What kind of progress is Linux making in financial services,
and is it anywhere near challenging Microsoft’s dominance? Linux’s appeal is obvious:
Anyone can make changes to the source code and redistribute it. And since no one
“owns” Linux, this brings obvious development and licensing cost
savings to Linux users.

In financial services, Linux’s greatest inroads have been
made in the back office. One area where it has scored well over Windows and UNIX
is in terms of pure processing power. Consider the situation at banking
software company ABK Systeme, based
in Germany. It had requests from users for transaction rates of 100 million per
day, peaking at up to 20 million an hour.

It seemed that UNIX could handle a peak of around 8 million
a day. ABK tweaked the performance, and stacked servers up, but it was still
struggling to deliver the new levels of demand. So it turned to Linux running
on its IBM zSeries hardware. Transaction volumes increased dramatically—as
verified by Forrester
Research’s subsidiary Giga
—to in excess of 19 million an hour and 155 million
a day. The company now has dozens of banks running on Linux.

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The growth of Linux in the enterprise can also be attributed
to the fact that it is now simply more visible to corporate users by virtue of
new distribution networks. For example, at the start of the year, Novell unveiled a
migration path to Linux
for its Netware operating system: This is a
“toe-in-the-water” offer, allowing companies to try out Linux with
relative ease.

So much for success in the back office. When it comes to the
front office, Linux’s progress is piecemeal. For example, Reuters ported its
Market Data System to Linux and in the three years since then, about 20 of its
largest customers have moved to the new platform. Alternatively, Red Hat in
Europe, the company that provides support and maintenance contracts for Linux,
reports that financial institutions are in the top three of its revenue

So, while the back office may provide clear opportunities
for Linux—capitalizing on performance—its leverage in the front office is more
complex. “For most companies, the cost to migrate away from Microsoft
Windows is simply too high and outweighs the benefits companies expect they
will receive,” says Michael Silver, research vice president in Gartner’s
Client Platforms group. “Most large companies have hundreds, if not
thousands, of applications, and the cost to migrate them to run on or be
accessible from Linux clients is huge.”

Another way of assessing the current state of play is to
examine the battle between Linux
proponents and Microsoft executives over which is best. “Pros” on one
side are routinely reinterpreted as “cons” by the other. For example,
Linux advocates say that it has a lower Total Cost of Ownership (TCO). They
point to the fact that you don’t have to pay for a new license every time you
deploy a new copy of the software. Moreover, the bureaucracy associated with
managing these multiple licenses also represents a significant cost—one not
borne by Linux users.

On the other hand, as
Microsoft points out, TCO does not depend only upon start-up costs. If a system
crashes, or needs upgrading, or is wanted to do something different —this all
costs too. Windows is arguably a cheaper option on that front. Another factor
that is routinely thrown into the ring is security. The prevalence of
Windows-oriented viruses is obvious, as is their ability to spread fast. But
then, Microsoft is throwing billions at the problem, and at the end of the day,
simply switching the operating system will not make you safe from hackers or
phishing scams.

Perhaps the truth of the matter is that banks will switch to
Linux when, and only when, it makes financial and technological sense. These
days, there are few ideologues in IT departments. So, Linux must make its case
to continue gaining ground. But then, so must Microsoft, if it is not to lose
its current, substantial lead.