Financial services brands foster a community spirit to drive innovation

Open source enables organizations to innovate faster and offers a level of flexibility and agility that would have been difficult to achieve if they were solely reliant on proprietary software
By Nikolai STANKA

Like most large enterprises today, banks and other financial services companies are striving to become technology businesses. At the same time, CIOs, CTOs and IT managers are under constant pressure to reduce costs and deliver on large transformation projects. The current pandemic situation has left brands having to support remote working on an unprecedented scale, placing greater emphasis on cloud and security.

IT departments need to strike a careful balance between cost and delivery. Consequently, more and more financial services organisations are turning to enterprise open source software. According to Red Hat’s own research 93% of IT leaders from across the financial services industry stated that enterprise open source was important to their respective organisations. A large proportion (83%) also remarked that enterprise open source has been instrumental in allowing them to take full advantage of cloud architectures. This is enabling banks to implement hybrid cloud strategies and develop cloud-native applications.

Open source enables organizations to innovate faster and offers a level of flexibility and agility that would have been difficult to achieve if they were solely reliant on proprietary software. Besides adopting enterprise-grade software products and solutions, banks can become leaders in setting technology trends and influencing software development through deeper collaboration with open source communities. This in turn helps to attract and retain the very best developers.

The magnification effects

From the outside looking in, it might appear that the financial services industry is ahead of the curve. Think of the many online and mobile banking applications and services we take for granted today. The fact of the matter is that most traditional banks are reliant on aging systems that are unable to keep up with the pace of change in the sector. They face an uphill challenge to remain competitive and be at the forefront of financial services technology.

In addition to using enterprise open source from a trusted vendor, major gains can be made by organisations that are prepared to work directly with open source communities, in what’s known as ‘the upstream’. This is where code is developed, in a shared process. From here, the software can be downloaded for free, or, it can be consumed via a trusted open source vendor that hardens the software, securing it, stabilising it, adding lifecycle management and service level support, to make it suitable for use in an enterprise; otherwise known as the ‘downstream’.

Upstream communities are the engines of innovation, made up of developers and thinkers, diverse individuals and organisations from around the world, all dedicated to building new software. Collaboration in open source communities is a fluid model that allows banks to contribute directly to the development of new code to help create and refine a particular piece of software. It’s a way of expanding a team many times over; supporting open source projects and contributing perhaps just a few hours of developer time per week and gaining the output of hundreds or thousands more. Creating a magnification effect!

In the driving seat

Participating in open source is a far cry from buying an-off-the shelf product. It allows an enterprise to play a leading role in product development by nurturing a solution that addresses a specific business requirement. Many organisations from the same sector can work together to get the capabilities they need. That’s fairly ground-breaking in a heavily regulated industry like financial services. It’s also likely the code will become freely available, providing an opportunity for other developers to access it via a set of open APIs. The software is frequently updated and improved by the many developers maintaining it. As well as being the captains of their own destiny, banks and their inhouse developer teams gain added kudos for being involved at the bleeding edge of emerging technology.

FINOS (Fintech Open Source Foundation) is one instance of a community that was set up by banks to encourage greater collaboration on open source projects. It started out as Symphony, a messaging and collaboration tool for the banking community conceived on the back of open source software that developers from a prominent investment bank used to create a secure messaging platform. It was then adapted by developers from other banks who went in to add voice and video capabilities. Symphony is now a major business valued at around $1.4bn, and the concept has expanded into what is now FINOS. However, FINOS at the moment focuses largely on software development for investment banks, which limits the impact it can have on other aspects of financial services such as insurance or retail banking.

Moving at the speed of innovation

Cloud migration and hybrid cloud adoption is central to any major digital transformation project. Banks need the agility and elasticity the cloud gives them to extend reach into new virtual and geographic markets. The framework known as Kubernetes – one of the fastest growing open source projects in history – enables companies to automate the management of large numbers of containerised applications across a hybrid cloud environment. Linux-based Kubernetes has become the industry standard for container orchestration. In fact, Red Hat has been contributing to the development of Kubernetes since its inception.

Given the opportunity, banks should be actively contributing to Kubernetes development. The upstream model gives them the ability to do this. They can marry their own resources with all that the community has to offer to shape Kubernetes-based products and solutions to target their own individual business requirements. It’s a model that promotes continuous development, benefitting the banks themselves and the wider community.

Banks are not averse to the upstream model by any means. Real-world examples include a major financial services organisation that joined a community to drive the development of a critical piece of middleware. The bank’s developers worked side-by-side with the open source community to create new software and features for the business process management platform. The community’s involvement allowed them to deliver the project in record time and at a considerably lower cost. Subsequently, the bank is now an active member of the open source community, regularly contributing new ideas and code to drive projects. This model has ensured the bank is able to build the features it needs to enhance its own product portfolio. A clear demonstration that leveraging global communities is a smart and cost-effective way to drive software development and transform digitally.

A strategic development

So, surely all financial services organisations are signed up to open source communities? Well, not quite. Specialist open source projects like FINOS do exist and there are more examples of community led projects like Symphony out there. However, these open source projects are the exception rather than the rule. Most developers operating in the financial services space are tucked away behind the company firewall. Like banking itself, software development can be a stringent and highly regulated process. It’s time to change this. In today’s fast paced digital economy, the policy of keeping your developers in a closed environment is no longer tenable. If you’re going to continuously innovate then you need to bolster your inhouse teams with the wealth of talent that’s available outside of the firewall. On the flipside, developers flock to organisations that are engaged in upstream development because it gives them exposure to exciting community-led initiatives.

There are lots of different ways an organisation can contribute to upstream communities and gain access to a global network of developers. They can invest in a community and support it financially, they can provide technical leadership or advocacy, but the most common model is to contribute code. By doing so banks and financial services organisations can discover, or help to build, software that can be adapted for a specific business need. Enterprise organisations that participate in existing open source projects can stay ahead of the curve, significantly reduce costs and speed up time to market

The writer is Director, Business Development, EMEA Financial Services

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