Productivity of open source softwares in BFSI Industry

Abstract

Open Source Software (OSS) has become an important part of software development and usage arenas inalmost all industries owing to its cost, quality, flexibility and reliability features. Banking industry is one oflargest spenders on IT areas of all kind like customer related software, security software, databases creationand maintenance, in-house operations etc. and its spending is expected to increase further in near future.The same is the case with Indian Banking industry.Till now the Indian banking industry has not focused its on Return of Investment (ROI) of the IT investment asits main focus was on getting the core banking software implemented. But from now on banks would beexpected to measure ROI of IT investment so that IT departments do not become huge cost centers. Usageof OSS could be one of ways of increasing the ROI on IT.To study the actual investment made by Indian banks on IT, various methods were used viz. finding in articlesand press releases about the investment, searching for various heads in banks’ financial statements (mainlyincome statement). Apart from these an attempt was made to use banks’ revenue expenditures as a proxyfor their IT investment. Finally, the actual figures could be found in Prowess Database in the form of yearwise unconsolidated figures. The data from Prowess formed the main source of the calculation done in thestudy.Of the total investment in IT by Indian banks, a large portion is spent on software licensing. Though thespending on Security seems small (10%), the actual cost incurred due to malicious software on a bank’snetwork could run into hundreds of crores depending on how long the operations were affected. As per ourstudy, the cost incurred by Indian banks in Development, Enhancement and System Integration (D/E/SI) incase OSS is used would be as much in case of proprietary software. But, major reduction in costs if OSS isused would come from two other areas. First one being application licensing cost savings, which accordingour study, is around Rs. 710 crores for the year 2010-2011. Second area is security opportunity costs. Undersecurity, if the banks environment is Windows, there would be no savings on Rs. 182 crores which is hecurrent spending on security software. But if OSS environment like Linux based OS is used there woulddefinitely be some savings on security costs as most of the malicious software are targeted at Windowsbased environment. More in OSS based environment banks would also reduce their downtime due to suchattacks, thereby avoiding loss of revenue during peak working hours.