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Linux takes over Wall Street, but business concerns linger

Should Wall Street be a bit more thoughtful about its open-source adoption? Probably. There are potential pitfalls that everyone should keep in mind, but which should not cause any undue panic.

I laughed when I read Network World's headline: "Wall Street Becoming Linux Stronghold." Is it 1999 or 2008, I wondered? Linux has long found a warm reception on Wall Street, where enterprises view IT as a source for competitive advantage. Network World cites one analyst's estimate that "Linux adoption among the 14 biggest investment firms this year will reach more than 72 percent of the installed operating server base vs. 60 percent in 2006."

That's big.

But the article goes beyond the "Wall Street uses a lot of Linux" argument and hones in on the next round of debate: Now that Wall Street has adopted Linux for technology benefits, are there licensing downsides?

To date, the answer has been 'No.' But this may well be because people haven't thought enough about the requirements open source may impose on Wall Street adoption:

Hergett said that concerns about Linux security and scalability have largely been replaced by concerns that are more "business-based," such as "open source governance" and the "life-cycle management of a complex stack" with 200 or 300 components. While Larry Tabb, CEO of market watcher TABB Group, is skeptical that investment firms will adopt open source applications widely because they have such a huge stake in their proprietary applications, he says there is no doubt that Linux adoption itself has become mainstream on Wall Street.

Larry, let me just state unequivocally for the record: This view is, unfortunately, wrong, at least as pertains to one flavor of open-source software. Let's just say I have firsthand knowledge with many of the world's leading financial institutions, and open-source applications are alive and well there.

Having said that, a caveat: A healthy dose of the Wall Street adoption of open-source applications that I've seen is of commercial open source, which allays much of the concern expressed above about what open source requires. Why? Because these companies can offer a license to the software that explicitly disavows the need to contribute back code upon distribution.

"Distribution" triggers contribution in open-source licenses. Normally, a company's internal use would not require them to contribute back derivative works. However, I think it's very possible that a "distribution" can be triggered by selling a division in an M&A transaction, such that the server (with software) moves to a new company.

In fact, I spoke with the CTO of one large financial services company recently, who told me that his company's policy is to treat any areas where assignment of contract would normally be required in proprietary software as areas where a "distribution" is triggered under the GPL or other open-source licenses.

I'm betting most people hadn't thought of that, figuring that once "internal" always "internal." Maybe. Maybe not. In our M&A-frenzied business landscape, however, it pays to think beyond the "inc.," given that businesses buy and sell divisions all the time.

Regardless, the adoption will continue, as it should. If any industry gets paid to manage risk, it's the financial services industry, and it's one that has bought into open source to a dizzying degree. The benefits of open source far outweigh any alleged risks.