To help make the move happen, Reuters has chosen a vendor troika: HP, Red Hat, and Intel. HP? You mean the new HP? Yes. And the news strengthens the convictions of analysts who kept saying that the HP/Compaq merger might spell trouble for IBM.

That a global force the size and scope of Reuters should be migrating away from Sun comes as no surprise, as banking and financial services sectors continue relentlessly adapting to new budgetary constraints that have them thinking hard about the technologies they use for market competitiveness. Their challenge is to find ways to control IT spending without missing out on powerful, reliable servers, software, and services. What does come as news is that Reuters is adopting Linux with goals that drive Linux into the center of the financial services industry as a core platform.

Linux needs no introduction to banking and financial services. Beyond Red Hat, Linux is old hat to technologists working for firms from Wall Street, to The City, and on to all corners of the globe. Up to now, however, Linux has been used largely for web serving or internal web-based networks, not for core trading operations. According to the Reuters Group, they are betting “that banks and brokerages will shift trading to the 'upstart' Linux software.” Nonetheless, as a news and information provider for global financial institutions, Reuters cannot afford to be playing with anything resembling a wild bet.

In making the move, Reuters simply had to listen to their own customers. According to Reuters CTO, Mike Sayers, the Reuters customer base sees “Intel-based servers and Linux as an important way to reduce their costs of operation and improve their service.” That sentiment is echoed by Tom McDonald, an executive at Morgan Stanley, who calls Reuters’ support for Linux on the Intel platform “important to our efforts and strategic to Morgan Stanley.” Back in March, Red Hat announced Morgan Stanley as a customer in its Q4 financial results.

Plans now call for Reuters to work with HP, Intel, and Red Hat to develop the software and have the system ready for testing some time in Q3 this year. The service is to utilize the Red Hat Linux running on ProLiant servers from HP powered by Intel’s Xeon and Itanium processors. That last ingredient provides the rub for those who predicted the HP-Compaq marriage spelled doom. The Intel-based ProLiant brand of servers is, after all, what HP acquired with its purchase of Compaq.

Reuters was attracted to HP largely due to the strengths of ProLiant, as well as, level of service and support that HP and Compaq together brought to the table. This is most interesting, considering how the very notion of an HP-Compaq merger had people voting yay or nay as to whether attempts to pool HP-Compaq strengths and to streamline strategies would help both better compete with the likes of Sun, Dell, and IBM. Those who said ‘Rubbish’ to the merger pointed to the fact that two floundering companies would not a winner make. Unhappy sources inside HP were telling reporters that integrating disparate server strategies was but a pipe dream

While HP was a poster child for seeing how companies thrive in alliances, fearful HP watchers pointed out that it had been a long time since the company tried to swallow a meal as big as Compaq and might not digest it well at all. Taking an opposite view, optimistic analysts like Forrester Group’s Charles Rutstein, research director, who noted that “HP-Compaq is hinging its future on growing a large profitable service business to rival IBM Global Services.”

When you examine the Reuters announcement, you realize how much service factors in, affirming the main concern that CIOs have in sticking with vendors with years of expertise in corporate IT deployments. HP Services will join Reuters Consulting and both will help Reuters customers ensure that Linux migrations will deliver maximum benefit. Services will include initial reviews, application audits, development of the Linux application architecture and migrations, through to ongoing support.

HP expects that the alliance with Red Hat and Intel will generate over $200 million in sales over the next three to five years. That figure includes the revenue from follow-on technical services supplied to Reuters’ customers and the sales of ProLiant servers.

There are, in fact, more than a few lessons to be learned from the Reuters deal, from how not to underestimate the impetus of Linux up the food chain in enterprise computing to how not to underestimate the wind-chill factor of HP and Compaq on IBM’s supremacy in landing Linux deals.

"Our value proposition is 2x or better performance at 1/2 or less the price"

How heavily was Red Hat involved in the initial discussions that led to the Reuters decision to place the software system on Linux?

TIEMANN: Red Hat has been involved for many months with many of Reuters’ key customers as well as with Reuters. This included executive-level discussions and face-to-face meetings. Reuters was invited to the Red Hat Advanced Server launch in New York City. Speaking directly with CIOs and CTOs of major Red Hat customers there as well as with senior executives from supporting partners and ISVs such as Intel, Oracle, and Veritas, Reuters was able to validate the breadth and depth of the industry's commitment to the Red Hat Advanced Server platform.

How vital was a working relationship with HP and Compaq?

TIEMANN: A relationship with HP and Compaq was extremely important to Reuters. Because of the nature of the Reuters Market Data System, which is both an enterprise-class system and a building-block for in-house developers, Reuters needed the ability to define a system that could be certified end-to-end: hardware, operating system, tools, middleware, and the MDS itself. Reuters’ decision shows confidence in the relationships that we have established with companies like HP and Compaq.

What’s your role in the porting, testing, and deployment phases to come?

TIEMANN: Reuters globally has several large development teams, who are thoroughly familiar with many flavors of UNIX, but are still new to Linux. Red Hat has competency in all aspects of migrating UNIX applications to Red Hat Linux, from assessment and planning, to development, testing, performance optimization, security analysis, deployment, and management. Red Hat and Reuters have also discussed the many training courses that are offered through Red Hat's Global Learning Services organization.

Reuters is a big win for Linux but not the first in this sector. Just how far have you been able to penetrate the financial services industry so far?

TIEMANN: From a technology perspective, penetration is quite high. Virtually everywhere there is UNIX, there is Red Hat Linux. From a business perspective, most companies in the financial services industries are still wrapping their minds around the fact that they “can” replace 80-90% of their existing UNIX machines with Linux, saving 60-90% on their operational IT costs. Many have begun to migrate. Some are in production and have validated our TCO and ROI models. Red Hat's focus is shifting from evangelism to execution.

In fact, you’re quoted in one press announcement as saying that Red Hat has technology and service relationships with 8 out of the 10 top financial companies in the world. Who are those companies and how are they using Linux?

TIEMANN: We are not prepared to name names at this time—most are at the beginning of their migration projects and have no status to report. An exception to this rule has been CSFB, who has allowed us to report some of their operational metrics.

[Editor’s Note: Red Hat last month announced that a mission-critical component of global investment bank Credit Suisse First Boston (CSFB)’s financial trading architecture was migrated from UNIX to Red Hat Linux. The application, called Agora, performs the complex financial transactions of basket trading, time slicing, and institutional order flow. The application can drive thousands of orders in seconds to locales around the globe.

Tell us what the Red Hat Linux pitch is that seems to be making the most sense to executives in the finance sector?

TIEMANN: They say that "Nobody got fired for buying X" (where X is a large company that would likely sue us if we used their real name), but today one cannot do one's job by simply buying X. Most CIOs we've talked within the past year have seen their budgets cut 20%-40%. Twice. The fact is that the job simply cannot be done with expensive proprietary solutions and an army of consultants, no matter how "safe" they appear to be. Our value proposition is 2x or better performance at 1/2 or less the price, built around a non-proprietary, service-based offering. What most CIOs really want is 2x or better the performance, what most developers need is an integrated platform with good vendor and ISV support, and what gets approved are projects that show 100% ROI in 6 months or less, with long-term TCO savings over 70%. The ability to deliver "all of the above" is what makes the Red Hat Advanced Server platform truly distinct from any other offering, proprietary or Open Source.