Regulations and compliance are 'a curate's egg' for digital transformation, say IT pros in finance, telecoms and public sector

Hurdle or driver for modernisation? A bit of both, apparently


For highly regulated industries, compliance is seen as a hurdle to digital transformation yet it's also viewed as one of the key drivers for modernisation efforts, at least according to an IBM study.

This seemingly paradoxical finding is from a UK survey by IBM and research firm Censuswide looking at the biggest drivers and barriers to modernisation among three of the most regulated sectors – financial services, telecoms, and the public sector. The survey included responses from over 600 IT decision-makers and professionals.

Across all respondents, security and regulatory compliance were listed as the main factors holding organisations back from digital transformation, with 44.8 per cent agreeing with this. However, when asked about their views on new regulations and policies, 40 per cent also said that these were a catalyst for innovation and created the opportunity to offer new or differentiated products and services.

Among the other drivers for modernisation were increased security threats and the need to drive cost efficiencies, both highlighted by 32 per cent of respondents. Other barriers to digital transformation comprised data security, a skills gap in the workforce, and the costs of modernisation.

Many of those surveyed are also well aware of the potential consequences of not delivering on digital transformation, with 34.8 per cent indicating that their main concern was being hit by increased costs for managing and maintaining a legacy system, followed by an increased security risk at 34.3 per cent, then other factors such as organisational inefficiency and increased risks due to non-compliance with industry regulations.

When it comes to making changes in response to recent or forthcoming regulations, 47 per cent said they will have to upskill their workforce or make new hires in response, 43 per cent claimed to have already done so, and only 10 per cent said they had no plans to.

According to IBM, the trend for companies in these highly regulated sectors is for adoption of industry-tailored clouds rather than generic cloud services to help them balance compliance with the need to innovate. Which is handy, dovetailing with IBM's view that the world will be a mix of on-premise, public cloud and private cloud infrastructures.

The figures from respondents indicate that 88 per cent of them have migrated or plan to migrate to an industry-specific cloud platform that has built-in support for the compliance features they require.

Not surprisingly, 49 per cent of respondents indicated that the use of a platform with built-in automated regulatory controls would deliver a boost to their ability to innovate, while 45 per cent said they believed that moving critical workloads to public clouds to take advantage of services such as AI, data analytics, and quantum computing would have an impact.

A large proportion of respondents felt that their organisation was well prepared for potential disruptions, with 72 per cent stating their company was ready for any policy changes and 75 per cent believed they were prepared for potential security threats. Doesn't everyone... until something happens.

Breaking out responses from the individual sectors covered by the report, IBM found that 71 per cent of financial services believe that "digitally native" businesses pose a threat to their business model, and this has made their transformation efforts more urgent, forcing them to focus on increasing use of emerging technologies.

The top modernisation priority among these firms is upgrading to newer enterprise-grade cloud security technologies, but also increasing the use of data analytics and AI.

Among public-sector organisations, 85 per cent of respondents have adopted or plan to adopt hybrid cloud architectures and are working with multiple cloud providers, which is perhaps not surprising given that the UK government adopted a "cloud-first" policy for procuring new IT services nearly a decade ago.

Almost three quarters (73 per cent) of public-sector respondents indicated that their organisation has been forced to upgrade its security strategy in light of recent cyberattacks like SolarWinds.

For the telecoms industry, there is intense pressure to evolve into digital platforms as part of the transformation of networks as 5G is adopted, IBM said, and this has led to 89 percent of respondents stating they are using or plan to adopt an industry-specific cloud platform for telecoms.

The findings of the study show that these highly regulated industries are feeling pressure to transform, but they cannot afford to drop the ball on security, resiliency and compliance, according to IBM.

"As regulations continue to advance, it is critical for companies to avoid vendor lock-in and adopt hybrid multi-cloud strategies to achieve stability, keeping compliance and data privacy at the forefront," said Howard Boville, IBM's senior veep of Hybrid Cloud. ®

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