Dive Brief:

• Bank of America is consolidating its infrastructure footprint as part of an internal cloud strategy, reducing its number of servers from more than 200,000 to 70,000, said Brian Moynihan, chairman of the board and CEO of Bank of America, in a Q3 earnings call Wednesday. The bank still operates 23 data centers, down from 67.
• The bank built a common architecture to allow the majority of its applications to run across 8,000 servers, Moynihan said. While BofA has pursued a private cloud strategy, Moynihan said third-party cloud providers are 25-30% "cheaper."
• Led by Cathy Bessant, chief operations and technology officer of BofA, and Howard Boville, CTO of BofA, the company is negotiating with potential providers paying closing attention to data privacy and security. "We don't need to own the hardware, we just need to find out who can provide the right way," Moynihan said.

Dive Insight:

Bank of America has focused on improving its customer experience and creating responsive digital tools users expect in the mobile era of computing.

In a "high-touch, high-tech" strategy, BofA has worked to redesign how customers interact with its financial centers and prioritizing digital banking.

Since 2010, BofA has spent $25 billion on new technology initiatives, which includes rearchitecting "major systems," building an internal cloud, and building software with rapid speed to market, Moynihan said in BofA's 2018 annual report. 

The bank was formed in 1998 and, much like every legacy enterprise, has technology debt to contend with. Financial services institutions are particularly vulnerable because of regulatory and compliance pressures. 

The reliability of mainframes, which handle bulk transaction processing like a dream and power many ATMs, can make it difficult to modernize. Long-running infrastructure becomes nested with modern applications, not primed for the digital era. 

In recent years, big banks have heavily invested in technology to update older systems and make way for a digital era. J.P. Morgan Chase & Co. allocated $11.4 billion for technology; in 2018, BofA spent $10 billion. 

While smaller banks are spending most of their tech budgets on maintenance, larger institutions are looking toward innovation and security. As technology architectures become more digital, infrastructure maintenance shifts to third-party providers, leaving the banks to focus on innovation and customer needs. 

BofA is not alone in looking toward the cloud, but its private approach falls in line with compliance and regulatory apprehension. Institutions wary of public cloud risks — regardless of the computing power provided — look to Capital One as an example of what could go wrong.