Wall St. leans toward Linux

With a handful of key Wall Street brokerage firms acting as icebreakers, Linux is quickly gaining ground on Unix and Windows as a mission-critical operating system within the securities industry. The attractions: its flexibility across systems and the savings it yields through the use of commodity hardware.

"The list of people in the queue who are saying 'When I have a new project, I'm going to use Linux' is larger than we can handle," said Rick Carey, chief technology architect at Merrill Lynch & Co. in New York. "I'd say it will be significant over the next year. A majority of new projects are interested in Linux."

WhWhile Carey said he still prefers Microsoft's performance for some functions such as desktop applications, "We get 10 for 1 price performance running Unix on proprietary hardware."

Since the beginning of the year, Carey has been immersed in a Linux rollout for mission-critical applications, including a mainframe-based 401(k) application that generates about 200,000 statements every quarter.

Merrill Lynch also runs Linux on 50 dual-processor Intel boxes that are clustered together to perform complex analytics related to foreign exchange options. Most of Carey's work has been on creating Linux prototypes and ensuring compatibility with other systems.

Merrill Lynch is in good company, with other New York-based firms such as Morgan Stanley Group Inc., The Goldman Sachs Group Inc., Credit Suisse First Boston Corp., and ETrade Group Inc. in Menlo Park, Calif., all deploying Linux systems.

According to a report released earlier this month by market research firm TowerGroup, some of the brokerages are deploying trading applications on Linux, "while second-tier brokers have not progressed beyond using it to deploy file/print servers as they wait for [independent software vendors] to begin supporting [Linux]."

Recent concerns in the areas of security, disaster recovery and business continuity are also pushing brokerage houses to fall back on the reliability and robustness of their old mainframes, which can run Linux more cheaply than Unix, according to Dushyant Shahrawat, a senior analyst at TowerGroup and author of its latest report on Wall Street and Linux.

Shahrawat said Linux is making headway in brokerages because the money-flush firms have always been among the earliest adopters of technology. Also, as an open system, Linux works well across the variety of systems normally found in sprawling financial services operations.

"They've got NT boxes, Java running on Unix, lots of mainframes, and they're tired of having to support applications on them. Now out comes a platform that runs on all of them. That's a very compelling value proposition," Shahrawat said.

ETrade made a fundamental change in its operating system strategy by deploying 90 IBM xSeries 330 servers running Linux last January. The open-source, standards-based platform held the promise of cost savings, according to Josh Levine, ETrade's chief administrative officer.

Using Intel-based servers and Linux has saved the online discount brokerage "millions of dollars" in software costs, said Levine.

TowerGroup estimates Linux is currently deployed on 7% of all servers in North American brokerage firms. Linux use will grow at an annual rate of 22% in the securities server market between 2002 and 2005, outpacing growth in Windows 2000, NT and Unix deployments, TowerGroup said.


The Linux Appeal

Linux clusters provide supercomputer-type performance at a fraction of the expense.

Linux has lower licensing fees than Unix, Windows NT and other operating systems.

It's able to run on a range of hardware, allowing cheaper alternatives to proprietary hardware.

It reduces leverage that large vendors have traditionally exercised by closely coupling hardware and operating systems.

It enhances competition and promotes an open environment and vendor neutrality.

Source: Towergroup, Needham, Mass.

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