Open-source technologies are increasingly attractive to financial services firms. They are in broader usage across the sector as they are more widely available and are easy to adopt, lowering the barriers for usage in new projects.
As well as helping clients reduce software and infrastructure costs, the increasing adoption of open source is fuelling innovation across the sector and has become increasingly key for firms across financial services. Open source is ideal to use in sandbox environments and experimentation, often leap-frogging existing legacy technology stacks. Its wide acceptance and growing ease of use helps firms to drive strategic decision-making and deliver their operational goals.
The psychology of engineers often fuels further innovation. Typically, they like to work on cutting-edge projects and they appreciate the peer recognition that stems from contributing to open source projects. Using the software also makes it easier for firms to start small on new projects without having to go through a protracted procurement or tendering process. This, in turn, can deliver crucial time to market advantages, accelerate the development process and – through lower-cost – quickly build a portfolio of innovative projects.
Driven by Cloud
In addition to the benefits outlined above, the uptake of open source technologies by financial services firms is also being driven by the growing prevalence of cloud resources. In fact, the two technologies often go hand-in-hand.
One of the reasons they are such a good combination is the fact that they came of age together. Open-source NoSQL database technologies like MongoDB and Cassandra are highly-scalable, flexible and good for big data storage and processing, all qualities that the use of the cloud can further support.
The two technology areas complement each other really well. Traditional applications, using e.g. a commercial RDBMS as a database, can, of course, be shifted to the cloud but will not necessarily benefit from scale advantages and the more flexible way of provisioning resources that cloud infrastructure brings.
Today, adopting open source typically means deploying cloud-native apps and migrating workloads to the public or private cloud built on open source infrastructure. Open source often provides foundational technology, including languages, libraries and database technologies that can provide a rich foundation to quickly develop applications. Firms can maintain cost-effectiveness while tapping into the expertise of the open-source user community. Also, deploying open source in the cloud allows firms to adopt a more agile OPEX-based model, sourcing capacity when they need it, which in turn leads to lower capital expenditure.
In addition, open-source technologies have to be weighed against the increasingly deep and proprietary tech stack offered by the main cloud providers as they can provide some insulation against the problem of vendor lock-in. That, coupled with an increase in the uptake of managed services options, is making open source still more attractive to financial services businesses and further driving innovation within these organisations.
Why managed services matters
A managed services approach can, after all, play a key role in helping financial firms overcome the challenges they may face today as they migrate over to a cloud-based managed services approach.
Firms will, for example, need to ensure they are picking the right open source projects where they will attain optimum value and also ensure they use the right open-source tools. There will, after all, often be a range of competing tools available to them which could potentially be applied to a specific problem and choosing the right one is critical. Some technologies, such as Python, Spark and Cassandra, have caught enormous momentum. Others may have lost it. So it is important that firms do their normal sourcing homework.
Aside from these more general challenges, financial services firms will be likely to have more specific data management issues that they need to address. They should be aware that there may be constraints on where they can put their data. They may, for example, need to store sensitive customer information in the cloud outside certain countries in order to avoid breaking any privacy or data protection laws. They may have concerns about keeping proprietary algorithms outside infrastructure that they alone completely control.
They may well also want to use NoSQL database technology that came out of open source for data management purposes. Cassandra is good for time series data modelling, while Spark is effective as a data processing framework. As financial services firms look to optimise their data usage, data scientists need to be equipped with the requisite data preparation and data quality solutions as well as with the tools they would need to analyse the data and test their data models.
In addressing a move to open source, firms should look to leverage the help of curated, open-source solution providers that both understand the cloud and use open source themselves and therefore benefit from some of the advancements that have been made in order to deliver cost-effective scalable solutions.
By partnering with a commercial provider in such a way, firms will also be able to access support from providers. In other words, instead of taking on the onus for leveraging the technology alone, the onus will be on the provider to deliver the underlying technology which will often also involve using various cloud infrastructure providers to help financial services clients optimise their cloud infrastructure deployment and get the most they can out of open source technology today.
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