Leverage Open Source to Defend and Disrupt..

(Image Credit – Larry Putterman)

“What Mark Zuckerberg (Facebook’s CEO) worries about the most is the lack of change, the lack of innovation, becoming the innovator’s dilemma company that gets big and stops moving and stops staying ahead.“ – Sheryl Sandberg (Facebook – COO)

I have found myself spending the vast majority of my career working with a range of marquee financial services, healthcare, business services & Telco clients. A vast percentage of these strategic discussions have centered around business transformation, enterprise architecture and overall strategy around Open Source initiatives & technology. These range from Middleware to BPM to Cloud Computing (IaaS/PaaS/SaaS) to DevOps practices.

In the last few years, more and more of those discussions have been focused around Cloud Computing, DevOps, Mobility & Big Data. We are at an inflexion point, there is now an emerging sense of urgency in mainstream Financial Services organizations to create and expand on their Open Source strategy.

Since the global economic crisis of 2008, seven years of steady economic growth and rising stock market indices, have conferred a sense of Banking prosperity while simultaneously increasing complexity across product lines. On the other hand, seismic advances in computing (namely in Big Data,Social,Cloud,Mobility & Analytics) & their convergence have increasingly begun to highlight technology led innovation as the core strategic differentiator in sorting out the winners from the laggards. With the emergence of FinTechs and their intent in dis-intermediating Banking business models, staid Banking increasingly resembles Silicon Valley.

In his pathbreaking “Innovators Solution”, Clayton Christensen codifies the significant difference between sustaining and disruptive innovations. Sustaining innovations result in evolutionary improvements that result in tactical savings in cost, performance & features. Disruptive innovations create and operate nascent markets, which incumbents find difficult to enter or engage with due to their legacy burden – in terms of both culture and IT. Disruptive innovations typically attack the lower end of the market and work their way up.

Open Source while being some what of an unknown challenge  to the mass middle market enterprise represents also a tremendous opportunity at most Banks & FinTechs across the spectrum of Financial Services. As one examines business imperatives & use-cases across the seven key segments (Retail & Consumer banking, Wealth management, Capital Markets,Insurance, Credit Cards & Payment processing, Stock Exchanges and Consumer Lending) it is clear that SMAC (Social, Mobile, Analytics, Cloud and Data) stacks can not just satisfy existing use-cases in terms of cost & satisfying business requirements across a spectrum but also help adopters build out Blue Oceans (i.e new markets).

Segments of open source include the Linux OS, Open Source Middleware, Databases and Big Data ecosystem. Technologies like these have disrupted proprietary closed source products ranging from popular UNIX variants, Application Platforms & EDWs, RDBMS’s etc. The rise of Open Standards and Open APIs have been the catalyst in this immense disruption.

Why are Open Source technologies becoming so popular & ubiquitous? I can think of eight key reasons –

1. They are designed from the ground up to be highly performant & scalable all the time dictating a minimalist design
2. They have been incubated in Open Communities with thousands of contributors thus satisfying a wealth of deployment options – On Premise/Cloud/Virtual/Hybrid etc
3. They’re Public and Private Cloud ready from the ground up; you dictate where to what to run it..the vast majority of them are Cloud,OS,Hypervisor,language agnostic
4. They are built with co-existence in mind as they subscribe to open standards (as applicable); they avoid feature competition while focusing on what 80% of the market needs are based on much lower cost. Most proprietary products offer extensive integration with complementary open source technologies
5. Developers just love Open Source projects as they’re a snap to install, a breeze to configure, easy to operate at scale & are beginning to provide highly flexible monitoring frameworks from whom a range of business metrics can be easily gleaned
6. They dramatically lower the bar to innovation and have open roadmaps that encourage corporate participation via co-development initiatives
7. They enable communities of the under served (customers and individuals) to design and launch revolutionary products & disruptive services that they would not otherwise been able to do while working with established vendors. This is due to considerations of cost, zero roadmap influence,security issues and lack of deployment flexibility due to bundling regimes (Oracle Cloud anyone?)
8. Open source roadmaps often lead to feature rich offerings that evolve over a period of time. I have seen short sighted technology decisions made in favor of proprietary stacks that have been outstripped in functionality, scalability & performance by the open source offering over a period of time

Banks leveraging & building solutions around Cloud, Analytics & Big Data (Hadoop,NoSQL,Data Science and other complementary technologies) see a panoply of benefits across a range of areas which we have done a reasonably comprehensive job of cataloging in various posts.

The enlightened architectures built in support of these business requirements take into consideration improving business processes to make them more customer journey focused while helping lay robust & scalable security foundations in place.

One could argue that in the web-scale space, the Fab Four (Google,Facebook,Amazon & Apple) have taken this to another extreme by creating and building significant open source projects & communities that support their robust platforms (as opposed to standalone or loosely federated applications). This approach has contributed to their outstanding business success. The benefit to the overall industry has been the creation of (open source) software technologies that enable business systems to operate at massive scale in terms of billions of users and at millions of systems.  They have done all this while constantly churning out innovative offerings while still continuously adapting & learning from customer feedback. These four are followed by two other new age giants –  Netflix & LinkedIn. To further illustrate –  the Netflix stack is one of the primary open source projects that enable the creation of micro-services & loosely coupled applications at scale – all running on Amazon AWS – yet another Webscale innovation.

Now, I typically like to bucket applications of technology to industry verticals into three broad (and somewhat simplistic) categories, which may or may not follow a progression, based on the culture & technology innovation in any given shop –

Category 1 –

This represents the entry point for a financial services organization in considering open source technology. Players in this stage are primarily focused on achieving lower TCO (Total Cost Of Ownership) & higher operational efficiency.

Here emerging investments in the SMAC (Social, Mobile, Analytics, Cloud and Data) areas augment & eventually supplant existing, expensive legacy technology investments with cheaper and more efficient (and typically) open source alternatives.

Indeed one would be hard pressed to find a real world enterprise which did not have an open source strategy to offload some of the routine workloads (email, web, database etc) that make up mundane IT.

Category 2 –

In the second category, these investments not just augment broad IT costs but also result in becoming crucial in meeting business requirements. Classic examples include RFC (Risk, Fraud & Compliance) areas & Information Security. These are areas that keep up the CIO at night. Spend in this category is important but not more important to meeting business requirements. IT investments begin to get more and more strategic here. The vendor moves from being a supplier to a business partner.

Category 3 –

This is the realm of disruption and blue oceans where inefficient markets become efficient or even transformed by new technology. In established enterprises, these business ideas range from the small (leveraging vast amounts of data & analytics to uncover customer engagement opportunities) to the medium impact – creating new business models based on Data Products to the Big Bet – spinning off promising new lines of business etc. In Financial Services, FinTech led innovations in areas ranging from Smart Trading to Robo-Advisor’s to Mobile Payments have all been predicated on creating & managing a new kind of customer.

To recap some of the benefits in going Open Source-

1. Create enormous Business Value in a range of areas as diverse as –  Defensive (Risk, Fraud and Compliance  – RFC ) to Competitive Parity (e.g Single View of Customer) to the Offensive (Digital Transformation across their Retail Banking business)
2. Drastically Reduced Time to Market for new business projects
3. Hugely Improved Quality & Access to information & realtime analytics for customers, analysts and other stakeholders
4. Huge Reduction in CapEx & OpEx spend on IT projects & initiatives

Either an organization and it’s key leaders adopts a disruptive mindset or can expect to be disrupted. Which category does your organization belong to? That is the quintessential IT question we all have to juggle in this Brave New Age. All said and done if there is one key takeaway I want to leave readers with – Neglect Open Source at your peril.