HDFC Bank Ltd, India’s second-largest private lender, plans to build in-house software applications around open source software, such as Linux, that will help automate and handle banking operations better, and work seamlessly with specialized packages that banks use.
The move by the bank, a first by a large lender in the country, signals increasing appetite for open source applications among Indian lenders. IDBI Bank Ltd, Canara Bank and Central Bank of India have chosen open source software in an attempt to reduce their spending on technology upgrades.
Unlike proprietary software, where enterprises have to pay annual software licence fee and cough up for any new upgrades, open source software allows users to tweak the source code and develop applications without worrying about the licensing cost.
HDFC Bank, which runs around 25,000 desktops on a free office application called ‘Open Office’, is putting together a group of around 10 tech professionals who will develop and test new banking applications with Linux software.
Until now, the bank had to call an external software vendor each time it needed any software feature or application to be customized. Setting up of this open source group “will allow the bank to independently develop applications such as cheque tracking and other utilities around core banking”, said C.N. Ram, head of information technology at the Mumbai lender.
This initiative will also help the bank avoid “software licensing costs that are determined on the basis of the number of CPUs (central processing units) and desktops running software from a vendor”, he added.
The new open source centre at HDFC Bank’s Lower Parel office in Mumbai will be run by Gurgaon-based IT company Info Axon Technologies.
Indian banks will spend around $2.2 billion (Rs9,020 crore) on technology this year, according to consulting firm Frost & Sullivan India’s director T.R. Madan Mohan.
But despite the growing popularity of Linux, many vendors are yet to make their software applications work on the open source software.
“I would prefer to move all my desktops to Linux, but our core banking software Finacle does not work well on the desktops yet,” said Sanjay Sharma, chief information officer of IDBI Bank.
Sharma already runs office email and human resource applications on Linux, serving more than 5,000 bank employees. The bank has budgeted more than Rs50 crore on technology spending this year.
Most of the core banking products in the market today, such as Flexcube from i-flex Solutions Ltd and Finacle from Infosys Technologies Ltd, are not compatible with Linux-based desktops on several features. “If core banking software is fully Linux-enabled, more banks will join the bandwagon to save costs,” said IDBI Bank’s Sharma.
While some state-owned lenders have shown interest in open source earlier, private- sector banks are new to join the bandwagon. Canara Bank, for instance, embraced Linux in 2005 and now runs around 10,000 desktops and 1,000 servers on Red Hat Linux, a version sold by North Carolina, US-headed Red Hat Inc.