Modernizing regulated industries with cloud and agentic AI
In today’s fast-paced world, businesses are feeling the heat to not just boost revenue but also enhance security and drive innovation—all at once. To tackle these challenges, many organisations are fast-tracking their journey to the cloud, recognising its potential to significantly improve business outcomes. A recent IDC White Paper, which Microsoft sponsored, reveals that operational efficiency is the primary motivation for cloud migration, with 46% of organisations focusing on cutting IT operating expenses. But it’s not only about saving costs; cloud infrastructure is also preparing organisations for a surge in AI adoption (37%), the development of high-performance applications (30%), improved resilience (26%), and compliance with governance and risk requirements (24%).
However, moving to the cloud isn’t a piece of cake. Migration and modernization can be quite tricky due to outdated architectures, scattered environments, and a continual shortage of skills, forcing organisations to seek ways to migrate more swiftly while reducing operational risks.
The IDC study spotlights agentic AI as a significant game changer. These smart systems are capable of automating evaluations, streamlining migration and modernization processes, and enhancing operations across hybrid settings, enabling a shift from occasional, manual efforts to consistent, adaptive improvements. This trend is fuelling tremendous growth, with IDC predicting that the public cloud services market will soar to USD1.9 trillion by 2029.
While migration frameworks may be generally applicable, their actual impact varies by industry. Healthcare, financial services, and manufacturing each grapple with distinct challenges presented by regulations, operational risks, and critical systems.
In this blog, we’ll delve into the key challenges surrounding migration and modernization in these three sectors—healthcare, manufacturing, and financial services—highlighting real customer experiences that illustrate the significant benefits of adopting cloud solutions.
Healthcare: Secure modernization for innovative clinical experiences
Healthcare organisations encounter the most formidable hurdles when it comes to modernization. They face rigorous regulations (like HIPAA/HITECH and HITRUST), disconnected clinical data from electronic health records (EHRs) and imaging systems, outdated infrastructure leading to high capital expenses, and increased vulnerability to ransomware attacks. Clinical settings demand ultra-low latency and utmost reliability.
According to the IDC research, while these challenges hinder progress, they also intensify the urgency for modernization, especially as organisations strive to enhance telehealth services, handle imaging workloads, manage genomics pipelines, and implement AI-driven clinical workflows.
So, what do healthcare organisations really need? The IDC study suggests:
- Secure integration of EHRs, picture archiving and communication systems (PACS), genomics systems, and Internet of Things (IoT) medical devices.
- Flexible computing resources for high-volume imaging and genomic tasks.
- Enhanced disaster recovery capabilities and quicker restoration times.
- AI-supported diagnostics and seamless documentation processes.
- Modern patient interfaces and secure collaboration tools for clinicians.
Customer Spotlight: Franciscan Health
Facing aging systems and the risks of disaster recovery, Franciscan Health implemented a practical strategy to relocate its Epic EHR to Microsoft Azure.
The outcome was impressive:
- $45 million in savings over five years after the migration of Epic to Azure.
- 90% faster disaster recovery compared to the previous setup.
- Failover times decreased to around 30 minutes, down from hours.
- Avoidance of potential downtime costs of $10 to $12 million per day.
Discover more about Franciscan Health’s successful transition to Azure.
The aim for healthcare’s modernization is clear: lower operational risks, comply with regulations, and leverage cloud AI to enhance patient outcomes.
Financial Services: Real-time insights and automated compliance
Financial institutions operate under some of the strictest regulations, including standards like PCI DSS, SOX, GLBA, Basel frameworks, and the KYC and AML rules. These firms often rely on outdated mainframes, making modernization a daunting task. Today, regulatory pressures are mounting with new frameworks like the EU’s Digital Operational Resilience Act (DORA) and the EU AI Act, which set higher expectations for operational resilience, risk management, transparency, and ongoing compliance monitoring. Under DORA, financial firms must show continuous management of ICT risks, advanced incident reporting, and resilience tests across vital systems and cloud service providers. Similarly, the EU AI Act imposes governance demands on high-risk AI systems, affecting fraud models and customer decision-making.
Insights from IDC interviews reveal a rising need for real-time risk assessments, fraud detection, digital onboarding, and flexible infrastructure to manage peak demand—capabilities that are no longer optional.
Key challenges identified by the IDC study include:
- Stringent regulations on data residency, model risk governance, explainability, and eDiscovery.
- High expectations for operational resilience and effective third-party risk management.
- Resistance to change from legacy systems and outdated batch processes.
- Evolving regulations necessitating ongoing compliance instead of one-off audits.
Cloud solutions—particularly platform as a service (PaaS) and managed services—allow financial institutions to move from static compliance processes to continuous monitoring and real-time insights. By cutting down batch processing times from hours to minutes, modern cloud infrastructures facilitate automated evidence collection and aligned compliance workflows that meet DORA and AI governance standards. Learn more about how Microsoft can support financial institutions in navigating these challenges.
Customer Spotlight: Crediclub
In order to speed up product development and meet the expectations of Mexico’s national banking and securities authority (CNBV), Mexican fintech Crediclub transitioned its databases to a serverless PaaS architecture and adopted microservices.
The results were remarkable:
- System uptime jumped from approximately 80% to 99.5%.
- Network latency dropped by 90% thanks to MPLS and dark fibre technology.
- Rapid introduction of new financial products facilitated by Kubernetes and DevSecOps.
For financial firms, modernization is now about more than just efficiency—it’s critical for resilience, trustworthy AI functions, and compliance on a large scale.
Manufacturing: Merging IT and OT for data-driven operations
Manufacturers operate in a notably complex environment characterised by legacy and proprietary operational technology (OT) protocols, isolated manufacturing execution systems (MES), and supervisory control and data acquisition (SCADA) systems, along with globally distributed supply chains. The demands for low latency, especially for critical safety operations, coupled with intermittent connectivity at the edges and the need to safeguard intellectual property, heighten the challenge. Successfully modernising and integrating these environments without compromising safety and performance is vital for transformative progress.
Unique modernization hurdles, as per the IDC study, include:
- Extremely low latency needs for safety-critical operations.
- Massive data ingestion and time-series analysis at scale.
- Complex operational landscapes across global supply chains.
- Secure safeguarding of intellectual property across edge and cloud settings.
Cloud offers exciting opportunities such as:
- Predictive maintenance using IoT data ingestion.
- Minimised unplanned downtime and enhanced overall equipment effectiveness (OEE).
- Creation of digital twins for facilities, production lines, and products.
- Utilisation of computer vision for instant quality and safety checks.
- High-performance computing simulations for design and engineering tasks.
- Establishment of standardised, global data models.
Customer Spotlight: ASTEC Industries
ASTEC integrated its disparate systems throughout its rock-to-road value chain—from aggregate processing to asphalt production and paving—by transitioning to Azure, adopting time-series databases, and developing a comprehensive connectivity platform using Azure IoT Hub, Azure Events Hub, and Power BI.
The outcomes included:
- Real-time visibility across operations.
- Predictive maintenance strategies to cut downtime.
- Introduction of new digital services enabled by connected machinery.
The drive for modernization in manufacturing is clear: unify IT and OT, enhance real-time data intelligence, and achieve global efficiency.
Microsoft’s Strategy: Continuous, intelligent, and collaborative modernization
Microsoft’s philosophy is straightforward: modernization should be a continuous, intelligent, and cooperative process. The IDC study underscores that successful companies adopt a balanced approach to migration, utilising a mix of rehosting, replatforming, refactoring, and software as a service (SaaS) substitution, depending on the importance of each workload.
Microsoft supports this methodology through a comprehensive suite of tools and features, including Azure Copilot and GitHub Copilot. With automation, organisations can:
- Conduct discovery and dependency mapping.
- Perform security assessments and receive 6R migration recommendations.
- Refactor and modernise applications, ensuring code is up-to-date.
Azure Migrate offers a seamless experience for discovery, assessment, migration execution, and modernization services. Azure Accelerate complements this with a structured framework that includes:
- Guided deployments through the Cloud Accelerate Factory.
- Funding and credits for Azure planning, piloting, and rollout.
- Expert partners and tailored training programmes.
The IDC study indicates that organisations utilising Microsoft Azure for migration and modernization see reductions in operational costs, enhanced resilience, quicker modernization timelines, and improved security—particularly in highly regulated sectors.
Looking Ahead: Agentic modernization as a cornerstone for AI-ready businesses
Across different sectors, IDC’s findings are consistent: agentic AI is emerging as a significant factor in driving modernization. It helps organisations manage rising complexities, regulatory demands, and competitive challenges.
While healthcare, financial services, and manufacturing each face specific constraints, cloud modernization remains the bedrock for driving innovation, operational excellence, and enterprise AI capabilities.
Microsoft’s approach equips organisations with unified automation, intelligence, and tools necessary for secure and scalable modernization.
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