ComputerWorld has a very interesting article that even as Lehman Brothers was heading towards bankruptcy it invested $309M on technology and communications in the quarter ended August 31. This figure represents a 9.5% year to year increase, which is down form the 18% increase, to $1.145 billion, in IT costs for the fully year 2007 vs. 2006.
It seems that Lehman was involved in selling some of its technology, specifically around a high-speed trading platform for equities called Baikal, to a number of investment banks and brokers.
Ralph Silva, a senior analyst at financial services advisory firm Tower Group Inc. is quoted:
“The units of Lehman currently selling technology to other banks are likely to be sold off
All banks are concerned about the ramifications of losing technology, and want more technology to be in-house,” he said. “So in this kind of situation, they tend to negotiate to get hold of the code or the entire systems. In Lehman’s case, the phone calls are probably already happening.”
It’s interesting to ponder whether the third parties using Baikal would be better off if the technology was open sourced? Probably, but who, amongst the 100s of customers, would continue its development?
Does any customer want to take on the effort of developing a trading system in-house? There is very little competitive benefit gained from the core of a trading system.
Next, consider the scenario of an independent company taking the open source code and offering support and future development. Or worse, if multiple companies began to fork the code and offer support and future development. As a current Lehman technology customer, I would be weary of having to select between 2, 4, or x number of forks.
On the other hand, there is also a risk if Lehman sells it proprietary technology to a company that then decides to go in a different direction than Lehman’s technology customers had expected of Lehman. But this is what source code escrow is for I guess.
I’m not sure that there is an easy answer here. Is there ever?