14 October 2008 Features

 

Open sourcery

Martin Banks

Open Source Software is starting to gain a foothold in mainstream financial services applications.

A recent survey has demonstrated the growing strength of the overall market for Open Source Software in Europe. Conducted on behalf of Actuate Corporation, the survey is the latest in an annual series, and shows worldwide trends in the attitudes towards, and adoption rates of, OSS. For vendors in the sector the view portrayed looks reasonably good. Europe, in particular, is already a stronghold of its adoption, with Germany and France leading the way. In France, it is the preferred option or explicitly considered as an option in more than 61% of installations. In Germany, that rises to 63%.

The fact that this trend is not always reflected too closely in the banking and financial services sector is no doubt geared to the fact that such users have a track record with existing proprietary applications and the associated conservatism which comes with having identified applications that do the job satisfactorily. This is a marketplace where the unnecessary risk attendant with changing applications is usually avoided by keeping changes to a minimum.

There are a couple of reasons, however, why this situation may be about to change. The banking community is starting to generate a much closer on-going relation with open source software, not least because the current events in the banking marketplace are bound to have a negative impact on short and near term capital expenditure plans where OSS can offer some cost advantages. In addition, there is liable to be a growing requirement for handling the IT consequences of mergers and acquisitions, where OSS vendors already have a wealth of experience in interconnecting and interoperating between disparate systems.

This interoperability is set to expand with increased use of Service Oriented Architecture based infrastructures, Software as a Service service delivery alternatives which are now being given the collective name of ‘The Cloud'.

The most important reason of all, however, is likely to be the changes that will come in the way banks interact with both their staff and their customers. Online banking technologies are only in their infancy and OSS is at the core of many of the new developments now appearing in Mashup applications and social software developments. It will be from these OSS-based arenas that the new online ways of reaching customers - both commercial and consumer - and providing them with new services, will appear.

There are two different views of ‘open source'. One is the open source operating system choice between Linux and other proprietary operating environments such as Windows or the various flavours of Unix . The other is in the area of applications code. In both areas, however, there are cost advantages to be found. Although the party line about OSS being ‘free' has been shown to be just that - a party line - there can still be cost advantages in considering it, even if it is just a mix of Linux as the operating system running Linux-compliant versions of familiar applications. Linux is now well-established as an alternative operating system and has companies such as Red Hat and Suse that provide enterprise-ready distributions of the operating system. These are not sold, per se - the support services are paid for.

Linux also has the performance needed for banking, for it is already widely used as the operating system for world's most powerful supercomputers. Hereby lies one of its important benefits. These huge systems usually comprise many thousands of individual servers working together in clusters, and this is an advantage when applied to banking. Scaling Linux-based systems to meet growth and/or performance demands can be a more straight forward task than with other technologies. Linux is also processor neutral, which allows the option of the same application code being run on different hardware platforms, allowing a good degree of mix'n'match in scaling options.

Indeed, its flexibility can be seen in the fact that IBM's recently announced z/10 mainframe, can run up to 4,000 virtualised Linux servers in a single system. This is particularly good for running the type of applications often found in financial organisations - multiple instances of the same application running separate tasks against a database, for example. As it can also run a mixed environment of mainframe applications and multiple virtual Linux servers, it could prove a cost-effective upgrade for any bank with an existing mainframe installation.

There has also been a great deal of hype over the years about OSS and support. There has been some grounding in truth of course - yes, in the early days support was largely based on posting requests for help to online Linux community groups and waiting for a response. This was never a comfortable option for any major business. But now there are many large, well-resourced open source vendors around that are the equal of their proprietary cousins in support terms. And in the end they may be arguably better, in that beyond their own third line technical support there is still that community of many thousands of committed specialists that can be called upon as a fourth line of support. The upshot is that intractable problems can usually be solved much faster and more cost-effectively.

OSS is very much about the application of standards, and it is this that has created the ability for different applications and systems to interoperate together. This is particularly important to the development of new banking services, such as in the use of Web services - and Web services development is set to be a very important tool for financial services because these are already becoming the primary way through to the customer. Indeed, most of the important tools for creating and managing Web services, such as the Apache Web server, and for developing the applications, such as the Eclipse development toolset, have roots in OSS. Web services means having the most users possible able to interoperate with a bank's systems to generate the most business potential. Their use will most certainly expand for the financial community.

This can raise the problem of integrating the real-time transaction events of a Web service with the business-critical back-office systems that run the real business engines of any bank. Most of these systems will be mainframes, but now there are a growing number of OSS and standards-based tools appearing, such as Shadow from DataDirect and SOLA from SOA Software, that can integrate the back-office mainframe with Web services and service-based infrastructures.

Web services are, however, likely to be only the beginning of the infiltration of OSS technologies into banking. The development of social software - already in common consumer use through sites such as Myspace, Facebook, Flikr and YouTube - is indirectly offering new ways for all businesses to interact with customers, business partners and staff. Social software is largely the preserve of the young, but as they enter the workforce - with skills oriented to using data rather than ‘technologies' - pressure is growing on the banking community to use these new technologies to exploit the skills of young staff as well as reaching out to customers.

Social software tools for banking are also starting to appear, and banks are starting to employ them. BNP Paribas, for example, realised that its individual divisions often had information useful to the rest of the business but no mechanism with which to disseminate it. It is now using Enterprise Social Software from BlueKiwi to build specialist staff blogging systems that allow staff to share the information.

New ways of interacting with customers is also going to be a key area for the development of new OSS and social software tools. For example, Monitise has a system available that allows consumer customers to conduct their basic banking needs - checking account balances, paying bills and the like - via a mobile phone connection. One of the most common social software options available to banks for customer interaction is the RSS (Really Simple Syndication) feed. Here, once a customer has signed up to receive a feed any change to the information source - a blog outlining new financial services or special offers, for example - is automatically pushed to them, keeping them informed of developments. Barclays is just one of many banks now exploiting this customer communications medium. This approach does more than inform customers faster, of course, for it can be directly coupled with the necessary online tools needed to make a sale, bridging the often growing gap between marketing efforts and the sales teams.

What is noticeable here is that banks in developing countries, particularly where there is no extensive legacy of communications infrastructure or traditional banking practices, are faster on the uptake of OSS and social software. Some banks in Malaysia, for example, have used the technologies to implement knowledge management systems from the likes of Lotus to restructure their business processes from a traditional western model to an Islamic Banking model better suited to the local culture. By using the knowledge management tools to capture the business process information it was possible to re-purpose it to fit the new business model.