Impact Study: Regional Banking Cloud Cost Benefit Analysis (CBA)

A regional bank had recently undertaken a migration of Core Banking to Fiserv's hosted platforms; however non-Core systems needed a plan. Mesh was brought in to perform a Cost-Benefit Analysis (CBA) to inform a Case for Change towards migrating the remaining infrastructure to Microsoft Azure Cloud.

Impact Study: Regional Banking Cloud Cost Benefit Analysis (CBA)
Impact Study: Regional Banking Cloud Cost Benefit Analysis (CBA)

A U.S. based regional bank wanted to understand the costs and benefits of migrating its non-Core systems to Microsoft Azure's Cloud in order to support growth objectives of reaching $20B in revenue in the next 3-5 years. 

The Challenge 

The regional bank had recently undertaken a migration of their Core Banking systems to Fiserv's hosted platforms; however ancillary services and systems that are not core nor functional banking services were not slated for relocation / re-platforming with Fiserv. Mesh was brought in to perform a Cost-Benefit Analysis (CBA) to inform a Case for Change towards migrating the remaining infrastructure to Microsoft Azure.

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"This model was thorough and bulletproof, showing the true value of the CBA work” - VP of Technology

Engagement Description

The Mesh Digital LLC team worked with the client to harvest a systems and capabilities inventory and supporting financial data for those platforms remaining in data centers post-Fiserv outsourcing, using the data to create a baseline of current operational costs which became the business as usual (BAU) use case. Several migration scenarios were pragmatically developed informed by best practice architectural models and factoring in skill levels, risks, migration pace. The cost for these scenarios were then calculated, taking into account the shift from CAPEX to OPEX accounting, and compared to a business as usual (BAU) use case. Additionally, the team also carefully considered the impact of accelerating existing capital asset depreciation and worked to ensure there was little to no need to do so avoiding negative impact on this publicly traded bank's books, while proving improvements in service levels and increasing savings were available opportunities.

Outcomes Delivered

A Clear View Of Current Costs and Expected Savings

The client had extensive financial data but lacked insights into the true costs of supporting their environment post outsourcing their Core Banking. Mesh analyzed historical spend data to identify their key cost drivers; like a Disaster Recovery (DR) facility and offsite storage tape vaulting services. Ultimately redesigning a future looking high-level cloud architecture that reduced costs while improving service capabilities, agility, and the bank's business resilience.

Identified Inefficiencies and Optimization Opportunities

Migrating to the cloud would eliminate on-premise hardware upgrades, simplify network connectivity, and reduce technical debt by updating system currency to the latest standards. Additionally, Mesh identified savings by rightsizing an underutilized environment, which only utilized 20% of its capacity.

Improved Service Levels and ESG Benefits 

Mesh over delivered, planning for an Azure architecture that eliminated the need for a separate DR site, yet offering an improved 2-hour Recovery Time Objective (RTO) for the bank's non-Core Banking mission and business critical systems. Backups were streamlined by removing offsite storage needs and significant, value additive ESG benefits were able to be introduced that the bank wouldn't have been able to achieve otherwise with a forecast Energy Savings of 52% - 79% and emissions savings of 92% -98%.

Net Financial Analysis of Moving to the Cloud

The CBA with multi-dimensional modeling demonstrated clear ROI in as little as  2 years, reducing annual expenditures by 45%. Ultimately, providing a conservative estimate of reduced Total Cost of Ownership (TCO) over a 5 year time horizon by $1.4M - $1.9M in fully loaded savings. Beyond the forecasted savings, further opportunities to lower Operating Expenditures (OpEx) and better align IT with business goals by reallocating resources to higher-value customer and business initiatives were identified.