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Can Banks Open Source Without Giving Away Their Secret Sauce?

Open sourcing and banks go together like skinny jeans and rugby players, it’s a bit of an awkward fit.

At the FINOS Open Source Strategy Forum in Canary Wharf last week, industry experts pondered the viability of squeezing a 19-stone prop-forward the likes of Goldman Sachs into a pair of GitHub brand superskinnies. Opinion on the subject was somewhat mixed…

The second day of the conference on the 32nd floor of 40 Bank Street began with an upbeat keynote from the aforementioned financial behemoth’s Gareth Davies, who detailed the bank’s vision for open sourcing elements of its software infrastructure to the wider development community whilst insulating itself from the associated risks and exposure. To what extent this kind of compromise is possible formed the subject of much of the discussion that was to follow.

Open source advocate Danese Cooper of NearForm gave a presentation entitled, Getting the Most Out of Open Source in a Regulated Industry in which she outlined the pros and cons of open sourcing for financial institutions.

The number one reason why large institutions avoid open sourcing is, according to Cooper, brand risk. Allowing your code to be scrutinised in public can potentially usher in a world of embarrassment. Next on the list is privacy, or as NearForm’s VP of Special Initiatives put its, “[big banks], don’t want to give away their secret sauce.”

Regardless of its drawbacks, banks are still eager to lay stake to strong open source development communities. So, why are they bothering?

The benefits of open sourcing are myriad but primary amongst them are recruitment and long-term cost effectiveness. Fostering an unpaid pool of techies well versed in your code not only keeps your software protocols healthy but also makes hiring your next generation of engineers an absolute doddle.

The problem Cooper sees with banks adopting an open source model is one of caution and control. In order for Open Source to yield real results, it needs to be unfettered and this requires a innovative freedom which companies like Goldman Sachs are unwilling or unable to grant. Speaking of her experiences switching from advising legacy to new wave financial services providers, Cooper explained that;

“I expected that it was going be exactly like what was described by Goldman Sachs, lots of process around releasing stuff into the public in a controlled way and what I found was that they were already passed it. They didn’t care anymore”

As with other branches of fintech, it appears as though the big boys still lack the agility of the young pretenders. When asked for her opinion of Goldman Sach’s approach she argued that they risked stifling any OS development community they might attract if they continued to be overly risk-averse, explaining that;

“Their job as good stewards of open source is to grow the number of people who can help them and it sounds like there’s a problem there”

If Danese Cooper had given the bankers pause for thought in the morning session, then Matt Barrett from Adaptive may have turned mild concern into blind panic following lunch. The CEO laid out in no uncertain terms the folly he considers most banks are making when attempting to open source their technological frameworks.

Barrett feels that financial institutions are open sourcing software which is intrinsic to their unique operational models and this is problematic for two reasons. Firstly, it’s difficult to build a community around software (or hardware for that matter) which lacks utility or relevance away from a specific organisation. The second reason is a little more obvious, tipping your hand is bad for business!

Barratt argues that the only way banks will be able to successfully harbour the power of open source is to follow the lead of the tech giants of Palo Alto.

“One of the things that banks are struggling with at the moment is the ability to open source effectively to externalise costs. I think this is something that Silicon Valley does exceptionally well. So, what do you do? Well, you take an internal capability that you’re continually investing in but which you don’t think is differentiating you in the market … you’re going to need to provide stewardship to build a community that will become self-maintaining and therefore reduce your investment.”

The key takeaway here was as much to do with what you open source as how you open source. Banks should be allowing free access to the more generic elements of their infrastructure, “the plumbing” as Barratt calls it and not the furniture. Whether or not Goldman Sachs and friends to heed the advice of Barratt and Cooper remains to be seen, but if they’ve been letting coders into the living room rather than the airing cupboard, it might already be too late.

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