TowerGroup: Linux Gaining Ground Fast in North American Securities Firms

In just ten years, the Linux platform has developed into a
compelling alternative to established operating systems for
securities firms–one which is now beginning to gain significant
traction at influential brokerages, such as Morgan Stanley, Merrill
Lynch, Goldman Sachs and E*TRADE.

Running on Intel processors and rivaling low- and mid-tier Unix
servers in performance, scalability and reliability, the Linux
platform boasts a lower total cost of ownership than other
platforms. In addition, its origins in the Open-Source movement
also make it highly “portable” across a wide range of platforms.
Combined, these attributes are creating an extremely attractive
proposition for securities firms struggling with an environment
where infrastructure cost is as paramount as speed and

New research from TowerGroup examines how Linux is being
implemented today–and what can be expected over the next few
years. Highlights include:

  • The need for more flexibility and the ability to “port”
    applications across platforms is driving many securities firms to
    consider migrating large parts of their IT infrastructure to Linux.
    And as avenues for further IT budget cuts become exhausted,
    migrating away from proprietary operating systems to Linux can help
    firms reduce software licensing and hardware expenses.
  • Linux currently trails behind dominant platforms in the
    securities IT mix. TowerGroup estimates that Linux is now deployed
    on 14% of total servers at North American brokerage firms. In
    contrast, Microsoft has 54% of the market (both NT and 2000
    combined), while Unix has 27% of the market.
  • However, TowerGroup believes Linux use will grow at an annual
    rate of 22% in the North American securities server market between
    2002 and 2005, outpacing growth in Windows 2000, NT and Unix
    deployments over that same period.
  • Firms are using Linux in a number of ways. One of the most
    popular is Linux “clustering,” which involves either stringing
    multiple processors on to a single server, or linking different
    servers so that they are managed as a single machine and share
    their workload. This strategy offers a number of benefits, such as
    rapid installation, enhanced performance and improved “uptime.”
    Clustering also supports brokerage firms in the area of disaster

“While Linux now offers a compelling new technology alternative,
securities firms shouldn’t let current enthusiasm for the platform
push them toward hasty implementation,” said Dushyant Shahrawat,
senior analyst in the TowerGroup Securities & Capital Markets

Shahrawat noted that even firms like Credit Suisse First
Boston–considered by many to be a ‘poster child’ for Linux in the
securities industry–are not replacing their current mix of Unix,
NT, Windows 2000 and mainframe platforms.

“Securities firms currently believe that each platform is
well-suited to its particular purpose in the brokerage
infrastructure, and it is not prudent to replace one platform with
another en masse for the next few years. Other firms should look to
this lesson when analyzing their current IT infrastructure, as well
as business and technological priorities, to determine where Linux
fits best in their environment,” he said.

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