A New Zealand bank has become the latest institution to adopt the open-source Linux operating system. According to reports, the bank is to move all its branches to the Linux platform.

New Zealand's TSB Bank will join a growing number of companies that are moving to Linux. The bank was not immediately available for comment, but if European examples are anything to go by, then software licensing and hardware upgrade costs are likely to feature among the reasons.

In Europe, BP and Banca Commerciale Italiana feature among the big companies that have moved to Linux. According to IBM, as many as 15 banks in central London are running Linux clusters. Korean Air, which now does all its ticketing on Linux, and motorhome manufacturer Winnebago, are high-profile examples. Even IBM is taking big doses of its own medicine.

Software licensing costs are often cited as a reason to switch to Linux, but hardware costs can also be a factor. BP switched all its point of sale terminals to Linux from SCO's Unixware after realizing it meant that hardware did not have to be upgraded with the software, according to Scott Harrison, director of Linux distributor Red Hat.

"SCO Unix was not going anywhere so BP had a strategy to migrate to Windows NT," said Harrison. "The whole IT division had spent nine months trying port the applications, and when we started talking to them they had another six months to go. On top of that they would have to replace every single PC in two to three thousand petrol stations around Europe because the machines in the field could not run NT."

One of BP's techies managed to port the application to Linux over a weekend, and this was enough to persuade the company to change, according to Harrison. "This saved them 20 million pounds in up-front hardware costs. They are still upgrading their systems, but on a cycle that fits with the business needs rather than having to upgrade everything at once."

The issue of software licensing, meanwhile, has become particularly pertinent in the recent financial climate. David Valentine, IBM Linux sales and marketing executive, cites budget cuts as a key driver. "A lot of the customers I visit have just about digested what Microsoft licensing changes mean," said Valentine. "One chief information office says he is having to deal with a 15 to 20 percent budget cut each year, but his key supplier (Microsoft) is charging more for the same functionality."

Another reason companies are increasingly looking toward Linux is its clustering capabilities, said Valentine. "Linux clusters allow you to take old Pentium II or Pentium III PCs and get tremendous power for the price of a teabag. We train our engineers on five-year-old PCs that have no other use. You can create a very robust, very low-priced, high-capacity server."

What's more, said Valentine, the skills are widespread. "Not a single university in the UK has not turned out a student that can build a Beowulf cluster, because they have done it already in college."

Citing the "15 or 16 fairly large" Linux clusters in central London banks, Valentine said that the company is not able to talk about them now, "but when the (confidentiality) contract runs out, we will start publicizing them."

IBM also has 25 customers sunning SAP on Linux. "There is a number of significant global corporations moving SAP entirely to Linux," he said. "A lot of customers are saying: 'if I can get these savings on the edge of the Web (with Web and e-mail servers), what sort of savings can I get with applications?'"

"This will be the year that applications on Linux will become really significant."

Internally, IBM moved 841 servers to Linux in 2001, said Valentine. "Through 2002 this number will increase dramatically. It is done for one reason: to lower cost in a reliable, structured low-service way. We do this because it works, we don't do this because it is a fashion statement."