Major Chinese banks are moving their core infrastructure to Linux, partly in accordance with a government's advocacy of Linux for its cost, stability, and as a platform for homegrown development.

Tokyo-based TurboLinux has recently announced that the Industrial & Commercial Bank of China will roll out Linux in all of its 20,000 retail branches. ICBC, which has 100 million customers and over 8 million corporate accounts, is the largest bank in China.

Under the deal, ICBC will buy an unrestricted user license and will integrate it throughout its entire banking operations network over the next three years.

The bank plans to use it as the basis for its Web server and a new terminal platform, a TurboLinux press release stated.

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And that's just the beginning, says Tony Le, deputy general manager for TurboLinux China, hinting at more customer announcements in the Chinese banking and securities industry in the next few months.

"Open source provides a great opportunity for China's software industry," he says. The Chinese government, for example, is advocating Linux use as a way to transition the country away from pirated software.

TurboLinux has already provided a payment surveillance and control system to the Bank of China, he says, and a Web-site development platform to the China Construction Bank.

Other Linux vendors are gracious about the ICBC win, describing it as an indication of growth in the overall Linux market. "ICBC is a good sign," says Chris Zhao, vice president of Beijing-based Red Flag Software, a leading Chinese Linux vendor. "We are happy to see this. It represents the rise in usage at the enterprise level, not just in the government sector."

"Other banks may follow the lead of ICBC," agrees IDC's Jiang. "I think we can see Linux grow dramatically in the financial sector."

Chinese state-owned media have already reported that the Agricultural Bank of China, another top-four bank, is expected to announce a deal similar to ICBC's. Meanwhile, the fourth major bank, the China Construction Bank, is expected to announce that it will move its IT systems to Linux sometime this year.

But Linux does face some challenges in China. Unlike U.S. firms, Chinese companies aren't used to paying for services, and Linux is an almost purely service-oriented business proposition for vendors. "The situation is tougher for Chinese Linux vendors," says IDC analyst Nielse Jiang.

Wendy Yu contributed to this report.

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