Microsoft and Novell may not be natural partners, but some financial firms are already cheering their new pact.

Given the number of mergers and acquisitions in the financial services industry, most institutions have a heterogeneous infrastructure environment, complete with more than one operating system. If only the systems vendors collaborated to increase interoperability, that complexity and risk could be reduced. In November 2006, Microsoft and Novell forged a pact that just might make that dream a reality.

Some big name financial firms reacted quickly to the news. AIG, Deutsche Bank and Credit Suisse have already announced their intent to take advantage of the benefits of the interoperability agreement between Microsoft and Novell. Under three separate customer agreements, Microsoft will deliver to each company SUSE(R) Linux Enterprise subscription certificates, allowing these customers to take advantage of the Microsoft and Novell agreement.

Credit Suisse, for example, is looking at using the virtualization solution from Microsoft and Novell to help them manage a mixed operating system environment. The bank is evaluating the benefits of virtualization and driving down the costs of managing a mixed source IT environment with separate infrastructure costs, management, people and support infrastructure. Deutsche Bank is already a significant user of Novell and Microsoft products.

According to Novell, more banks are in the pipeline. “We have signed two additional ones that we have not disclosed yet,” said Justin Steinman, director of marketing for Linux and open source solutions at Novell. “We have a healthy pipeline of 30-40 companies with whom we are in active discussions right now.”

Lack of interoperability at the server level not only makes it difficult to manage across the infrastructure using a single set of tools, but it also prevents organizations from establishing consistent directory structures across multiple environments. Moreover, incompatibility affects file transfers at the client level.

According to Steinman, the lack of interoperability between Windows and Linux has been a fundamental issue for many years. “The attitude of many IT vendors has been to say: ‘Here’s my software. I really don’t care what else is in your environment. Make it work. It’s your problem, Mr. Customer,’” he said.

But financial institutions were left responsible for getting the information between the two systems, writing the translators and setting up a management interface. When large customers such as Goldman Sachs finally had enough, they started to apply pressure on the IT vendors. After all, if vendors claim to be their business partners, they should solve the problem.

Hearing that language from customers drove Microsoft and Novell to agree to collaborate in four areas. The first is virtualization. Ideally, organizations want to achieve complete bi-directional virtualization, which is the ability to run Windows on Linux and Linux on Windows. Firms such as Goldman Sachs and Merrill Lynch have tens of thousands of x86 servers. But the hardware capacity of these servers has far exceeded the software utilization. In order to justify the hardware investment, they need to run multiple operating systems on one box.

Through the collaboration between Microsoft and Novell, firms will be able to have their preferred Windows application running on Windows, their preferred Linux application running on Linux, and it will not matter what the host operating system is. They can simply move the virtual machines around any x machine in their environment.

Microsoft and Novell plan to release a roadmap giving details of the technology development in February 2007. “I do feel comfortable saying that you’ll see this technology release within the next year,” said Steinman.

The second area of collaboration, which is tied to bi-directional virtualization, is heterogeneous systems management. Firms tend to have physical servers, virtual servers, Windows servers and Linux servers in their data center. They can be used in any combination – physical Windows, physical Linux, virtual Windows or virtual Linux.

Microsoft and Novell will continue to compete in the systems management market. But they agreed that there only needs to be one way to pull factual data out of the operating system. To this end, the two companies will collaborate on a standard called Web Services Management (WS Man). Firms will be able to pick their preferred management solution to run either operating system in physical or virtual mode.

Directory and identity federation is the third area of collaboration. Many organizations have both Microsoft’s Active Directory and Novell’s eDirectory. But an eDirectory cannot be used to drive a Windows asset without extensive custom coding and vice versa. Under the agreement, technology will be developed so firms can federate these two directories and resolve this issue.

Finally, the two companies will collaborate on an Open Document Format (ODF). Novell’s OpenOffice productivity suite relies on the ODF standard. Microsoft introduced an alternative open document standard called Open XML with its release of Microsoft Office 2007. The two companies plan to build a translator between the Microsoft Open XML format and the ODF that is part of OpenOffice.org.

There are a few ways in which financial institutions can benefit from these initiatives. Some firms have proprietary applications written in-house on J2EE that they are moving onto a Linux platform. The interoperability with Windows gives them the ability to run these applications in virtual mode and deploy them to the server with the most available processing speed. They can consolidate servers and increase their asset utilization. They have more flexibility in designing their data centers, and they can run them without any downtime.

One of the biggest wins for firms comes in the areas of intellectual property. “As large companies, these financial services firms are often litigation targets,” said Susan Hauser, general manager of customer advocacy at Microsoft. “The Microsoft-Novell deal gives them the assurance that they will not be sued for infringing Microsoft’s or Novell’s intellectual property.”

Many financial services firms take their cue from Microsoft and its future direction, so the fact that Microsoft is accepting Linux and partnering in this space is seen as a significant move. Observers are quick to point out, however, that financial institutions already have been moving toward virtualization solutions. The ones getting most traction are VMWare, XenSource and SWsoft. In fact, XenSource has already teamed up with Microsoft. Although the Novell-Microsoft pact is broader in scope, it builds on this earlier announcement.

Firms have already acknowledged that by architecting virtualization into the infrastructure they can benefit from more flexibility, improved efficiencies and guaranteed service levels. “Financial services is a great example of a vertical where the service level agreements really do matter and really do have some very severe financial penalties attached to them, not to mention the reputational risks involved with failing to deliver service,” noted Duncan Johnston-Watt, CTO of Enigmatec Corp.

Some industry observers however, caution not to expect too much too quickly. For example, as for the collaboration on the ODF, it will be extremely difficult to make file transfers seamlessly, according to Al Gillen, IDC Research’s vice president of system software.

“To hope for a nirvana where we have 100 percent interoperability is not something that’s realistic,” he said. “However, the mere fact that Novell and Microsoft are working together and building a roadmap for how they’re going to make these products work better together does bode well for customers.”

For Labro Dimitriou, industry manager of financial services at Platform Computing, an important benefit is freedom from some legal worries. “The agreement says that if you don’t sue me, I’m not going to sue you,” he said. “I’m sure that’s something that’s in the heads of CIOs and CTOs as they bring in heterogeneous technology. It gives them a peace of mind.”

www.novell.com

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www.enigmatec.net

By Sherree DeCovny