In this exclusive Q&A, Mohamed Emad Eldin, Head of IBM Public Cloud Business for the MEA region, shares his insights on the pivotal role of cloud technology in today’s business landscape. He discusses the premium benefits of the cloud, the importance of hybrid cloud solutions, and the impact of cloud adoption on financial institutions’ balance sheets. Eldin also addresses the risks associated with cloud concentration and the essential nature of cloud technology for the viability of modern financial institutions.

Beyond cost advantages, of the further benefits the cloud brings, which do you put the highest premium on?

I prioritize easy access to new technology and time to market as the most valuable benefits of the cloud. These aspects are intertwined, forming two sides of the same coin. In recent years, the pace of technological advancement has been remarkable, with innovations like blockchain, digital banking, and more recently, AI and generative AI, becoming integral to every industry.

An IBM report ‘6 Hard Truths CEOs Must Face’ found that 44% of CEOs in the Middle East & Africa region view hybrid cloud technologies as a crucial tool for achieving the results they want in the next three years. The ability to swiftly adopt such technologies is no longer merely a competitive advantage; it’s a survival tactic. It’s not a question of ‘if’ you can access and utilize these technologies on time, but rather ‘how’ you will leverage them to outpace your competitors and continue providing optimal services to your customers. Failure to do so in a timely manner could result in being left behind indefinitely. In essence, being able to swiftly adopt and adapt to new technologies through the cloud is essential for remaining relevant and competitive in today’s fast-paced market.

Is cloud concentration risk a concern?

Cloud concentration can pose a multifaceted risk to banks. Operational risk arises from the potential for service disruptions or outages at a single cloud provider, which could impact critical banking functions and customer service. Vendor lock-in is another concern, as heavy reliance on one provider may limit flexibility and increase dependence on their ecosystem, potentially inhibiting innovation and competitive agility. Additionally, there’s the risk of suboptimal cost management, where over-reliance on a single provider may limit opportunities for cost optimization and negotiation.

We’re seeing regulations continue to emerge around cloud concentration risk in the banking sector, especially in the European Union and the United States. Moves like this indicate that regulators are paying closer attention to the evolving threat landscape and aim to minimize risk and close gaps in the supply chain. Prioritizing resilience across hybrid, multicloud environments with a single point of control is key, allowing financial enterprises to gain a holistic view of their IT estate, as well as potential threats. We must remember that cloud is not a destination – it’s an enabler.

Is a hybrid cloud/on premises arrangement likely to be the norm for banking technology use?

Yes, a hybrid cloud approach enables greater resiliency, performance, security and compliance for banks and other enterprises in highly regulated industries. , There’s no one-size-fits-all approach to cloud for banks – it requires intentional placement of workloads based on where they will perform best whether that’s on-premises, in the cloud, or at the edge.. IBM, for example, continues to make improvements to our enterprise cloud platform for regulated industries, striving to deliver the most resilience, high performant, secure and compliant cloud. Years ago, we launched the first industry specific cloud platform, IBM Cloud for Financial Services, providing banks and other financial institutions with built-in security and compliance controls to adhere to the stringent regulatory and compliance standards of this industry.

An intentional hybrid cloud approach lets banks leverage the benefits of both on-premises infrastructure and cloud services. With a full stack approach the enables data-sharing, resiliency, security, and compliance, banks can have IT environments that are open, continuous and allow for speed innovation.

Has cloud use in the past few years brought tangible upsides to banks balance sheets?

In general, cloud adoption has indeed yielded tangible benefits for banks’ balance sheets, although the extent of these benefits can vary across different markets and countries. The shift from high capital expenditure investments in infrastructure to project-based operational expenditures is a notable advantage facilitated by cloud technology. However, the realization of these benefits depends on various factors, including the approach taken by banks in adopting the cloud, the level of training and planning preceding the cloud journey, and the efficacy of tools utilized for optimizing and managing cloud costs.

It’s worth noting that many banks have encountered challenges, particularly in cost management, which can affect the perceived benefits of cloud adoption. Common issues include improper usage practices, such as maintaining full capacity regardless of actual demand or overcommitting to reserved instances instead of utilizing more flexible pay-as-you-go models.

Nevertheless, there’s reason for optimism as the industry’s understanding of cloud technology matures. Banks are becoming more adept at optimizing cloud usage and extracting maximum value from their investments with support from consulting experts like IBM Consulting and ecosystem partners, implementation can become increasingly seamless and drive positive impacts on their balance sheet.

Can any modern-day financial institution remain viable if not making some use of the cloud?

In today’s financial landscape, cloud technology is not just advantageous but essential for modern institutions’ viability. The absence of ‘Cloud only’ services underscores its ubiquity. Lagging in cloud adoption means delays in addressing challenges and seizing opportunities, as well as facing prohibitive operational costs. The cloud offers agility, scalability, and cost-efficiency, crucial for adaptation and profitability. With evolving cloud technology and innovations like generative AI, institutions risk irrelevance without embracing the cloud’s transformative potential. An IBM report found that 72% of executives agree that improving ROI from the IT investment portfolio by 25% or more is a top C-suite priority for 2024. In short, cloud adoption is no longer optional; it’s a strategic imperative for staying competitive and future-proofing operations.