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IBM Banks on Linux for Financial Services

IBM Thursday took a new tack in its quest to lure financial service companies into using its Linux-based servers, with a move to open a New York City-based technology center.

The Linux center, which will be based in IBM's Manhattan building, will include hardware, software and services from IBM as well as various participating companies, designed to help financial services customers test and implement Linux applications. IBM said it will initially fund the center with $1 million. It didn't disclose how many employees will staff the center.

While the financial services industry has historically been run on UNIX based servers, the new center will aid customers to move their software to Linux computers.

"In the face of a challenging economy, IBM customers in the financial sector are moving to Linux because of its low cost, powerful security, stability and flexibility," said Elaine Sullivan, General Manager, Financial Markets at IBM.

While Linux has much to offer financial services companies, such as low cost and open standards, the industry has been slow to adapt it.

According to Al Gillen, an analyst at IDC, there are a number of reasons for the firms' slow movement on the Linux front.

"What you'll find in the Linux space is that applications are in shorter supply and scalability could potentially be an issue," said Gillen. "Linux doesn't really have the scalability or headroom that Unix has, and it won't for a long time."

IBM's investment in bringing Linux to the server-side forefront, however, could advance its usage by financial service firms dramatically and accelerate availability of applications.

"IBM is putting its corporate credibility on the line by offering a technology such as Linux in this space," said Gillen. "If IBM is going to be there to back it up you can be pretty sure that IBM has a high degree of confidence that the solutions are going to work for customers and the solutions are going to be reliable and successful."

Other leaders in the Linux industry have also begun to heavily target the financial services market. Intel and Reuters on Wednesday broadened an alliance originally signed in May of this year with Hewlett-Packard to advance a Linux version of its server software for exchanging financial information.