Financial services must think open source

Open source software is highly valuable to the financial services industry, and 93 per cent of the sector’s IT leaders agree enterprise open source is crucial to their organisations. Adoption rates bear out this perspective, with enterprise open source currently making up 40 per cent of software used in the sector, and projected to rise to 46 per cent in two years.

While banks have long been consuming enterprise open source products, many are yet to embrace open source ‘upstream’ community projects. Here’s why working in upstream communities is a smart tactic for firms looking to innovate more quickly:

* Benefits of working with upstream

Upstream engagement offers FSI firms many benefits, the first being scale. It allows banks to capitalize on ideas and resources from thousands of developers worldwide, providing a magnification effect. The company contributes developer time, resources, and funding to support projects – and benefits are apparent from the output.

Besides productivity gain and wider talent pool ideas, companies that provide community leadership can influence product roadmap. Banks have done this by having IT team members participate in an existing open source middleware project, and contribute in steering business process management capabilities upstream.

This they would then use in a product form once the software is secured by a trusted vendor.

Upstream collaboration doesn’t just scale up a company’s own development efforts - it provides access to a diverse pool of programming and business problem perspectives. Community contributors can have a broad range of backgrounds, which enables financial services to benefit from insights gained in other industries.

Engaging in these projects helps banks recruit new talent from passionate people communities and help retain their own developers. They encourage them to build up their expertise by participating in the open source community innovation engine.

Exert influence

There are three ways banks can strengthen their influence and contribution to the upstream community through valuable resources many of them possess.

* First is by providing funding, which can involve paying for a full-time community manager to oversee the project, or sponsoring an event or other value-added expenditure. Companies have struggled to hire talent, sponsored an open source project, and have subsequently been flooded with enquiries from potential new hires. It’s a tried and tested method for success.

* Second is providing human resources through internal developers to broaden the talent pool.

*Third, banks can offer valuable technical level leadership, using their expertise to verify code quality by helping to keep developers motivated or arranging community get-togethers.

Banks shouldn’t simply expect to open source their code and suddenly reap the benefits. As with any community-driven initiative, participants must be active contributors, and open source is most successful when organisations look beyond their own needs to help drive benefits for the entire community.

Initiatives like FINOS (Fintech Open Source Foundation) have done this, providing open collaboration financial services industry forums such as Symphony, which has benefited from contributions by multiple organizations and individuals.

Still there’s reluctance

Banks often risk losing control or exclusivity of their ideas. Product features could take years to develop internally, whereas in open source, those ideas can be built and improved in much shorter timeframes.

The customer-facing layer is where companies can drive the most competitive differentiation, and underlying platform technologies such as Kubernetes or Linux are a common foundation for many companies. This is why they attract contributors and where the greatest opportunity lies.

There are also structural barriers that many banks need to overcome before engaging in upstream participation. Not all banks have the tech or legal mechanisms required to send their code outside of a company’s corporate firewall and transitioning from legacy organisational structures is not always easy.

Rigid company policy on what employees can and can’t do is non-trivial when a business wants to be technologically agile. This cultural challenge is readily acknowledged by banks, and one that many are working to address.

In a heavily regulated industry, it takes time for companies to introduce the policy and organisational changes needed to participate in open source communities. However, as software ecosystems expand further, financial services innovation will be increasingly driven in open source. Given the benefits to be gained, it is an opportunity worth seizing.

- Tim Hooley is the EMEA Chief Technologist for Financial Services Industry, Red Hat.