Thursday, January 31, 2008

Open source off-shoring

Following a post in Enypher blog, I came across, the company behind OpenAMQ. OpenAMQ is an open source implementation of AMQ, a messaging middleware protocol designed for low latency, critical applications. JPMorgan contributed to the project from 2004 and migrated trading desks globally over the last 3 years. iMatix claims zero downtime since 2006.

The middleware open source offering is spreading its wings. We are now seeing a number of projects challenging commercial applications: I mentioned RedHat MRG in an earlier post, OpenMPI is the product of years of research in multi-core systems and parallelism, Hadoop is a data management and clustering solution sponsored by Google, Yahoo and HP. 0MQ is the last open source initiative for very low-latency middleware, backed by FastMQ and Intel.

This prompts for the question: How much money has been saved by financial corporations sponsoring open-source initiatives vs. structural off-shoring?

For the last 10 years (ever since I got involved in trading systems development) the refrain of every business manager was about IT development going to India. Entire IT departments were counting their days and Bangalore was going to become the new mecca of finance IT development. Starting with back-office systems and gradually moving to the middle-office and desk applications, the future of IT management was in off-shoring. Keyword: cost-cutting. Ah..., the commoditization of finance IT...

Today Bangalore is the Silicon Valley of India and --guess what-- production costs there have risen. At the same time we have seen a number of open source projects emerging as the de-facto standard in finance: in the 90s, X11 and Motif were the state-of-the-art for front-office GUIs; Linux is now used in critical server applications; Cygwin X Server offers a no-cost alternative to Exceed; SOAP, XML and HTML are open standards; Samba and SVN are the best tools I know for remote file access and source code management in terms of price/quality (hint: price = 0). Is MySQL next?

In my view, the fundamental error lies in seeing software development as an industrial process, rather than a creative intellectual effort. Not surprisingly, the IT and the Business units in most investment banks have been organized as two separate entities, with the latter framed mainly as a support center rather than core-business. Today the move that saw venerable technology institutions (HP, IBM, DEC, SUN...) supporting academic efforts in the past might spread to financial institutions supporting open-source projects. After all, it's all about cost-cutting.

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