The new face of open source on Wall Street

Open source has long flourished on Wall Street as financial services firms have sought competitive differentiation by tweaking open-source software for enhanced performance and functionality. Wall Street was the first sector to buy heavily into Linux, and it has also welcomed a host of other open-source infrastructure projects.

Indeed, Wall Street adoption has reached the point, in the words of senior Accenture executive Lloyd Altman, that open source has become a mandate for cash-strapped financial services firms tasked with doing more with less.

I've seen this in my own business: open-source applications are suddenly the less risky choice, given the need to get more for less.

But the more dramatic shift for Wall Street right now is that it is considering open-source alternatives for fundamental, industry-specific applications, applications like Marketcetera's open-source trading platform, which I've called "a lifeline to the hedge fund industry" because it enables the industry to become more efficient and more productive. REvolution Computing, Esper, and others are also benefiting from this shift.

Cost may be a primary driver for the shift to open source, but as the managing director of Technology Risk Management at Bank of New York Mellon told me, open-source software has become the innovation platform of choice for financial services companies.

Marketcetera's Graham Miller explains this concept as it relates to his company's trading platform:

We've built out a platform product that provides out-of-the-box components for market data, signal analysis engines, market connectivity and user interface capabilities to exchanges, ECNs, brokers and lots of different destinations.

The key differentiator with a proprietary platform is you're limited to the kind of usage and the kind of customization that the vendor has forethought. If the vendor lets you change the fonts and colors on the EMS, then that's the limits of the flexibility on the systems, whereas an open source offering is really unlimited on what you might integrate with it and what features you might be able to add.

In other words, open-source tools like Marketcetera's put the customer in the driver's seat, and charge a lot less for the privilege. This is a recipe for success in any economy, and particularly in this recessionary economy.

Wall Street was an early adopter of technologies like Linux, JBoss, and more infrastructure software, and has been a key constituency for open-source applications. As it signals a move to replacing core, industry-specific business applications with open-source alternatives, is it also foretelling a macro move by other industries to vertically focused, open-source solutions?

I suspect the answer is "Yes."

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