Stuart Cohen, the former CEO of Open Source Development Labs, is founding the Collaborative Software Initiative, a firm to develop software for vertical industry players at what he predicts will be half its normal cost.

Participating commercial companies will continue to employ their own developers, producing applications for a competitive advantage. But they will pay the Collaborative Software Initiative to hire developers and produce applications that can be used across their industry. The CSI developers are expected to use open-source code development methods and, after a year's effort, to produce code that can be released as open source. The arrangement "will provide efficiencies for everyone involved," said Cohen in an interview. Several financial services firms, such as Merrill Lynch, Morgan Stanley, and Bank of New York, have told him they need such an organization, he said.

Even though such firms have many software needs in common, such as compliance, human resources, or call center systems, they can seldom simply sit down together to share developers and map out projects. With a tradition of competing with each other, they don't have the immediate common language or culture. Another concern is that the Justice Department scrutinizes how much competitors are working together with a wary eye on restraint of trade.

Cohen said the companies do not need to be persuaded to make the output of the projects they sponsor open source code. On the contrary, they want it adopted as widely as possible by their business partners and the rest of the industry, easing interoperation problems. In addition, broad adoption insures a wider community eventually testing and supporting the software, open source practices that they want to incorporate into their commercial operations.

One of the chief benefits of many parties adopting a piece of open source code is that it gets subjected to testing in different environments. "There is a strength in numbers when it comes to risk mitigation," he noted. Although the first project is likely to focus on financial service industry needs, many vertical industry groups have the potential for developing shared software, including retailing and insurance.

Evan Bauer, former CTO of Credit Suisse First Boston, has been named CTO of the venture.

Cohen said CSI will work through IBM, Novell, and HP to identify the vertical industry projects that it will undertake first. CSI will form the project and provide central hosting and management. He said he has sought advice from Eben Moglen, chairman of the Software Freedom Law Center, and Brian Behlendorf, CTO of CollabNet and co-founder of the Apache Foundation.

"CSI represents the next round of innovation for open development," said Daniel Frye, VP, Open Systems Development at IBM, in a prepared statement.

CSI will "bring together customers with similar IT challenges to jointly develop essential but non-competitive applications," said Ron Hovsepian, CEO of Novell in a prepared statement.

Software produced by CSI will be issued under a still to be determined open source license. It may also be available in as software-as-a-server mode, Cohen said. More information is available at www.csinitiative.com.