Cloud market CH 2020: Finance and insurance industry on the way to the cloud

Swiss financial service providers and insurance companies benefit from the advantages of the public cloud. An analysis.

The public cloud market in Switzerland has undergone an exciting development in recent years. For a long time, the public cloud was approached by many Swiss companies in a rather «shabby» and reserved manner. For many companies it was only used selectively. 

We have observed this behaviour, especially among our customers from the finance and insurance sector - primarily due to concerns about data protection / security and compliance. As a result, many of these companies have cautiously launched their Cloud Journey on-premises with a Private Cloud / CaaS (Container as a Service), thereby gently aligning their organization with the Cloud Journey.

In 2019, Public Cloud became a «must-have»

In 2019, the Swiss public cloud market received a real boost - public cloud became a «must-have» in practically every IT department, and for very different reasons:

  • More business agility
  • Incredible innovation
  • Shorter time-to-market
  • Better service quality and resilience, but also higher security
  • Optimisation of operating costs
  • Replacement of current data centers

Cloud services are the catalyst for the digitalization and differentiation of businesses. The benefits of cloud services are seen and will be benefited from. The opening of Swiss data centers, such as Microsoft with Azure and Google with GCP in 2019, have certainly given this development an additional boost. 

Based on an analysis of our CH customers from the finance and insurance sector, we recorded and processed the current status of use of cloud services at the beginning of 2020. The results provide interesting insights and trends can be identified. 

Efficiency increase is the driver of the Cloud Journey

For what reasons do our customers from the finance and insurance industry use public cloud services and what do they hope to gain from them? The following is a summary of their seven most important drivers on their Cloud Journey (in descending order of number of entries):

  1. Speed / Efficiency increase

  2. Cost reduction & optimization in operation

  3. Business agility and flexibility

  4. Stability & resilience in operation

  5. Reduction of vertical range of manufacture and stronger focus on core competence

  6. Production relocation (outsourcing of operations, dismantling of data center)

  7. Innovative strength

Governance and Compliance are the No. 1 challenges at the Cloud Journey

At the same time, our customers face a number of challenges on their Cloud Journey. The following is a summary of the seven most frequently mentioned challenges of financial service providers and insurance companies in our customer portfolio on their Cloud Journey (in descending order of number of entries):

  1. Governance and compliance

  2. Know-how / skills

  3. Security

  4. Acceptance / mindset / culture

  5. Operationalization: complexity with automation, operation and resilience

  6. Organization: processes and responsibilities

  7. Costs: control and intransparency

Private Cloud / CaaS are the entry into the Cloud Journey

The following diagram (Fig. 1) shows possible cloud journeys from a «no cloud» to a «cloud-native» company:

Cloud Markt_Journey.png
Fig. 1: Possible cloud journeys from a «no cloud» to a «cloud-native» company.

Various paths lead to the public cloud. A large majority of companies are developing via private cloud/CaaS towards the public cloud or hybrid / multi cloud. Other companies make the step directly into the public cloud, but this is a small number. Only a few have made the step towards the Multi Cloud so far. A more detailed look at cloud use is given in the following section.

Hybrid Cloud will be the predominant cloud model from 2020

The following illustration (Fig. 2) shows the cloud usage of our CH customers from the finance and insurance industry along the Cloud Journey outlined above as a comparison. Status at the end of 2019 and changes in 2020:

Cloud Markt CH - Grafik_Veränderung.png
Fig. 2: Cloud usage by our Swiss customers from the finance and insurance sector. Status at the end of 2019 and changes in 2020. (Note: «Hybrid Cloud» and «Public Cloud + Private Cloud / CaaS» differ in the sense that with «Hybrid Cloud» the cloud management is universal, with «Public Cloud + Private Cloud / CaaS» it is not)

The above comparison clearly shows the development of cloud usage by Swiss financial service providers and insurance companies in our client portfolio between the end of 2019 and 2020:

  • The vast majority of Swiss financial service providers and insurance companies rely on the cloud, including public clouds. However, the state of development on their Cloud Journeys is very different.
  • As described above, the path to the cloud usually leads via private cloud / CaaS and is then combined with a public cloud.
  • With the development from 2019 to 2020, it is becoming apparent that many companies are expanding their Private Cloud / CaaS with Public Cloud and in a subsequent step are moving to a Hybrid Cloud. Few transfer their investments in their Private Cloud / CaaS directly into the Public Cloud or into Managed CaaS from Public Cloud.
  • Few Swiss companies use Multi Cloud because it is complex and therefore the development of know-how and operation is too expensive for companies of their size.

From this we conclude that cloud usage is continuously shifting to the public cloud and is developing towards the hybrid cloud. As a result, Hybrid Cloud will be the predominant cloud model from 2020. This model enables companies to gradually develop their private cloud / CaaS towards the public cloud and thus benefit from the advantages of both worlds.

Cloud usage is continuously shifting to the public cloud

Cloud usage by Swiss financial service providers and insurance companies is on the move and will increasingly shift to the public cloud in the coming years. It is clear that private cloud / CaaS will play an important role in the coming years. But in parallel, workloads are increasingly being shifted to the public clouds of AWS, Azure and GCP and combined with Private Cloud / CaaS.  At this point, we refer to the study on IT Security 2020 by United Security Providers, which conducted a detailed survey of cloud use in Switzerland.

Our conclusion: Public Cloud will be used more often in 2020 - the biggest challenge is the transformation

The Swiss cloud market is still very much on the move and we are seeing a lot of growth in the public cloud environment. Public Cloud is a further step towards the industrialization of IT and has great potential in terms of:

  • Increase in efficiency
  • Speed or time-to-market
  • Relocation of production and vertical integration

There are new challenges in the use of public clouds, sometimes with a strong focus on security. In the public cloud environment, security issues are addressed by the hyperscalers with concrete measures. However, the challenges are not only of a technical nature, but also in the areas of competence / organization and mindset / knowledge. The transformation towards the public cloud therefore also takes time. But the direction is clear - Public Cloud is the «must-have» of every IT department and will largely replace today's data centers. But for the time being, hybrid cloud will probably be the predominant cloud model from 2020 onwards, so that the cloud journey can be approached step by step and the advantages of both worlds can be exploited.

Our recommendation: Take your Cloud Journey step by step, enablers your organization in terms of Cloud and go along successes into the future - let's make technology valuable!

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