The Linux operating system has proliferated rapidly within the middle levels of the banking world, especially in high-powered analysis machines, and now financial institutions are looking at it for core transaction processing.
At a one-day conference on Monday, technology executives said that a once-marginal technology has matured to the point where it is both stable and secure.
"There's no reason not to" use Linux for core banking applications, said Mark Snodgrass, the vice president for Linux convergence strategy at Merrill Lynch & Co. The company has a team at its London branch thats studying Linux for the core.
Leonard Santalucia, a senior consulting sales specialist at International Business Machines Corp., one of the leading suppliers of Linux-based systems, agreed with that assessment. "I really feel that this is the year when we will see more and more of that happening."
The Linux on Wall Street conference was co-sponsors by two New York consulting and event planning firms, Lighthouse Partners Inc. and Flagg Management Inc.
Pete Harris, Lighthouse president said Linux is starting to be used more in core processing. He cited E-Trade Group Inc. as an early adopter. "They are running their entire system on Linux," he said. "It's beginning to happen."
While many speakers at the conference were open about using Linux in their networks, some grew cagey when asked whether they plan to use it in core systems.
Tim Hunt, a vice president at Goldman Sachs Group Inc., gave a very brief presentation during a panel discussion in which he said the economics of Linux are compelling. However, he also said he could not disclose any of his company's plans without giving away a strategic advantage. "Linux is a weapon in our computing arsenal."
John Vitkus, IBM's Linux program director for financial services, said brokerages and other financial services companies are now "quite protective about how Linux is becoming a weapon they can use against each other."
Eric Hirschhorn, a senior vice president at Lehman Brothers, was enthusiastic about the technology's potential. He said that Linux-based systems can run as much as 30% faster and sometimes cost one-fifth as much as proprietary Unix technology.
"It's very, very compelling purely on the economics," he said. "It's very much a Cinderella story."
Lehman lost its primary data center in the Sept. 11 attacks, and it had to rebuild its network capabilities practically from scratch in just days. Afterward, when looking at growth projections, it became clear that doubling the computing power could easily mean spending as much as Lehman did on the rebuilding effort, Mr. Hirschhorn said. "We realized it was economically unsustainable."
It starting shifting some of its systems to Linux. In some areas, powerful computational machines were replaced with clusters of Linux-powered servers. In others, Lehman is using racks filled with small Linux machines, each dedicated to specific tasks. That will give it room to expand by simply adding a second unit when needed, he said.
"We've completely changed the way we architected our business," Mr. Hirschhorn said.
When discussing whether to use Linux for the transaction processing at the heart of Lehman's business, Mr. Hirschhorn chose his words more carefully. "We are evaluating Linux at every level of our network."
