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Home Banking Open source vs. proprietary software in banking

Open source vs. proprietary software in banking

23/08/2022
(6 min)
Peter Shubenok
Managing Director

Proprietary Software vs. Open Source in Banking. Can a Hammer Beat an Anvil?

The ongoing battle between open source and licensed software has been hitting the internet headlines for a long time now. Multiple pitfalls and issues are closely examined and scrutinized by supporters from both camps. This fanatical dispute, in its most recent phase, forced both sides to inspect the issues of security, flexibility, and development cost with closer precision than ever before.

In the article, we are going to review the two opposing sides and their usage in the banking industry. To do so, we invited RNDpoint’s experts, who are ready to share their thoughts with you.

But let’s inspect the “altars” of the two “beliefs” first, before making our open source vs proprietary software comparison.

What’s behind the lines of code

The development of any software takes expertise and time. And there are many models for funding it. Different models of ownership exist too.

What is proprietary software? Sometimes it is referred to as closed source or licensed software is a type of software that legally remains the property of individuals, groups of people, or organizations that created it. Those who own the rights to the product usually keep the source code a secret. They may also insist that a special license key must be purchased to use the software or receive technical support, or regular updates.

What is open-source software? This type of software, on the contrary, is openly available and free to users and programmers. People who create open-source software solutions publish the code and allow anyone to use and modify it. Communities of developers often work together to design the software and provide users with technical support for their products. Open-source software is usually tested by online contributors in the public sphere.

At RNDpoint, we offer both open-source and licensed software for our customers as well. Drools, My SQL, MongoDB, and Hadoop are preferred by some of our clients. FICO® Blaze, Oracle DB, Adobe Experience Manager, and FICO® TONBELLER are the preference of others. Paraphrasing a popular saying: so many businesses, so many minds. In the article, two experts from RNDpoint will try to reveal open source vs proprietary software advantages and disadvantagesfor you.

Open source – open minds

Denis Stolyar is the Head of Business Development at RNDpoint. His field of expertise refers to the banking sector. Though his clients are part of one of the most conservative industries, he sees a certain shift in their preferences. He agreed to share his point of view on the topic.

Several years ago, licensed software substantially dominated open source. But now the tendency of an equal share in the market becomes more obvious. Even banks turned their gaze to open source technologies in spite of the prevailing myths that open code is not safe enough to provide vital data security.

Open-source software solutions provide multiple advantages for customers as well as for developers. Open source program users get:

  • no periodic fees and payments (monthly, annually, etc);
  • free solution customization;
  • the flexibility of open-source software for integration into other solutions;
  • opportunity to change and upgrade their systems easily due to a large number of open code programmers.

There are certain advantages for developers too. These include:

  • huge knowledge base;
  • free to use open code;
  • a large community of programmers ready to help;
  • access to the latest cutting-edge ideas and solutions.

However, it is not all roses in the garden of open-source software. There are hidden flaws, such as:

  • though open code is free, custom open-source software development costs quite a sum;
  • due to the fast development of open source technologies, once created, the solution can soon become out-of-date;
  • you never know, what is hidden in the code line and whether there are vulnerabilities in it, causing security issues;
  • it takes time to develop a solution.

Buying a license is buying consumer rights

Denis Stolyar is the Head of Sales at PST Labs. Every day he deals with banking and financial entities and organizations of different sizes and forms of property. He tries to explain the peculiarities of proprietary software and why banks often choose licensed products.

Open source and licensed software cannot be classified according to domain reference. I think that large companies and organizations are inclined to use proprietary solutions. While small and medium enterprises (SMEs) prefer open source technologies. The same idea applies across banking, insurance, health, telecommunication organizations.

Corporate business is more likely to purchase licensed software. It is often a question of reputation. It is more likely that a well-known vendor will be chosen, and a higher price will be paid. Reputation is everything.

Among the advantages of proprietary software, Denis Stolyar names:

  • out-of-the-box ready-to-use product, no programming is needed;
  • technical support throughout the product lifecycle;
  • better product reliability;
  • professional user interface (UI) and proven by time user experience (UX);
  • routine updates.

But some disadvantages of licensed software do not escape my attention. They are as follows:

  • proprietary software solutions can be bulky and contain components unnecessary for the customer;
  • in the long run, licensed products are costly because of periodic payments and paid updates;
  • dependence on a vendor in proprietary software customization;
  • lack of flexibility and speed in necessary update development.

In my mind, licensed software solutions will prosper as long as the corporate business exists. That is why it is much easier to buy a ready-made program than to develop a new one from scratch.

Open source and proprietary solutions: advantages that matter

When one will choose open source software, the other would prefer proprietary solutions. The choice here depends on too many things to consider. For better understanding the strong sides of each type of software, it’s necessary to have a clear vision of them.

The advantages of open source solutions are:

  • high adaptability;
  • free access to the source code;
  • free and fast support;
  • continuous code refining and enhancement.

The strong sides of proprietary software are:

  • stability;
  • reliability;
  • warranty;
  • uniqueness.

Conclusion

Our experts described the open-source vs proprietary software pros and cons. But, the decision as to which one suits you best is a tough call. To help you decide, Denis and Sergey leave you with one final gem of wisdom – when choosing a software solution, always bear in mind:

  • your budget;
  • your business needs;
  • your technical skills.

On one hand, an open platform provides greater flexibility, but it can be more vulnerable to cyber threats. On the other hand, proprietary software is easier to use but limits your options and leads to higher costs in the long term.

We hope we’ve cleared up the proprietary vs open source debate. However, feel free to get in touch with our experts if you need a more detailed consultation.

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Peter Shubenok
Peter Shubenok
Managing Director
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