Guiding an Effective Cloud Business Case

Financial services are complex. They involve a wide range of business processes, customer data, documentation and integrations that must be supported by IT infrastructure. Many long-standing industry standards have evolved into legacy systems built on monolithic infrastructures that can hinder progress and digitalisation.

Reorganising and restructuring these complex systems can be daunting and even more difficult to approach.

Over the years, cloud technologies have developed significantly, while insurers have matured in their understanding and use of them. Proven guidelines and solutions are now available even for highly regulated and audited industries.

It is time for the insurance industry to take the next major step towards the cloud.

Every new initiative begins with a business case. At Sollers Consulting, we have developed a phase-based approach to laying the foundations for a cloud transformation. Below, we outline the key stages that can help build an effective cloud business case.

Cloud directives confirmation

As with any new project or initiative, the business direction must first be defined and aligned across the organisation. The technical direction should support the business objectives.

Let’s start with the biggest question: Where are we going?

Perhaps the COVID-19 pandemic has highlighted the need for infrastructure that can securely support remote work, IT service management or the development and testing of new services. Perhaps the goal is to optimise business processes and costs while creating capacity for new initiatives and projects. Whatever the reasons, identifying and aligning these drivers is the first major step in determining whether cloud is the right direction.

It is also important to look beyond the IT infrastructure itself. What kind of internal growth do you want to achieve? How can innovation support further digitalisation? Technical infrastructure connects employees, processes and services across the organisation.

“As-is” analysis

Once the business vision is clearer, the next step is to answer a seemingly simple question: What are we working with?

The existing environment should be assessed from three perspectives.

How are we managing our services?

An operational perspective helps assess how existing services are used and managed. The people who interact with the infrastructure every day can provide valuable insights. Identifying where they encounter the most issues and where they spend the most time and resources can reveal important areas for improvement.

What does it look like under the hood?

A technical perspective is needed to assess the design and capabilities of existing services and resources. It helps identify technical bottlenecks and areas where performance is struggling. A seemingly minor complaint can indicate a larger underlying problem, so a detailed technical analysis is required to understand the limitations and inefficiencies of the existing environment.

Where is our money going?

A financial perspective helps assess the cost of using and operating the existing infrastructure. The most tangible costs include on-premises resources such as hardware, office or data centre space, licences and utilities. Operational costs such as maintenance and labour can be more difficult to assess, especially when processes and functionalities are intertwined across different resources and systems.

Combining these three perspectives provides a clearer picture of the health and total cost of ownership (TCO) of existing services. A thorough analysis is essential for building a strong cloud business case and later measuring the impact of the transformation.

Impact evaluation

After analysing the existing infrastructure, cloud practitioners and consultants can begin assessing potential cloud solutions. The same three perspectives can be used to evaluate the impact of the proposed changes and the requirements associated with them.

How will this evolve our operational framework?

From an operational perspective, we can outline how the use and management of IT services may change. It is important to consider different groups of internal users to gain a holistic view of daily operations, as the operations team may not be the only group responsible for keeping the infrastructure running.

Questions should include: How can compliance and regulatory requirements be implemented and monitored more effectively? How are issues identified, and how can they be escalated more efficiently? A solid understanding of IT service management best practices plays an important role here, as the goal is to evolve the existing operational framework.

How will this improve our technical capabilities?

From a technical perspective, we can assess the impact on the performance and flexibility of existing services and resources. It is important to understand the environments in which these services operate and how they can respond to significant changes, such as sudden traffic increases, the introduction of new projects or unexpected events such as a global pandemic.

How will this decrease costs and free up resources over time?

From a financial perspective, we can estimate the Total Cost of Ownership and the potential cost benefits of maintaining the new solution. It is important to look beyond direct monetary savings and consider broader cost optimisation drivers. Better visibility into IT costs and cost allocation can significantly improve financial control and analysis.

Gap analysis

These analyses help identify the gaps that must be addressed to make the transformation possible. All perspectives and participating teams should be assessed to determine what is required to implement the changes successfully.

The most obvious gaps may involve cloud migration, development and refactoring required to implement the new services. Other gaps may relate to training, recruitment or outsourcing needed to obtain the skills required to build and manage the new environment.

Solution selection

Once the assessments are complete, the available options can be compared, discussed and analysed by stakeholders.

Take a broader view and assess the potential impact across the entire organisation.

Which path should we take?

Discussions should focus on understanding and weighing the advantages and disadvantages of each solution and finding the right balance for all stakeholders. Business objectives and initiatives are important, but it is equally important to listen to the subject matter experts who will drive the change. Open communication and constructive debate help create the right environment for selecting the most effective path forward.

Cloud ROI

Once the preferred solution has been agreed upon, the next step is to examine the benefits and potential Return on Investment in greater detail.

The traditional model for measuring ROI is based on two KPIs: IT capacity and IT utilisation. In a cloud infrastructure, capacity can scale with demand and may be measured through storage, CPU cycles, network bandwidth and memory. Utilisation can be assessed through availability and usage volumes.

Comparing cloud with traditional computing models is important, but it is not enough to capture all the tangible and intangible benefits of cloud transformation. Several additional factors should be considered when assessing the value of a cloud investment.

Speed of adoption: Business strategies and initiatives can be adopted more quickly by cloud infrastructure. Starting a new project often requires less effort because IT resources can be provisioned and scaled more easily. Cloud platforms can also provide pre-built functionality and simplified integrations that support the introduction of new services.

Cost of inaction: Cloud has become a standard foundation for many modern technologies and services. New infrastructure services and InsurTech solutions are increasingly cloud-native or cloud-ready. The longer an organisation delays modernisation, the more complex and difficult the transition may become.

Compliance and governance: A major infrastructure transformation can also provide an opportunity to simplify and strengthen compliance and governance. Cloud platforms can offer administrative tools that centralise IT service management and automate traditional operational tasks. Over time, this can strengthen security and legal operations while reducing ad hoc work for operational teams.

Resource and financial capacity: Reducing ad hoc work and IT costs can create capacity for new projects and initiatives. A well-configured and increasingly self-sufficient infrastructure can enable teams to focus more resources on innovation and further transformation.

An incomplete assessment or poor understanding of the current environment and available options can make any cloud initiative extremely difficult.

Rushing through the initial stages of migrating or refactoring workloads can generate significant technical debt. A quick “lift-and-shift” approach may simply move existing problems into the cloud rather than solve them.

A thorough and realistic business case provides the foundation needed to guide an organisation through the complexity of cloud adoption.

A one-size-fits-all cloud transformation is not enough.

At Sollers Consulting, we have over 600 IT/business experts with extensive experience in financial services and insurance. We have guided 250 projects in over 30 countries and continue to stand at the forefront of digital innovation. We have considerable know-how in cloud transformations involving IT infrastructure, spanning various mission-critical systems and operational functions.

Author: Shinnosuke Fuchigami, Senior Analyst at Sollers Consulting

Shinnosuke is an experienced professional who has consulted for major vendors and has project experience with insurance clients as a QA Lead and Release Manager. At Sollers Consulting K.K., Shinnosuke is responsible for the internal development of cloud topics.