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Software-Defined Data Center Adoption in the Banking Industry

By Enrico Boverino

While organizing my notes on my flight home after meeting with the CIO of the IT Shared Services organization for a large global bank, the metaphor “selling ice in the Arctic” came to my mind. Like me, some of you may have been subjected to play it out during a job interview, in order to demonstrate your creativity and persuasive skills.

The main topic of my meeting with the CIO was how a software-defined data center (SDDC) could help his IT organization accelerate its ability to modernize the delivery of services while achieving the 3-year cost-saving objectives set forth in the company plan. However, our meeting was not about me (as amazing salesperson) trying to sell a technology solution to someone who didn’t need it, or to persuade him to go against his best interests. My role was to understand my customer’s business needs and the unique challenges the banking industry presents to his IT organization.

Our discussion centered on how technology, processes, and organizations can be managed to achieve business objectives faster and more efficiently. Today’s banking industry is moving past a few challenging years. And while many banks are still executing for cost savings in back-office optimization or making the necessary investments to adhere to new regulations such as SEPA payments or Bank of Italy Continuity Controls, I do see a strong movement to quickly modernize. In fact, many banks are embracing technology innovations to adopt a digital strategy and to create new services to transform from a transaction-centric to a customer-centric model.

This innovation leads to the development of new personalized services such as digital wallets, new online payment processes, and personal finance applications that can be offered as value-add services to the existing online banking experience. These new services also create requirements for dynamic customer front ends that address mobility and new social behaviors. There are examples of banks developing two unique customer experiences that are demography-based—simpler and limited interface for traditional customers; richer and more dynamic interface to attract Generation Y. And of course, there’s the rising demand for more data storage and richer data analysis—mostly related to customer transaction history, spikes of trades, and social data insight.

In the banking industry, innovation can have different meanings to different IT organizations, based on their resources and constraints. And, there are tradeoffs and negotiations on how to fund “RUN the bank” versus “CHANGE the bank” initiatives that shape corresponding IT strategies, as shown below:

RUN the Bank

  • Front-to-back office modernization
  • Financial transparency of IT services
  • Regulatory compliance and operations continuity
  • Efficient procedures and selective sourcing

CHANGE the Bank

  • Accelerate M&A and geo expansion
  • Share commodity functions across bank communities
  • Enhance customer experience and grow mobility offerings
  • Data consolidation and rich analytics to create new offerings

So how can a software-designed approach enable my customer’s IT organization to deliver on new service requirements and accelerate innovation for his business stakeholders? Today, he manages to distribute budget and resources to support both sides of the bank’s initiatives, but I pointed out that his IT organization remains too anchored to the RUN side, which is slowing the outcomes he could realize from innovation.

In my next blog, I’ll compare an SDDC greenfield approach to a build-and-replace model. While there are different approaches the bank can pursue, creating a new data center platform—an SDDC greenfield strategy—can put the CIO and his IT organization on a fast track toward meeting business objectives.
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Enrico Boverino is senior business solution strategist for VMware Accelerate Advisory Services based in Italy. You can follow him on Twitter @eboverino.