Beyond the Cloud – DevOps in Financial Services

One of the hottest topics in the financial services industry these days is the swelling adoption of the cloud1. After a late start, financial services is making up for lost time by aggressively moving processes and products to the cloud and to good effect. But does cloud by itself have the ability to deliver transformative and long-lasting results for an enterprise? Most firms are finding that more is needed in order to fully realize the promise of the cloud and one key component of this effort is DevOps.

DevOps in Financial Services

What is DevOps?

The roots of DevOps can be traced back to the emergence of Agile programming in the early 2000’s2. While Agile transformed the way that software was developed, taking a step-by-step “waterfall” process and turning it into a faster, leaner series of consecutive iterations, the operations side of the business went unchanged. This led to obvious friction between the development side of the shop and the operations team. In turn, this fostered the creation of a new discipline: DevOps. Put simply, “the goal of DevOps is to change and improve the relationship” between development and IT operations “by advocating better communication and collaboration between the two business units3.” The discipline is relatively young, with the first “devopsdays” taking place in Belgium in 20094.

Challenges and Opportunities in Financial Services

As we have noted in previous posts, the financial services industry has been relatively slow in responding to and adopting new technologies and processes for a variety of reasons. When it comes to DevOps, three key drivers for this have been regulatory restraints, concerns about security, and the sheer magnitude of the importance of the functions that the financial services industry performs. Along with the healthcare industry, financial services is the most heavily regulated business there is. Due to this level of oversight, security is paramount importance and a constant concern. After all, nothing is more important to us, as individuals, and as a society, than health and wealth!

On the other side of the coin, the opportunities are so compelling that change is occurring in spite of the obstacles. The primary driver is cost. Just as cloud services can help reduce capital expenditures (capex), the faster delivery of software and products that is enabled by DevOps can help reduce operating expenditures (opex) as well. Beyond cost, DevOps is essential if operations are to keep up with the speed of business. The development side of the business has learned to respond to today’s on-demand, “app store” mentality by becoming agile and now operations needs to follow suit. At the end of the day, such action and response is required if financial services incumbents don’t want to become the Blockbuster compared to Netflix as fintech competitors swarm to gain advantage in increasingly larger markets and products.

DevOps in Action

How is DevOps being put into action at financial services companies? Capital One and SIX offer two very good examples.

At Capital One, the adoption of DevOps was a natural progression stemming from success with Agile development. After beginning with Agile in 2011 with just two teams, they soon found that they were building software more quickly, but it was taking too long to get working software into production. Agile continued to spread on the development side, ultimately expanding to 700 teams. The addition of DevOps, including following Continuous Delivery practices5, was needed in order to accelerate results throughout the entire organization.

The adoption of DevOps has allowed Capital One to consistently be among the first to implement new financial products, including TouchID biometric features to its mobile app and, recently, becoming the very first bank to integrate with Amazon’s Echo/Alexa. The practice of DevOps is an enabler that allows the organization to succeed.

“Once you go upstream and have development teams truly own their code in production, there is an accountability and a quality dynamic that happens that is a very powerful incentive,” according to Capital One CIO Rob Alexander. “That’s the destination that we’re trying to get to across the board.”6

In the case of SIX, the Switzerland-based financial infrastructure company, DevOps principles and practices were leveraged in a way that turned the concern over regulation on its head: instead of being an impediment, the DevOps team facilitated discussions that lead to positive outcomes and results. Prior to investing in implementation, the DevOps team was able to interface with regulators in a way that allowed them to iron out potential compliance issues ahead of time. Heavy regulatory requirements for security vulnerability identification at build time, along with change traceability and auditability, could not have been met if it were not for DevOps. Further, rigorous examination determined that internal policies were more restrictive than regulators required, allowing for changes that gave more freedom to developers that saved both time and money. At the end of the day, the DevOps team was able to find efficiencies (and lower costs) on both the front end and back end of development. Without the principles of DevOps, these results would not have been possible.7

DevOps and the Big Picture

While we are certainly well past the “peak of inflated expectations” in the cloud “hype cycle”8, there is still a great deal of ignorance regarding the extent to which the adoption of the cloud can have positive impacts on business. While gains in speed and efficiency are alluring, they cannot be fully realized unless there is a wholesale change to the people, processes, and tools that comprise the whole of the business ecosystem. What’s more, they must be undertaken in a way that breaks down the assembly line orientation of old business units that are both too hierarchical and isolated to respond at the speed of business.

There can be no doubt that the pace of software development has increased in such a way that old business practices, in development as well as operations, are no longer tenable. In this environment, DevOps is a natural reaction and a logical evolution for business. The adoption of the flexibility and speed of Agile methods, lower cost and greater capacity of the cloud, and all other practices that are driving the relentless digitization of business are vitally important in every industry.

While financial services were initially a lagger in this battle, that is changing and it seems clear that industry incumbents are aware that change must be embraced in order to both stay relevant and to realize the tremendous benefits that can be gained by adopting and adapting DevOps and other best practices. Because, as General Eric Shinseki, former chief of staff of the U.S. Army, said: “If you dislike change, you’re going to dislike irrelevance even more.”9

1 See “Sunny Skies for Financial Services in the Cloud” in the October 2016 Maven Wave newsletter.
2 For more on Agile development, read “Agile Development for Financial Services” in the October 2014 Maven Wave newsletter.
3 DevOps – development and operations
4 DevOps definition
5Introduction to DevOps for the Financial Industry” For more on Continuous Delivery, see this posting on Wikipedia.
6Capital One shifts to DevOps to keep pace with customers
7DevOps Survival in the Highly Regulated Financial Industry
8 Hype Cycle
9 Eric Shinseki

About the Author

Andrew Dunmore
Andrew Dunmore
With over 15 years of solution delivery experience, Andrew Dunmore leads the financial services consulting practice at Maven Wave. Mr. Dunmore is one of Maven Wave’s thought leaders in capital markets innovation and delivery excellence. Prior to Maven Wave, Mr. Dunmore served as a Vice President at Bank of America in their global private equity investment office and an Assistant Vice President at LaSalle Bank in their credit derivatives servicing division.
January 27th, 2017

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