Windows Cheaper Than Linux? Not on Wall Street

By Maria Trombly | Securities Industry News | Dec. 23, 2002

According to a recent Microsoft-sponsored study, Windows is cheaper than Linux when it comes to total cost of ownership-but don't throw out your Linux servers just yet. The results don't apply when it comes to the most common Wall Street applications, analysts say.

The study, in which International Data Corp. surveyed more than 100 midsize and large companies, looked at the current total cost of ownership for Windows 2000 and Linux. It found that when it comes to network infrastructure, print serving, file serving and security applications, the Windows 2000 server solution costs between 11 percent and 22 percent less than a Linux solution over a five-year period.

The biggest reason Windows is cheaper, on average, is personnel costs. Companies typically have lots of people who are experienced with Windows, and not too many Linux experts. Another reason is that many applications are simply not yet available on Linux, and would have to be written from scratch.

But when it comes to the most common uses of Linux on Wall Street, neither of these two reasons applies. Linux is a version of Unix, and Wall Street firms typically have a great deal of in-house Unix expertise.

"Organizations having strong Unix skills would find Linux much more like what they were used to than Windows and would probably not have to incur the expense of retraining users or developers," said IDC analyst Dan Kusnetzky.

Staff costs total between 50 percent and 70 percent of the five-year costs of an operating system, he added. Such organizations would already have in-house the tools they would need to manage a Linux environment.

Second, a major use of Linux on Wall Street is for heavy-duty number crunching using grids of cheap, networked servers. the firms typically write the software themselves, said Kusnetzky, and Linux has a strong advantage. such applications include risk modeling and scenario modeling of equity holdings, he said.

The IDC study also showed that Linux has a 6-percent cost advantage over Windows when it comes to serving up Web sites. This is the single most common use of Linux on Wall Street.

Another IDC study released just last week shows that, on Wall Street, Linux implementations demonstrated total cost of ownership cost savings ranging from 5 percent to 80 percent, depending on the size and scope. Most firms reported cost savings to date in the 25 percent to 33 percent range, according to IDC analyst Damon Kovelsky.

Finally, Wall Street IT managers often choose platforms in order to gain competitive advantage rather than save money at any cost.

Linux is an open-source operating system, which means that users can change it to fit their needs. For example, it can be stripped of everything but the essentials needed to run a particular application, said Gordon Haff, an analyst at Nashua, N.H.-based Illuminata. This improves stability, increases operating speed and reduces security risks.

Linux is being used at Merrill Lynch, Morgan Stanley, Credit Suisse First Boston, E-Trade, Ameritrade, Putnam Lovell, the New York Stock Exchange, the International Securities Exchange and the Securities Industry Automation Corp. In fact, it's hard to find a Wall Street firm that isn't using Linux, either to run its Web services or for distributed computing. Linux comes built-in with many stand-alone appliances, like displays.

And the use of Linux is expected to grow at a 28-percent compound annual growth rate over the next five years, according to IDC analyst Marilyn Carr.

Meanwhile, Microsoft's cost advantage in network infrastructure, print serving, file serving and security is threatened as companies like IBM and HP roll out new management tools for Linux that could help to bring down administration costs across the board.