Q1. Could you start by giving us a brief overview of your professional background, particularly focusing on your expertise in the industry?

Over the last 20 years, I have moved through various roles within the IT ecosystem and have seen many transformations up close. Through my current role as Sales Director, I focus on the EU Financial Services Industry. My background predominantly comes from a Digital Foundation perspective, and I have seen many seismic shifts from client-server architectures and basement server rooms to state-of-the-art hosted datacenters, to public cloud, to hybrid cloud, to GPU-enabled AI clouds in recent years. 

Over the years, one constant source of excitement that has kept me going is the systematic simplification of the consumption of digital foundation technologies. Over the years, it has consistently become more automated and programmatic. This has resulted in it becoming less of an obscure black box and bringing it much closer to actual consumers by removing layers and processes, thus providing more direct business value.

Q2. Looking ahead, which parts of the digital foundation value chain are structurally positioned for margin expansion or consolidation—and which are facing irreversible margin erosion? What changed?

The digital foundation value chain has changed significantly in recent times, driven by the proliferation of cloud and AI. The traditional pillars of IT services—standardized infrastructure management and legacy application maintenance—are experiencing significant margin compression, while high-abstraction layers such as sovereign AI infrastructure, managed FinOps, and automated resilience testing are emerging as high-margin frontiers.
Margin Expansion (Value and Regulatory Driven Spend)

Technology Value Management: This has evolved from simple cost-cutting to a strategic discipline. The ITO team now manages multifaceted infrastructure across hybrid, private, and public clouds. With regulatory pressures and technological advancements, they are forced to operate in a hybrid cloud world. Add to that, the focus on AI is increasingly shifting away from standard maintenance services and towards finding enterprise value across all initiatives through better orchestration. SIs can expand margins here by providing the Business Value Enablement that connects infrastructure strategy to business value outcomes.

Sovereign Infrastructure: Regulatory (GDPR, DORA, EU AI Act) and geopolitical developments are prompting a rethink of data residency and even the adoption of EU-local solutions. Organizations are undergoing a slow yet deliberate shift in thinking across these trends, not only moving workload residency within the region but also considering potential service delivery in the same or nearby region. Well-equipped SIs can capitalize on the situation to package a truly local/regional solution for the EU market.

Cybersecurity and AI Spend: While initial AI spend is going largely toward AI Infrastructure and solution providers, organizations will look for an orchestrator who can consolidate all AI spend and drive meaningful value from it. Add to that increased spending on cybersecurity due to the ever-increasing attack surface. Organizations will focus on ROI rather than cost-cutting in these areas.
Margin Erosion (Legacy & Commodity)

Standard Infrastructure Maintenance: Traditional services are being aggressively challenged by the fast-paced advent of GenAI and Agentic AI. There is ever-increasing pressure on SIs to incorporate these elements either to significantly increase productivity or to fundamentally rethink the entire support model to align with newer trends.

Legacy Core Maintenance: Maintaining 30-year-old COBOL systems is becoming a strategic liability. Actual IT costs for these systems are often 3-4 times higher than initially budgeted. With the advent of AI discovery, replacement planning will become easier and may give the final nudge to phase out legacy products.

Q3. What conditions made cloud and infrastructure modernization a non-discretionary, board-level priority for some banks and insurers—and why did others still treat it as optional spend?

The spending is driven by external factors and by what the board perceives as a need for strategic, competitive advantage.

Regulatory Changes (Non-Discretionary): Ongoing EU regulations, especially those applicable to the financial services industry (GDPR, DORA, EU AI Act), are mandating a modernization journey for organizations. While they may be able to buy some time from regulators after presenting that execution plan, management teams and boards face the heat from regulators from a compliance perspective

Regulatory Inquiries (Non-Discretionary): Alongside regulatory changes, ongoing audits by regulatory authorities make it non-discretionary for BFSI organizations to invest time and effort in modernization initiatives. Any risk management perspective findings need to be acted upon without undue delay, as they directly impact resilience and customer trust. These actions will only gain momentum, especially now that the infusion of AI makes these gaps even more glaring at a faster rate.

Regional/Smaller but Dominant Markets (Optional): Organizations present in smaller pockets/regions and with a smaller yet loyal base are reluctant to invest in modernization unless they are forced to. These organizations have a small, loyal customer base and do not face intense global competition in their areas of operation. Some of these organizations are even protected by local language penetration and developing geopolitical situations. However, neo-banks and neo-insurers pose a challenge to them from a customer retention perspective.

Lack of Institutional Knowledge (Optional): Many traditional financial services organizations, especially banks, still operate their core systems on outdated technology. Over the years, knowledge of these systems has been lost due to a lack of documentation and workforce churn. Organizations face a particular challenge in undertaking modernization initiatives for such a system due to the fear of breaking already functioning systems. Unless the board and management team decide that modernization initiatives are necessary from a competitive-advantage perspective, these organizations tend to ‘keep the lights on’ by performing minimal maintenance. More often than not, they end up spending more; however, they continue doing so due to a lack of institutional knowledge to overhaul these systems.

 

Q4. How have competitive dynamics among large IT service providers, niche specialists, and hyperscalers changed in European financial services—and which players gained or lost pricing power as a result?

In the pre-cloud world, the providers were largely hardware and software providers and System Integrators (SI). These 3 entities held significant pricing power due to their interdependence, expertise, and scale.

However, with the advent and significant proliferation of cloud technologies, pricing power began to shift and became multidimensional. The power balance has shifted from "capacity/scale/pedigree" to "capability & value".

Hyperscalers (Gaining Pricing Power): They are now able to provide not only compute power and platform software, but, with the combination of these, they have started offering IaaS, PaaS, and SaaS as a one-stop shop. Add to that AI workloads, which are almost invariably offered on a subscription-based model on cloud platforms. This has moved pricing power away from pure-play hardware and software vendors towards hyperscalers. We can also see this in the pricing trends, where subscription-based pricing or usage-based pricing has become the norm even for traditional hardware and software vendors.

System Integrators (Loosing Pricing Power): With the advent of cloud (especially cloud native technologies) and simplified SaaS platforms, the amount of integration efforts required to be put in by SIs has reduced significantly. Rather than scaling, demand for expertise and outcomes became more prominent. This led to new pricing models, such as RU-based and Squad-based models, providing much-needed scaling flexibility (while remaining linked to clear outcomes) even in the services area.

Niche Providers (Slow start but now gaining pricing power): The emergence of niche, small players focusing on specific technologies, tasks, or outcomes is a result of the industry's shift toward outcome-based rather than cost-based pricing. Industry has started engaging players who will provide definitive value for a specific task/technology/function rather than mass skill onboarding. Initial acceptability and scale were low; organizations are now far more open to making value-based decisions rather than pedigree-based decisions.

The impact of newer technology trends is not only seen in the implementation of modern technologies but also in the way of working and the technology consumption/contractual model itself. This has resulted in traditional hardware and software vendors and SIs losing pricing power, which has now shifted to hyperscalers and niche providers. Traditional players are also emerging with non-traditional pricing mechanisms to compete in this market.

Hyperscalers and niche players have also launched industry-specific solutions, which assure the industry that these solutions are custom-built for them; for example, many hyperscalers place extra emphasis on regulatory compliance requirements when serving financial services customers. Due to data residency requirements, many of them have increased their regions so that data remains within confined national/regional boundaries, providing comfort to FS organizations. We will continue to see this trend with AI workloads being built, where Sovereign AI and Sovereign Cloud will continue to gain momentum.

 

Q5. Which cloud strategies in financial services proved economically resilient at scale—and which created hidden cost, complexity, or lock-in that ultimately destroyed returns? Why?

Over time, cloud strategies that have proven economically resilient are those that focus on true value creation rather than those driven solely by cost savings.

Cloud-Native (Economically Resilient): Cloud-native architectures—using API-driven platforms and microservices have truly created business and long-term economic value. Running legacy software on a modern platform does not allow taking complete advantage of cloud-native offerings. Neobanks or Neo-Insurers have found this cloud-native adoption much easier, as they started without any technology baggage. For established organizations, it was always a struggle to shed baggage and realize the full potential of the cloud. In such cases, identifying correct cloud workloads has helped traditional organizations to enforce resilient strategies.

Strategic Hybrid and Multi-Cloud over full-scale public cloud (Economically Resilient): BFSI organizations are regulated entities that traditionally carry technical debt. Moving away entirely to new technology always proves slow and costly. Instead, organizations that consciously focus on creating hybrid cloud strategies have found long-term value and remained compliant and nimble over the long term. Organizations that have focused on adopting containerization and fit-for-purpose multi-cloud environments have avoided hyperscaler or technology lock-ins.

Operating Model Modernization (Economically Resilient): Cloud not only offers modern technology but also requires a new way of working to extract full value. Organizations that have redesigned workflows, skills, team structures, roles, and operating models to align with cloud offerings have been able to extract long-term, sustained economic value from cloud adoption.

‘Lift & Shift’ Trap (Value Destroying): Many firms fail to account for the per-gigabyte cost of moving data out of the cloud. Egress fees and API operation fees can significantly inflate cloud bills. Organizations that have chosen to only adopt ‘Lift & Shift’ invariably see their costs ballooning on account of these hidden/not-so-obvious costs.

Lack of FinOps (Value Destroying): Unmanaged cloud on the promise of ‘Pay for what you use’ often results in not so well thought out autonomy. This initial lack of tighter oversight has resulted in overprovisioned, idle, and disparate resources in the cloud. Without proper and continual FinOps discipline, costs have only ballooned, destroying overall value. And now organizations must work to align cloud spend with expected value.

 

Q6. In financial services, which aspects of cloud transformation delivered fast, measurable business value—and which consistently underperformed or took longer than promised? Why?

The ‘Technology Value Gap’ persists when you adopt technology for the sake of new technology, and it is also evident in the cloud transformation case.

Fast Business Value

Digital Experience & Personalization: Cloud technologies have paved the way for new ways of interacting with customers, employees, contractors, and partners. This has resulted in significant, measurable value and rapid adoption due to the use of cloud-native or relatively internet-based technologies and quicker application development cycles.

Customer Channel Expansion & Transformation: Launching new channels and an omnichannel experience has helped the organization proliferate and expand consumer reach much faster than traditional modes. Speed has often trumped accuracy, as faster release cycles have continued to provide novelty to consumers and significantly improve adoption.

Core Cloud Way of Working: Fundamental levers of cloud technology adoption through new ways of working (IaC, DevOps, Automation, etc.) have, in a way, forced value-driven adoption resulting in sustained IT value (cost reduction, faster time to market, etc.). This has now expanded into a non-cloud world, also creating an overall cloud-like experience rather than just cloud adoption.

Underperforming

Big Bang Modernization: BFSI organizations carry significant technical debt, and their business processes have become increasingly entangled over the years. Expecting a quick, faster modernization purely on the technology front has not really worked. Organizations have spent a significant amount of money over the years, only to realize that fixing technology alone will not solve their cloud challenge. They rather need to fundamentally rethink business processes around cloud adoption.

Cost Savings Focused Adoption: Another misnomer of cloud adoption was significant cost savings. More often than not, it has resulted in haphazard short-sighted ‘Lift & Shift’ strategies without realizing that complete and quick cloud movement is not possible on a faster scale, owing to regulatory hurdles and significant technical debt.

Data on Cloud: The data problem is never a platform problem but invariably becomes a data quality and governance problem. Trying to solve it quickly by adopting cloud-based platforms has only led to new platform adoption, but foundational data-related problems still persist.

 

Q7. From your vantage point, what are some important questions to be asked of senior management to understand the digital foundation growth and margins?

The questions must focus on Value Alignment from all stakeholder perspectives.

• How much of our budget is 'Keeping the Lights On' vs. 'Innovation,' and what is the trend?

If >70% is still spent on RUN, there are not enough modernization initiatives. Also, if the RUN spend is ever increasing, then modernization initiatives are not fast and effective enough.

• Have you implemented Platform Engineering (Internal Developer Platforms) backed by an aligned Digital Foundation Platform?
• The pervasiveness of newer ways of working suggests how much you have embraced new technologies to their full extent. Are you still using it in the old way, or have you fundamentally altered the way you operate to unlock full value?
• How are you mitigating the 'Cloud Concentration' and 'Exit Strategy' risk requested by regulators?

Test your strategies and provide resilience, compliance, and comfort.

• How do you calculate ROI for the modernization initiatives?

It is not only ROI for the new technology that you should consider; you should also look at Opportunity Cost and Legacy Cost Ballooning.

• Have you implemented the Federated Cloud Consumption Model? Have you balanced it?
• Like in a classical federal democracy, which decisions are central, and where do you lend more autonomy to practitioners? Too much central control stifles the speed of innovation and go-to-market, and too little creates a disparate, uncontrolled environment.
• What are the 3 NET things BUSINESS will get from digital foundation modernization initiatives?

Gone are the days when the digital foundation was a backroom function. Unless you demonstrate business value, you will not find sponsors for your initiatives.