DevOps skills are major issues.

The increased use of AI and automation is encouraging, but the acid test is whether this is genuinely integrated at scale into the various systems across the business. There are still a number of IT transformation challenges to be resolved before banks are fully ready for disruption.

By Peter Barrett

Peter Barrett is the global financial services lead in the marketing team at Avanade. A version of this article originally appeared on the Avanade Insights blog.