Jonathan Dedman, Director at Cloudhouse
Financial services firms are under mounting pressure to modernise – but many face a twofold skills shortage that’s slowing transformation. On one side, the pool of experts who deeply understand outdated, complex banking applications is shrinking. On the other, demand for cloud-native talent is surging, yet remains hard to fill. Without both, banks risk a widening divide where they’re struggling to maintain critical existing systems while lacking the capabilities to fully exploit new platforms.
Compounding this challenge is the growing reliance on third-party suppliers. While partnerships are essential to fill capability gaps, they can also introduce operational vulnerabilities if in-house teams lack the expertise to oversee, validate and manage those providers effectively. This combination of internal capability gaps and supplier dependencies poses a significant risk to operational resilience.
Closing these gaps requires more than short-term recruitment initiatives. Firms must plan operational transformation with a clear five-year horizon, ensuring they can adapt to evolving demands while protecting mission-critical services. That means valuing legacy expertise alongside modern skills, proactively managing supplier risk, and adopting strategies that safeguard continuity during change.
Here we explore three actions financial institutions can take to bridge the talent gap:
- Adopt phased migration strategies
A complete overhaul of outdated systems in one go is likely to cause a lot of disruption and significant system vulnerabilities. The issue is financial services can reach a point where they have to modernise their outdated infrastructure, as it is approaching its end of support or is simply not fit for purpose any more. Simultaneously, however, these applications are critical to operations – pulling the plug would present major risks to the business. But the risks of holding on to them are greater. And the internal dilemmas continue.
So, what can these firms do?
Phased migration strategies allow companies to maintain operational stability while new capabilities are developed. Ideally, these take place incrementally on an ongoing basis, so that timelines adhere to when infrastructure and environments need upgrading when they reach their end of life, or when business priorities demand innovation and evolution.
However, when change is time critical, there are ways to transfer critical existing applications onto supported servers with minimal disruption. This keeps the applications running as they are but ensures they can continue to provide critical operational capabilities but be deployed on supported, secure environments, either in existing data centres, moving to new data centres or into the cloud. In time, the applications can then be upgraded themselves if necessary.
- Leverage automation and trusted external partnerships
The manual process of packaging and deploying apps onto new infrastructure can be time-consuming and expensive – not to mention the specialised skillsets required to perform the task. The use of an application compatibility solution can automate the packaging and deployment of applications in the cloud or on-premise, simplifying and accelerating the migration process.
But modernisation should not be treated as a one-off event but an ongoing activity. It’s possible to use smart, centralised platforms that can automatically and continuously monitor the whole IT environment, providing teams with a single view of their entire IT estate. This enables them to spot and manage any configuration changes and enable reconciliation and remediation in a rapid and proactive manner. Such a setup reduces the manual burden as well as the risks and licensing costs that come from being dependent on third party suppliers.
External partnerships are still crucial to this process in building and maintaining such an environment. They can help financial firms to enhance their profitability and access innovative technology as well as consultancy, training and support to achieve the highest ROI. Looking through past case studies and trialling their systems are some of the ways companies can ensure they are trustworthy.
- Invest in targeted upskilling to create balanced teams
Many banks and financial institutions have relied on co-existence strategies which have created a network of old and new systems working in parallel. These strategies have helped them to mitigate risk and spread cost, but they have also created a widening range of knowledge and skills needed to oversee these banking applications.
As a result, it’s imperative banks can build balanced teams that contain legacy and cloud expertise. This depends on targeted upskilling that can develop new capabilities in-house and ensure sustainable modernisation, allowing firms to adapt to evolving demands. For example, as a modernisation project takes place, it’s worth including team members in training and onboarding sessions to teach these skillsets incrementally.
Developing knowledge more widely in-house can safeguard banks from knowledge loss and being dependent on costly external developers and consultants.
Narrowing the divide
Many banks face a widening divide at both ends of the spectrum, attempting to manage and modernise their old, complex systems with limited expertise, while simultaneously building cloud-native capabilities that remain scarce. Without a strategic approach, this capability gap risks derailing transformation efforts – and the risks of not modernising outdated software are difficult to mitigate.
Operational transformation means adopting phased migration strategies, leveraging automation alongside external partnerships, and investing in targeted upskilling. The legacy talent gap represents a threat to financial services’ operational resilience. But these three steps can help provide financial institutions with a considered and responsible strategy to narrow the divide.