Ronan Bradley's FinanceTech Directions

I said only earlier in the week that we really can’t say much about future banking IT trends until we have some idea what the industry will look like. However, I thought I would respond to some upbeat comments on the likely impact on OSS of the economic downturn by Jay Lyman (of the451group). My opinion is more mixed: While we may see some initial additional adoption of OSS in a financial service industry strapped for cash. In the longer term disruption in financial services in particular may slowdown the spread of OSS outside of already established strongholds.

To start with Jay Lyman who disagrees when he states here that

"The more I consider the continued gloomy outlook, the more I am convinced the economic struggle will translate to increased interest, use and adoption for open source software."

And quotes OSS vendors who are saying to him:

"We think organizations are being forced to cut costs at the same time they are being forced into compliance and regulation, so it’s driving deals our way."

The first comment does make sense when departmental budgets are tight, there is a very sensible tendency to look for cheaper solutions and a very human tendency to look for solutions which do not require staff reductions: Where easier to save money than to remove the software license fee element.

However, that very tendency may have the first knock-on effect that will impact on the longer term development of OSS. As is well recognized among OSS vendors (for want of a better term) and analysts, the OSS specialists have struggled even in relatively good times to get users to pay the maintenance and consulting fees that they need to survive. It is also widely understood that most OSS projects rely on the vendor side to drive the project forward and in many cases provide most if not all of the code. Therefore, while the OSS project may become more widely adopted, the vendors could suffer from the same challenges as closed source vendors. This may result in consolidation in favor of the giants (IBM, Red Hat, Oracle etc) who have the scale and stamina to prosper. If this happens, it will slow down innovation and development of OSS in general.

However in another related piece he identifies what could be a longer term fly in the ointment:

"Big banks and insurers are among the primary forces that have ushered greater open source acceptance and maturity in the enterprise. It began largely with Linux and internal development, but has since spread to other parts of the infrastructure."

Jay is right to point out that financial services – and investment banking in particular - has been at the vanguard of OSS adoption and has also been instrumental in starting and funding some of the key infrastructure OSS projects. This has been the case for many years – probably starting with OpenAdapter from DKW up to more recent projects such as active-MQ. With less investment banks in existence and potential less room and interest in innovation, the OSS drive into infrastructure may stall.

Ronan