Open Source software has taken the world by storm over the last two decades or so. The term “open source” refers to something that can be modified because its design is publicly accessible. While it originated in the context of computer software development, today the term “open source” designates a set of values—what we call the open source way. Open source projects, products, or initiatives are those that embrace and celebrate open exchange, collaborative participation, rapid prototyping, transparency, meritocracy, and community development.

However, domain specific application software in the open source world is not very popular. Things are slowly moving into this direction, but there is a lot of progress to be made. Also, this may be the next big thing in the open source world, where one would see new companies release mainstream application products which are open source, with an “Open Core” business model and giving the traditional vendor companies a run for their money with their quality, feature set and rapid innovation. Making a product open source leads to more set of eyes looking at the code, thus enabling more peer review of the code and probably, leading to faster fixing of defects as well.

Here are the key benefits of Open Source Software:

• Quality – Open Source leads to more high quality-products or libraries. For example: Boost libraries for C++ is a very high quality peer-reviewed cross-platform C++ library.

• Innovation – When you have open source products, there is a likelihood that more people would be using your product in the way you would never have imagined. This leads to feature requests and often redesign of the applications, making them better in general.

• No Vendor lock-in – Since you have the source code, there is no need to be locked into a particular vendor when looking for upgrades and maintenance of the product. An open source ecosystem leads to more service providers, who would be more than willing to enhance and maintain upgrades or fulfilling special requirements of the client.
• Security – Obscurity does not help when it comes to information security in software products. Open Source software leads to healthier and more secure products

• Stand on the shoulder of giants – Some great open source software has been possible because of the large number of open source projects which have been executed. A lot of “big data” applications and frameworks may not had been possible without it.

However, financial services technology companies generally take a back seat when it comes to adoption of open source technology because of their limited understanding and perception about the product. Let’s take a look at the top three concerns and possible answers to them:

• My software system is very complex and sophisticated, no open source can replace it – If you can build it, most likely others can as well. Please try and be realistic. If your system is really that sophisticated and complex, consider sharing it with others through Financial-services Open Source Technology (FOST) if you feel the initiative is valuable for eco-system over time, else you may continue to work independently.
• What about stability, security of the modules offered on FOST – It’s a collaborative effort. We should look up to everyone to selflessly help drive this initiative. In general, open source technologies offer better performance, better security, and more flexibility at competitive cost.
• How will such a product be maintained, enhanced, customized, and serviced? My business depends on it – Linux is a very good example. You can use the basic products directly at no cost. You may test it and customize it to your needs. For its premium versions there are products like Red Hat that provide customization and support (Red Hat is a multi-billion dollar company, so money can be made through the open source technology initiatives). We expect various other companies to come up and offer premium service models on top of FOST.

What kind of Open Source Products are currently being adopted by Fintech Companies?

Financial Institutions have been using open source projects throughout their technology stack. Full-suite application software is probably the last mile, where the financial institutions and the industry, in general, can adopt open source products and bring the associated benefits for everyone in the ecosystem. Increasingly, there have been products in Financial Technology, which are open source and are being widely adopted. QuickFIX is unarguably the most widely used FIX engine, which is probably being used in all the financial firms (big or small). OpenGamma has coming up really well as an open-source Risk and Margining system, which is increasingly being deployed across various financial firms.

Another notable mention is FinTP product by Allevo, which is a very well respected product in the payments and financial transaction processing industry. Allevo has released the core engine of their product FinTP under GPLv3 license and the source code is available on github. In the capital markets space, there have been products like Marketcetera, Tradelink, Lodestone (Deutsche Bank initiative), which have tried to fill that gap with varying success.

The author is CEO & Co-Founder, uTrade Solutions.