01 July 2004 Features

 

Looking for linux

Surveys suggest that Linux is increasing its penetration in financial services, but where is it? Gary Flood goes in search and finds that the reality is more complicated

If the adoption of Linux is growing as much as the numbers suggest, surely an aggressive user of technology like the financial services sector should be pioneering its use — especially in combination with cheap but powerful hardware from Intel?

The answer turns out to be a lot more fascinatingly complex and murkier than either the Linux acolytes or any of the established server platform suppliers such as Sun Microsystems and Microsoft would have us think.

Ask banks outright if they’re evaluating Linux, as Banking Technology has been doing, and the answer comes back uniformly in the negative. Major players like Barclays and Lloyds TSB either declined to comment or didn’t return calls. Newer, and one would have thought more innovation friendly, banks were similarly neutral to dismissive. Abbey and its Internet arm Cahoot said they hadn’t looked into it, while Egg said it “wasn’t in a position to discuss these issues”.

No doubt. Some people may be playing possum here. “There is great interest in Linux in banks, and in fact there are very few that aren’t doing at least some work with it in the datacentre,” is the claim from Martin Dekkers, Linux architecture expert at services group Computacenter

Indeed, though there are no public UK converts to Linux and Intel, there are some globally. In January last year Merrill Lynch revealed it was looking to cut costs by replacing mainframe enterprise servers using IBM servers running Linux, and by using Linux with Intel-based, commodity PCs and appliances. No price for the contract or expected savings have been revealed. In May this year Italian bank Banca Popolare di Milano announced a deal with IBM around a new architecture unified on a Linux, J2EE and IBM WebSphere platform with a Web-based application interface, all of which is centered on IBM eServer zSeries mainframes with Linux clients across the branch network.

So why are UK bankers Linux shy? “They just don’t want that getting out — be that for competitive advantage or worries over the Linux court case or whatever it might be. But Linux on Intel is a cheap compute platform and that’s these guys want,” claims Dekkers.

Other suppliers agree — though they hesitate to say that there’s much real Linux-Intel heresy in the heart of the data processing high church, the banking glasshouse. “There’s a fair amount of Linux in banks already, but at the moment mainly in mundane applications like file and print or Web serving — application areas not seen as too high risk,” says Rashik Parmar, executive IT architect in IBM’s financial services team for the UK, Ireland, Netherlands and South Africa.

“But that’s changing, and we see many customers starting to think about more high risk uses, such as server consolidation projects using Linux. It’s obviously easier to have two machines instead of dozens to manage if you can.”

The suggestion is, then, that despite public indifference banks and financial services institutions are indeed interested in Linux. The question thus differentiates into why, where, and for what?

Careful if you think you know why: Price is an issue, but it’s already a truism that Linux isn’t necessarily cheaper. “The newsworthy thing about Linux is the price competition against Microsoft, but the real pragmatic issue is the migration from Unix variants onto a common Linux platform,” says Phil Dawson, senior programme director for infrastructure at IT analyst firm the Meta Group. “Linux and Windows end up costing nearly the same; the biggest cost-saving potential is the Intel element for the hardware. Many users in finance are aggressively questioning the Unix application base on cost.”

So it’s not necessarily “free software” that’s driving Linux investigations, it’s a Unix that runs on Intel line of research? Possibly, but certainly not exclusively. As another analyst closely watching the financial services space, Gary Barnett, research director with UK analyst group Ovum, warns that as “banks are built so much around big, protected datacentres, anything to do with Intel tends to be a bit of a ‘big ask’”.

Instead, Barnett believes it’s Linux running not on RISC or even on Intel that’s the focus: “I see the most interest at the heart of bank’s data processing to be the Linux on the mainframe idea.

“That’s appealing to these guys. Because as they tend to be IBM shops, interested in Java, and holding lots of data on big databases, that’s a pretty cool technology — basically building a virtual distributed network inside the mainframe. Why not do it that way instead of the other way, which is linking lots of cheap Intel boxes together to create a virtual mainframe?”

Interestingly, that’s not the view from IBM, which has so successfully managed to wrap itself in the Linux flag yet still shift impressive quantities of its own proprietary kit. Of course it’s keen on its multiple-Linux-partitions-on-one-mainframe idea (using zOs to mount potentially thousands of copies of Unix applications ported onto Linux instances on a big mainframe) but even Linux advocate Parmar pooh-poohs the notion of any big rush.

“There have been one or two such moves but not many. Linux just opens up more possibilities, be it consolidation projects or high-performance computing through blade technologies, in applications from branch or call center refurbishments, possibly ATMs, even maybe desktops,” he says.

And Computacenter’s Dekkers scoffs: “Linux on the mainframe? We see some work but really that’s all just driven by one vendor, IBM, and the benefits still haven’t been convincingly shown. It’s more short-term, tactical, high-performance gains that we see customers in banking looking for from Linux-Intel.”

Banks are showing interest in datacentre Linux but it’s really more in retail banking branch network and point of call applications in the call center where high-performance computing farms could service apps that, for example, bring together credit risk calculation and so on,” adds Meta’s Dawson. “I can see proprietary in-house applications talking directly to the bank’s hardware being changed at the moment.”

So where does all this leave Sun? Sanguine, it turns out. Sun Microsystems used the SIA show in New York in June to show what it called a ‘concept car’ Linux and Unix-based trading room application as a demonstration of the potential of this combination. It says that it will develop this into a product if there’s enough interest.

“Yes, financial institutions are looking to drive cost out of IT wherever they can, and as Linux is so positioned as a low-cost platform naturally they’re evaluating that, and there’s been a big trend in the last twelve months where customers ask: ‘Can I have that on Linux?’” says Nigel Woodward, global manager for capital markets and securities at Sun.

Reports of Sun’s decline in the City are premature, he insists. “We haven’t done a great job getting the message out, but we’re not being taken to the cleaners at all. We have got strong solutions around the AMD Opteron chip, which offers Sun users phenomenal price-performance, and partnerships for Linux applications — we’re not defensive about Linux at all.”

Woodward says that when it comes down to it, banks’ sensitivity to operational risk means that “optimised and stable” platforms, including Solaris, are the ones they will run mission critical systems on.

But he does admit Sun has work to do. “We were the traditional default City desktop of the 1980s, but then we went into the server space as a company and lost that constituency to Wintel. Now we can come back into it — it’s a massive opportunity.”

So what’s the reality of Linux use in the banking world? Maybe it’s like OAP sex: there’s probably a lot more going on than we ever hear about, but no-one wants to shout about it.

research

By the numbers: is Linux Unstoppable?

• Meta Group expects Linux to grow from around 15% penetration today in banks to 30% by 2007.

• Earlier this year IDC predicted Linux would have 6% of the global desktop market by 2007, more than doubling its 2.7% share of the market in 2002, the most recent figures available. Most of that growth is expected to come at the expense of Microsoft, which held 92% of the desktop market in 2002.

• In the US Sun claims it recently sold 10,000 desktop Linux programs to “a large overseas financial institution that wanted to avoid the cost of upgrading its Windows systems for some users” (Wall St Journal, June)

• The latest Computer Weekly/SSL Quarterly Survey of Appointments Data and Trends claimed the number of job advertisements asking for Linux skills has increased by 50%

• A recent survey of 50 UK financial data managers by City software firm CMS WebView claimed 61% of market data managers at banks such as Citigroup, Morgan Stanley and Goldman Sachs report that their banks have already moved from mainframes to PC servers in certain key areas