Can Linux Manage in Data Management?

The word "Linux" is not new for financial services. Linus Torvalds first released open-source operating platform under General Public License in 1994, allowing for free distribution of the source code. Since then, Linux has gradually become mainstream, with believers coming out of the woodwork in cult-like proportions.

Linux is a new flavor of operating system that closely resembles Unix, and can now be found in many financial-services institutions. At some firms, a single developer is tinkering with Linux specs in his free time. At others, an entire department is deploying the platform for applications such as workload consolidation or clustering multiple processors on a single platform. Few securities firms are not experimenting with Linux in one way or another.

While many horizontal applications have reaped the benefits from Linux deployment, the industry is still out to lunch on whether the platform is viable on mission-critical vertical applications, such as data management.

"Market data is one of the most demanding areas to actually implement technology," notes Dushyant Shahrawat, a senior analyst with TowerGroup. "It's not the first place people think of moving to Linux."

Most market-data departments entrust their applications to platforms such as Sun Microsystems' Solaris or Microsoft Windows NT. These platforms, which have been tried and tested to handle the rigors of data management, are found on the list of platform offerings for most market-data vendors.

However, in the last few months, the data-management marketplace has seen some of its vendors place their bets on Linux, offering applications that run on the open-source platforms as a substitute for traditional operating systems.

Yet despite the commitment of some vertical vendors, potential client firms are less than enthusiastic about making the platform switch.

FIRMS ON THE FENCE

As an open-source operating platform, there is a definite cost benefit to Linux since the hardware investment is significantly less than its rival platforms, Microsoft NT or Unix. In fact, in any discussion with industry participants, the phrase cost-cutting seems to accompany Linux the way jelly follows peanut butter.

One technology executive who oversees operating systems at a Boston-based investment firm notes that, from a pure hardware point of view, maintenance on a Linux system runs at just 10 percent of the cost of maintenance on a PC-based machine. "Everyone is looking at the bottom line more than they were three years ago and Linux is certainly a way to reduce costs," says the source who requested anonymity.

However, the executive adds that with Linux out on the market its competitors have lowered prices. "Unix is bringing out lower-priced boxes, so they're definitely not standing still," he says.

Shahrawat says that training and administration are another consideration. "There is an initial cost involved for rewriting some of the firm's technologies and getting comfortable on Linux," he says. "But costs will go down as clients begin to adopt because Linux is a fraction of the expense of Unix or NT to operate."

While cost benefits are evident, some experts argue that people don't pick a doctor because his services are on sale. "Data management is a sensitive area since this is a platform that people rely on to make money out of," explains Matthew Hoban, director of IT at Minneapolis-based investment firm Miller Johnson Steichen Kinnard, who operates his data-management system on a Windows NT platform. "This is a concern anytime you make any kind of platform change because of the need for consistency and integrity of data."

Performance measurement of Linux in data-management is still relatively unknown. Because of a fear of exposing competitive advantages, firms that are experimenting with Linux are not publicizing their benchmarking.

"For the most part, it probably can do just about anything in this business, but like anything else, there has to be more research and determination at each level of use," says Joe Doria, an industry consultant on market data at the New York City-based consulting firm Jordan & Jordan.

One vendor that is willing to attest to Linux's performance ability is Reuters, which recently released a version of its Reuters Market Data System (RMDS) on the open-source operating system.

RMDS is a newer version of "middleware for market data," says Casey Merkey, program manager for RMDS on Linux. The product combines aspects of Reuters Triarch and the TIB Market Data Distribution System to manage real-time financial content across trading desks. While many firms still use Triarch and TIB for that function, he says that Reuters will not be updating those platforms and will instead continue to enhance RMDS.

"We have found Linux extremely fit to task and have had no operating issues," asserts Merkey. "It is stable, secure and runs well."

Reuters' most notable signing for RMDS on Linux is the Bank of America, which is utilizing the HP ProLiant Linux server to run the product in its London trading room. While the Bank declined to comment on the implementation or its results, a spokesman for Reuters confirms that the platforms have been up and running since this summer.

"Reuters leapfrogged the group by coming out with a full-end data-management product on Linux," says Jordan & Jordan's Doria. "With Reuters going first, we will start seeing it pop up more and more as vendors realize they need to offer it to stay competitive."

While RMDS is also offered on a Solaris platform, an exclusive agreement between HP and Reuters had determined HP as the only vendor offering the product on Linux during its initial stages. However, a spokesman for Reuters says that now that the exclusivity has expired, the vendor will seek to engage in Linux agreements for RMDS with other hardware vendors.

In addition to Reuters, data-management vendors such as Asset Control and Fame Information Services have also recently announced that their product suites are available on Linux.

Although a spokesman for Fame claims to have customers that have "actively switched to Linux," as well as others that are looking into it, he declined to name any.

Asset Control's CEO Ger Rosenkamp confesses that despite the Linux offering, the vendor has yet to have a customer apply it. Recent implementations of its AC Plus platform at Harvard Management Company and Societe Generale Corporate and Investment Banking did not involve Linux. "Our latest customer who did the pilot on Linux was expected to run on Linux," Rosenkamp says, adding that a competitive price on Sun Solaris led the firm to go in that direction instead.

Asset Control's latest customer, Harvard Management Company, declined to comment.

Jean-Luc Robieux, Soc Gen's deputy manager in the Equity-Derivatives IT Referential Group, says that his firm's decision to stick with Unix was part of its overall IT strategy when it began to re-engineer equity derivatives two years ago.

"We are looking at Linux now, but we did not evaluate it then. At that time, it was not mature enough for us," Robieux explains. "It's something we are keeping an eye on because we are conscious of the price and the higher-speed processors. But it has to be a strategy choice made by our infrastructure people and those platforms have to be validated."

CLOUDY FORECAST IN LINUXVILLE

Some firms hesitating to jump on the Linux-wagon argue that the operating system is still not viable in a data-management environment.

The operating-systems executive from a Boston-based investment firm says, "The first tests that we've done have shown that certain pieces have a hole in the infrastructure that we can't plug with our normal products. But with all the people that are coming out with Linux products, those holes are rapidly being filled."

TowerGroup's Shahrawat notes that market data is a critical process that needs to be integrated closely with the back office. "In the end, there won't be a mass migration because market-data distribution is so core," he asserts. "To replace a system is a laborious and risky task and not something people are willing to do in this environment, unless they are a die-hard Linux-using firm."

Despite whispers of implementation, industry sources maintain that it will be a while before any firm is publicly screaming about its own Linux experiences in data management. "Most of the players in this business tend to be slow and always worry about being the first one," says Doria. "The key is that there has to be someone to go first."