Investors demonstrated their enthusiasm for the Linux operating system last year, when Linux information technology vendors Red Hat Inc. and VA Linux Systems floated hugely successful initial public offerings in June and December, respectively. Before the first month of the new year had drawn to a close, computer giants IBM Corp. and Sun Microsystems Inc. had announced major new business strategies sparked by Linux's rise.

Yet as the free, open, Unix-derived operating system is taking capital markets by storm and restructuring the landscape of the OS marketplace, bankers remain cautious about adopting it. In general, banks are holding back on implementing the system for critical business applications. Some, however, have begun to adopt it for more peripheral parts of their information systems, such as firewalls, Web servers, mail servers, and file and print servers.

Consultants attribute banks' reluctance to join the Linux wave to the newness of the product and to institutions' reluctance to experiment with operating systems, which are the platform on which different computer applications run.

"A lot of banks look at back-end technology as part of their regular cost of doing business, not as a place to get a technical advantage. That's why they have been waiting to see, rather than taking the leading edge," says Daniel Kusnetzky, program director of operations environments and serverware with the information technology research firm International Data Corp., Framingham, MA. "Banks often take the lead in voice response or ATM technology, but when it comes to the back-end they're conservative. They take the attitude, why rush? Let others test it out, and if it works, they will follow."

Accounts from systems engineers at banks seem to confirm this reluctance. Officials at First Union Corp., Charlotte, NC; KeyCorp, Cleveland; and Summit Bancservices, a subsidiary of Summit Bancshares, Fort Worth, TX, all say they are not using the system at all. "We don't do development work here, we are a pretty small shop," says Richard Burt, president of Summit Bancservices, which primarily uses Windows NT as its technology platform. "It has never come across my desk. We get mostly turnkey systems that we integrate into our operations, and I haven't even seen any vendor come by with a Linux solution."

At Wachovia Corp., where a limited adoption of the technology has begun, IT managers are satisfied with Linux's performance yet remain guarded in their appraisal. "There are always zealots about new technology, but we feel (Linux) is not really ready for full-scale use with the servers," says Frank Robb, executive vice president and CIO. "We need to see more before using it, but it has a lot of potential."

The Winston-Salem, NC-based bank is using Linux for its firewall and front-end security. It is holding back, however, on other implementations, Robb says. He explains that before Wachovia would consider wider implementation, Linux needs better change management tools to make it easier to tweak the technology to suit specific business needs and a wider choice of applications running on the platform.

The system's popularity for use with Web servers stems in part from its being developed primarily on the Internet. In 1991, Linus Torvalds, then a student at the University of Helsinki in Finland, patented Linux under the Free Software Foundation's General Public License, making it available free on the Internet. Soon programmers around the world began reporting bugs and sending "patches," or pieces of programming code to improve the system's core module.

"Linux was entirely developed in the Internet age," says Paul McNamara, general manager of the enterprise business unit, Red Hat Inc., Durham, NC, one of the leading sellers of packaged versions of the system. "Internet protocols are native to Linux-29% of public Web servers run on Linux, more than any other system."

It helped that the system was created in the image of Unix, a source code developed by AT&T in the 1970s. Users note that Unix, a popular platform for Web applications, is particularly helpful for operating in a networked IT environment, which in turn is essential for optimizing use of the Internet and e-commerce. "Unix was born as a network operating system. It has that from the inside out rather than Windows, which had that added on later," says David Trowbridge, senior analyst with market research firm Survey.com, San Jose, CA.

Because it was free and easily accessible, Linux first grew in popularity among hackers and in universities, giving it what some have described as a counter-cultural image. Yet even competitors note that in some ways this has been one of the product's strongest advantages. "Linux has its strengths in areas like education and national labs, but that's where the innovation is occurring," says Herb Hinstorff, software strategy manager for the computer systems division at Sun Microsystems Inc., Palo Alto, CA.

In the meantime, the rise of Linux companies such as VA Linux Systems, Sunnyvale, CA, which sells Linux-based Web servers and workstations, and Red Hat, has helped fuel the system's recognition and acceptance by a wider business audience.

How free is 'free'?

Perhaps Linux's greatest advantage is its price. "You can get the operating system for free, you can get the Apache Web server (which can be run with Linux) for free, and if you prefer a packaged deal from a vendor like Red Hat, you can get that at a modest cost," says Kusnetzky of IDC. "The other thing that is unique is the licensing. Because it is open-source, you can repeat it as many times as you please. So if a bank has 150 branches throughout a region, if you put it in one branch, you can (deploy) it in all 150" at no additional cost.

For a company that runs a database on Unix, that amounts to a savings of $1,000 to $3,000 on the cost of the operating system alone, Kusnetzky estimates. Part of this cost benefit may have begun to evaporate when Sun in January announced that Solaris 8, the newest version of the company's Unix platform, will be distributed free of charge (with certain restrictions). Sun officials acknowledge the move is an effort to offset Linux's cost advantage.

But Linux can achieve cost savings in other areas, such as through its efficient use of hardware, which allows it to be run on older or less powerful computers. "A small PC can have relatively good through-put," says Jon Hall, executive director of Linux International, Amherst, NH, a Linux trade association.

The promise of cost reductions aside, software developers and consultants alike note that while Linux may have no initial cost, no operating systems are installed, run and serviced for free. "The up-front (purchase) cost is a very small percentage of the cost of running an operating system over its life, just as the up-front cost of hardware is small compared to the lifetime (cost). There are people costs and other costs involved," notes Stanley Rose, vice president of the technology infrastructure group at The Bank of New York Co. The bank has no plans to switch to Linux primarily because the cost of adding any new operating system must be justified, he says.

Rose adds, "There is a lot needed to use any product. You need tools to run applications in the data center, management features, tools to back up the system and the database." Moreover, running multiple systems requires having IT staff trained to work in different computing environments and sometimes means having several support groups.

And Kusnetzky notes that while more large vendors such as Hewlett-Packard Co., IBM and Sun Microsystems are offering technical support for the technology, experts and prospective clients question whether the level of support available for Linux is on par with support available for Windows or Unix systems. For today's bare-bones bank IT departments, that's a critical issue. "If you have in-house Unix technical staff, then Linux support shouldn't be a problem. There are some differences but it should be easy to pick up. If you have a Windows staff, Linux might be too complicated and Unix-like for them, and then it might be expensive," he says.

Linux International's Hall counters that the system's open-source architecture-which draws on Linux users across the globe for modifications and fixes-provides some of the best support available. "Because you are contacting the open-source community, there are less layers to go through," Hall says. "With Unix, something would be sent to a problem center, they would determine what was wrong, then it would be reviewed and distributed to the company and the paid customers-there are just more layers."

Unix still rules

Aside from price, the young operating system's other trump card is its reliability. IT analysts generally regard Linux as more dependable than Windows.

"It has stayed up and running since it was installed; my other servers we have to reboot every few weeks," says Walter Thompson, senior networks engineer with $110 million-asset Surety Bank N.A., which began using the system about six months ago for firewalls, DNS and a mail server. Fort Worth, TX-based Surety also is converting its remaining Windows NT servers to Linux, which the bank expects to save money and increase reliability.

Yet the system still has not reached the level of reliability that Unix systems have, and that's what financial institutions demand for mission critical systems. "With Windows, you hear people talking about the system being up for a couple of months. With Linux, it's up for one or two years," says Hall."But it's not to the point of being up 99.99% of the time." For example, he notes, there are some systems that can be updated while they are up and running, and H-P and Sun guarantee 99.99% uptime for their Unix systems. "There are some things that you have to pay a lot of money for, but they will add the extra nines after the decimal point that you will need" to ensure working systems, Hall says.

Linux's scalability also does not match that of Unix systems. "A center with Solaris can handle 64 processors, and you get performance out of the sixty-fourth. The most we've seen with Linux is four (processors)," says Mark Tamres, a project manager in the Solaris group at Sun Microsystems.

But perhaps the biggest present drawback to Linux is a shortage of financial applications compatible with the platform. "For some things, like the applications for our tellers, there aren't applications that run on Linux, and there isn't even talk of creating software that would run on it," Thomson says. Unix-based tools for security and workload management are also more mature than their Linux equivalents.

Nonetheless, Linux's similarity to Unix may give the system its best chance at breaking into the banking industry, where Unix has a strong foothold. "As a system it's very reliable, and it's easy to import Unix applications, so for companies that are using Unix and want to reduce the cost of ownership it's a good choice," says McNamara of Red Hat. "The banking industry is one of the industries in which a lot of the applications have been developed internally by the institutions, and they have often been developed in Unix, so it's easy to transition."

At Charles Schwab Corp., San Francisco, Linux's close relationship with Unix makes it useful for another reason. Software experts at the big discount brokerage are taking advantage of the low-cost operating system to create applications on Linux and then import them to the larger Unix systems the company uses for more critical operations. "We are using it informally for research and development," a Schwab spokesman says.

New holy war?

One of the surest signs Linux is making waves in the mainstream is the steps that some of the larger computer companies have taken since Linux's popularity has taken off.

On Jan. 10 IBM of Armonk, NY, announced that Linux would be a key part of the company's future e-business strategy. Among its plans for supporting Linux include making all its server platforms Linux-friendly; developing more software applications that are Linux-compatible; and offering a wide range of Linux consulting and technical support services.

The company's embrace of Linux is not intended as a move away from its own Unix-based operating system, AIX, but as a way to help customers use all the systems they employ throughout their organization. "I don't think there will ever be a single be-all-end-all operating system for any environment," says Miles Barel, IBM's program director for Unix. "Even companies the same size in the same industry with the same type of clients can require completely different systems because they have completely different business models. We need to build applications that can be easily deployed over different systems."

Even apart from such developments, Linux is changing the operating system landscape in more subtle ways. Says Sun's Hinstorff, "We are finding that, while before everyone was saying Windows NT was inevitable, now Linux and the Internet have changed the pitch so that Windows is no longer inevitable. It is clear that the Unix API set is becoming further entrenched as the foundation for high and low commerce."

Microsoft officials declined to comment on to the system. Instead, it issued a statement conceding that Linux is a direct competitor for simple Web serving and related tasks, but that Windows 2000 provides "more functionality and a more cost-effective platform for delivering solutions for customers in key areas such as scalability, high availability and manageability than its competitors."

In a recent Survey.com poll, 31% of the 60 respondents who identified themselves as working in the banking industry say they have deployed an open-source Unix-flavor operating systems (either Linux or the lesser known BSD); 46% of the respondents who aren't currently using such an OS say they have considered it. The survey also found 150% to 500% growth in the use of Linux across U.S. industries, depending on the application. Trowbridge of Survey.com cautions that the sample from the banking industry was too small to call the results a trend and that the overall rise might be exaggerated in some instances because the installed user base is so small.

But IDC's Kusnetzky notes that, in the limited ways the banking industry has been using Linux, Solaris is not a good substitute for the fledgling platform, especially if an organization is moving from Windows to Linux. "Let's say you have a 300 MHz Intel machine that someone decides they aren't going to use because they are moving to 500 MHz. You wouldn't be able to put Solaris on it because Solaris is bigger than Windows. Linux will fit very nicely for a machine that was designed for Windows," he says.

How the OS landscape continues to develop is anyone's guess, Kusnetzky adds, because, just as Sun's free access to its source code may create a new community of Solaris programmers, it could also have the opposite effect. "Linux people might take advantage of some of the maturity of the Unix source code to get ideas on how to strengthen (Linux). They could take advantage of the work already done elsewhere to build on the progress of the Linux tools and middleware."

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