Beyond Linux: Focusing on the future of open source

By Maria Trombly | Securities Industry News | June 9, 2003

It's every technology vendor's nightmare: a proprietary moneymaking technology is replaced by a free alternative built by a global army of volunteers working in their spare time, destroying the business model overnight. Of course, this is also the dream of every technology user who's tired of paying too much for unmodifiable code and being locked into one particular platform. Wall Street IT departments are no exception. In fact, with the recent wave of budget cutbacks and a renewed emphasis on efficiency, open source is starting to look really good. The most popular example is Linux for Web servers and for distributed computing.

"Schwab has a major commitment to Linux," said David Dibble, EVP of Schwab Technology Services. "We're moving schwab.com to the Linux platform this year and Linux will be a major strategic project for us."

Liquidnet, an electronic order matching system for buy-side firms, also uses Linux servers, as well as the open source Apache Web server. Most recently, it's rolling out an open source content-management solution from Abstract Edge for its corporate Web site, intranet and customer extranet.

"Open source was really good for us because we want to be self-sufficient once the system's up and running," Steve Greenblatt, chief product officer for Liquidnet. "Because we're a financial services and technology company, we have a strong technical team who were interested in having a solution that they could learn from, work with and take advantage of. And not having to pay expensive licensing fees was certainly an appeal as well."

In general, open source alternatives are most common for basic-budget utilitarian purposes and to solve problems for which there are no proprietary solutions. Much of the Internet, for example, is run on open source software, written before the major software vendors even considered it as a market.

This trend will likely continue, meaning lower costs for Wall Street users. Even if a particular firm doesn't choose the open source variant of a particular application, the fact that it exists will cause vendors to drop prices.

"You'll see a big move of things that have been high priced toward commodity pricing-such as FIX engines today and order management engines tomorrow," said Nigel Woodward, Sun Microsystems' global segment manager for securities and capital markets. "We're going into an environment where competitive pricing is the key."

Of course, the products have to be reliable, maintained, and fully supported.

"We believe in the promise of open source but any commitment to the use of an open source solution needs to be done with an eye toward the requisite intellectual rights issues as well as an eye to how it will be supported," Dibble said.
Open source hasn't necessarily scored well in the past in these areas-but times have changed. Although open source is still mostly done by volunteers-employees of technology companies and of Wall Street firms themselves-private companies have recently gotten into the game in a big way. This bodes well for Wall Street users and anyone who depends on open source software for critical tasks.
There are currently two ways to make money on open source software.

The first approach is to give the software away free, but charge for support. This is the approach taken by Red Hat, which offers a distribution of the popular Linux operating system. Users can download the operating system free over the Internet, or buy an inexpensive CD. For everything beyond that, however, they need to sign a service agreement with Red Hat.

This approach is so popular that Red Hat has become the de facto official distribution of Linux on Wall Street and many vendors are developing their applications to work specifically on Red Hat Linux. Even Sun Microsystems, which has its own version of Linux, has begun offering Red Hat Linux as an alternative to its customers.

The other way to make money on open source software is to give it away for free to anyone who wishes to use it in an open source manner, and to charge for those users who plan to use it in a proprietary fashion.

For example, if folks want to use Sleepycat Software's Berkeley DB database tool in their application-and want to share the source code of that application with the world-then they don't need to buy a license.

Otherwise, if they want to sell the resulting application or distribute it to users within the firm, they need to buy a fixed-price license that lasts forever and doesn't depend on the number of users. For another 20 percent per year, they can also get upgrades and support, said Sleepycat CEO Mike Olson.

Many Wall Street firms already use Berkeley DB and don't know it because it's embedded into the applications that they already have. For example, Red Hat comes with Berkeley DB. And Red Hat doesn't have to pay for a license because its operating system is distributed as open source software.

Both of these two approaches means that Wall Street firms can be confident that their open source software is stable and reliable, and backed by a company that will step in and help out if something goes wrong.

For example, Olson said, when the Nasdaq Stock Market built its SuperMontage trading system, Berkeley DB was part of the applications. Two of the top five investment banks also use the database, said Olson.

Unlike Oracle and DB2, Berkeley DB is not a stand-alone database that requires a database manager and then interfaces with other programs. Instead, it is an embedded database. As new applications are developed, Berkeley DB's source code is inserted where it's needed and customized as required.

"More and more people are writing Web-services style of applications where little pieces of it are running everywhere," said Olson. "Historically, the big relational guys have been running on a server with lots of database [administrators] around it. Berkeley DB is designed for places where there are no DBAs. You don't need to think of the database as a separate external thing-you can put the data right there in the application. It's much faster and much more manageable."

Berkeley DB can be found in many infrastructure products used by Wall Street firms, said Olson. For example, both IBM and HP used Berkeley DB as part of their grid computing frameworks.

In addition to using open source software to enhance their own proprietary offerings, some vendors are hoping to offer open source products to entice customers to buy their hardware or their consulting services. IBM, for example, which offers both, has been a big proponent of open source-unlike Microsoft, which isn't a big player in either open source or Linux.

"We've been told by customers that open source is very important to them," said Dan Powers, vice president of IBM's grid computing strategy. "It helps them save on costs, helps them have a standards-based operating environment."

Sun is another big proponent of open source software and has contributed three major projects to the open source world, said Juan Carlos Soto, Sun's group manager for advanced technologies in the software CTO office.The most famous of these is OpenOffice, a free alternative to Microsoft Office.

"If you're a brokerage looking to save a lot of money, OpenOffice saves you a ton of money over the renewal license you have to buy today," said Soto. "It's fully interoperable with Microsoft Office files, and works on all the popular operating systems. And it's 110 percent ready for prime time-I use it every single day. In fact, if you were to download Red Hat or any other Linux distribution, the office productivity suite you get is OpenOffice."

Other open source projects are more industry specific. For example, one of the top five downloads recently at SourceForge, which provides open source news and software on the Web, was the Market Analysis System, which includes facilities for stock charting and futures charting, as well as automated generation of trading messages.

Firms can also use open source when they develop applications completely in-house to avoid getting stuck with an obsolete application as the rest of the world moves on. "They're at risk of getting painted into a corner with something that they'll have to support themselves and watch it become nonstandard," Soto said.

Building an application around open source, however, provides standards-based framework and a source for future improvements.
"In effect, they're riding the wave and can evolve as that technology evolves," he said. "They're hedging their bets."

Getting Around in an Alternative World

Terms and Definitions

Source code-When a typical application is written, in a language, such as C++ or Java, it can be read and modified by human beings. This is the source code. After it is compiled, it can be executed by a computer-but is no longer modifiable or easily readable by humans, since it now exists in some form of low-level machine language.

Open source-An application that is distributed in uncompiled, source-code form, or one for which the source code is easily available. Having the source code makes it possible for a programmer to modify an application.
Kernel-The kernel is the heart of the operating system that manages key resources such as memory and processes. To be technically accurate, Linux is in fact a kernel, not an operating system.

GNU-(A programmer's humorous acronym that stands for GNU's Not Unix.) Includes compilers, tools, editors and other functions that are not part of the Linux kernel but are still needed in order to have a useful operating system.

Distribution-Vendors combine the Linux kernel, parts of the GNU system, other open source components, and enhancements of their own into one nice package. The most popular distribution of Linux on Wall Street is Red Hat Linux. Others include Sun Linux, SuSE, Debian, Mandrake, Connectiva, and Red Flag.

Community-A collection of volunteer, academic and even corporate software developers working collaboratively on a software project and is often organized by an individual, committee, board of directors or a foundation.

GPL-The General Public License is the most frequently used open source license and requires that any modifications to the source code be made available to the open source community.

Projects in Progress

Project JXTA (www.jxta.org)-A networking technology that allows devices to discover each other and communicate with one another on a very basic level. Downloaded more than 1 million times by developers, it's used for building in-house or commercial applications.

OpenOffice (www.openoffice.org)-A free alternative to Microsoft Office sponsored by Sun and an extension of Sun's StarOffice. This combination of word processor, spreadsheet and graphics editor runs on Windows and Linux machines and is almost entirely compatible with Microsoft Office files.

JINI (www.jini.org)-A networking technology that enables systems on a network to interact using the Java language. This technology is deployed on Wall Street for applications such as exchanging services between a network and a wireless device on a trading floor.

Eclipse (www.eclipse.org)-The Java community's open source answer to Microsoft's Visual Studio .Net development environment.

Struts (www.jakarta.apache.org/struts)-A framework for building visual interfaces within Java that comes under the Jakarta project. It's widely used by firms looking to building consistent user interfaces.

SourceForge (www.sourceforge.net)-A place for open source developers to come together and share code and ideas.

CollabNet (www.collabnet.org)-Enables companies like HP to host open source projects that are specific to their businesses.