IDC: Linux Becoming Entrenched in Capital Markets

Linux is well on its way to becoming entrenched in capital markets, with
leading edge firms turning to the platform for mission-critical
applications, according to a new report by IDC Financial Services (the
fruit of IDC’s acquisition of Meridien Research).

The report’s authors, IDC Financial Services analysts Deborah Williams and
Damon Kovelsky noted that in addition to mission critical apps, most firms
are also turning to Linux for more fundamental applications like basic
infrastructure, e-mail and printer servers.

“Future wide-scale implementations of Linux-based, mission-critical
business applications may get less press, but they will continue to happen
at all of the largest global financial institutions,” Kovelsky said.
“Critical to this migration will be the ongoing support of the large
hardware vendors, especially their ability to provide support tools and
services for porting and new development. We believe that within the next
18-24 months, installing a Linux-based software package will become as
normal as installing a Windows or Sun Solaris system.”

Kovelsky said they predict the real move will come within 18-24 months
because the current macroeconomic conditions don’t yet support it.

“Not a lot of money is being spent on technology right now, especially on
Wall Street,” Kovelsky told “I would expect that
in about a year that will change. The word has to get around that these are
successful implementations for first movers.”

He added, “The hardware vendors and providers are set to go. It’s really
just the demand-side.”

The analysts noted that Linux has become an attractive platform to many
firms because it has demonstrated that it can be a less expensive
alternative to Unix for some workloads, but still provides many of Unix’s
core features, like stability.

“It’s currently a less expensive alternative to what’s currently being used
on Wall Street,” Kovelsky said. “It’s just as good. Since we are in a time
of cost-cutting, cheaper is better.”

Initially, Kovelsky said he sees Linux-based solutions capturing a larger
slice of engines and applications that are transactionally based, and don’t
require a lot of processing. For instance, he said Linux makes a good
platform for matching engines and trade order management solutions.

However, currently at least, he doesn’t see Linux getting much play in
areas that have heavier processing and database usage requirements.

“[Right now] a lot of the databases that are being used on Unix are not
really demonstrating that they can be ported to Linux,” he said. “I think
we’ll start seeing that change next year.”

But the market still has growing up to do, and the major players need
business experience before they will be able to fully leverage their
offerings, according to Kovelsky.

“Linux providers’ lack of capital markets expertise and inability to bring
in independent software vendors will make them important but fringe players
in the capital markets over the next 18 months.”

IBM , which already has a heavy presence in the financial
services market, and Hewlett-Packard — especially with
its Compaq relationships — are in the best position to capitalize on
Linux’s increasing penetration of capital markets. Kovelsky said the
software vendors could enter the market, but they will have to invest in
personnel with business expertise, and that’s not a cheap prospect.

“Your pay scale is going to have to exceed what they’re making on Wall
Street,” he said.

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