Linux Garners Wall Street’s Attention

For Josh Levine, the decision to ditch his Unix servers in favor of Linux devices for powering E*Trade Financial's customer-facing Web sites has had a major impact.

Not only has Levine, chief administrative officer and president of Server Wars: Linux looks to be gaining ground on the entrenched Unix platform. saved the company money, he's seized the technology back from vendors and feels firmly in charge.

"For the first time ever, I get to manage the vendors and stand up and say no," says Levine, who's based in Menlo Park, Calif.

Earlier this year, E*Trade migrated its architecture from a Sun Unix platform to IBM Intel servers running Linux. The decision to port to Linux grew from a discussion about how the popular Google search engine ran its service on Linux. "We were looking for a low-cost platform, that's how this all got started," he says.

To date, Levine estimates he's saved about $10 million. "Our feeling is that we can cut into future spending even more significantly," he says, adding, "We're saving on the order of 30 to 1," meaning he used to spend $30 for every $1 he now spends.

Given the economic climate facing the capital markets, numbers like that get noticed and Linux is now facing greater scrutiny by technology managers at financial institutions looking to get their costs in line.

The brainchild of Linus Torvalds, Linux is the ultimate in open-source computing. It can be downloaded for free and developers can adapt it to their needs without the worries of breaching software licenses. As well, developers disclose changes so patches and upgrades can be shared quickly. Like the Internet, Linux's roots have been in the world of academia and science and it's now crossing over into the corporate world, spurred on by firms like IBM and Red Hat, Inc.

Currently, Linux is a blip on the screen when examined in light of other operating system's penetration, but that's expected to grow.

Research firm TowerGroup predicted in a 2001 study that the growth rate for Linux in broker workstations will be 4 percent and 23 percent in the server space by 2004.

A July study from Forrester research also shows growing interest in Linux by financial institutions. Eight percent have completed some type of implementation, while 15 percent are considering the implementation of Linux.

However, that could change as Linux gets more mainstream play. Even now, the consensus is that the major Wall Street players all have some type of Linux pilot underway, though they are tight-lipped about it.

Linux has been used for a variety of purposes including networking, software development, and as an end-user platform, though some have questioned its ability to run mission-critical systems.

Dushyant Shahrawat, an analyst at TowerGroup in Needham, Mass., however, notes that the mission-critical debate is a "religion issue. Some (IT executives) are comfortable taking chances with newer things, others are not."

He thinks that Linux is the best example of the "future of open-source computing," and how software will be developed moving forward.

Certainly, in the past year there have been a number of Linux-related deployments and announcements by financial-services firms that have garnered attention, suggesting that momentum for Linux is quickly building, including in the area of mission-critical operations.

In April, Red Hat, Inc. an open-source-technology provider based in Raleigh, N.C. disclosed that Credit Suisse First Boston (CSFB) had migrated part of its worldwide financial-trading architecture to Red Hat Linux from Unix.

The key application - called Agora, which is Greek for marketplace - performs complex financial transactions such as basket trading, time slicing and institutional-order flow. It can drive thousands of orders in seconds, to locations around the globe, including the United Kingdom, Japan, Hong Kong and Korea.

At the time of the announcement, Steve Yatko, director and chief technology officer of Securities IT at CSFB said in a statement that, "In an environment of increasing trading volumes and surges in demand, our systems need to be agile. We can gain a competitive advantage with a system that is flexible enough to constantly adapt to new business requirements while always improving prices for our customers."

CSFB converted from a four-way RISC-based architecture to a two-way Intel architecture running Red Hat on an Intel chip. It was able to consolidate more than 20 RISC-based machines to a few Intel processors, which can process up to a half-billion transactions daily. CSFB also noticed a 20-times increase in overall performance, compared to its legacy system.

Last fall, the Securities Industry Automation Corporation (SIAC) and its subsidiary, Sector, Inc., announced it ported its key ARTMAIL application to Linux.

SIAC runs the computer and communications systems of the New York Stock Exchange and American Stock Exchange and ARTMAIL is responsible for delivering the daily activity reports of buy and sell transactions to Wall Street. Between 15 to 20 million buy/sell transactions are processed daily.

Other firms are either dabbling with Linux or taking the plunge. Kevin Houstoun, director, equity electronic trading at Schroder Salomon Smith Barney in London, is using Linux in an automated test environment for customers who want connectivity to Salomon's Europe, Middle East and Africa operations.

"Customers can connect to us using FIX," which it currently runs on Sun Solaris, a Unix system. His firm has used Linux to create a test environment for firms that want to connect via FIX running on the alternative-operating system.

"Smaller customers are more cost conscious," says Houstoun. As well, they "don't necessarily need the features in something like Solaris," so Linux offers them "a lower cost platform."

In May, data provider Reuters announced it is working with HP and Red Hat to make Reuters Market Data System available on Linux.

Peter Lankford, vice president and head of front-office systems for Reuters, who is based in Oakbrook, Ill., says, "We've responded to a real and clear demand from our customers to port this thing to Linux." He says the demand is from both the "big and small players. I think with the economy in the shape it's in, companies are more in tune than ever with the total-cost-ownership benefits."

Sun Microsystems, the king of Unix, announced an entry-level server that will run Linux and Solaris. Sun sees a role for Linux in "edge-of-the-network" applications, things like caching servers, content-delivery solutions, firewalls and Web and printer servers. "We think this space is a high-growth business," says Neil Knox, executive vice president, volume systems, products, computer systems, Sun Microsystems.

David Littlewood, director of worldwide financial services at Sun, says, "There's a sense that people are now looking at Linux more seriously." For business-critical applications, though, he still sees Sun as the go-to server.

Not surprisingly, IBM disagrees. It recently opened a technology center in Manhattan to help its Wall Street clients learn more about Linux in a bid to get them to port over. The center, funded with $1 million, will provide Linux training and technical advice.

John Vitkus, worldwide program director for Linux in financial services at IBM, says the objective is to "enlighten our Wall Street customers on the capability of Linux." The center will feature a range of IBM and Linux technology being developed by IBM's partners. "Customers can bring their developers to help educate them around Linux." He says the fact that competitors, such as Sun, are "now embracing Linux is proof positive" of the system's staying power.

There are a number of upsides in addition to cost savings and the ability to better manage the vendor relations. E*Trade's Levine says that "maintenance costs go away." He also thinks it brought him closer to the research groups at vendors.

Linux.org, a Web site that promotes the operating system, lists additional benefits, including: stability, reliability, flexibility, ability to share CPUs and multi-tasking.

There are some downsides to Linux, as well. TowerGroup's Shahrawat says the "major downside is that (the Linux marketplace) is the Wild West. You got various issues."

The fact that no one owns the source code also raises questions about the commitment of vendors to the space. Shahrawat says "Linux is a new platform and people aren't comfortable with support issues."

One thing is clear, as long as Linux works, it will draw its share of supporters. "I haven't found any issues," notes Levine. "We run Linux on some pretty big machines. As far as I am concerned all this stuff is a commodity, why not take advantage of it?"