Open-source software (OSS) can provide fund managers with several benefits, including cost savings; increased customization; access to a collaborative community that provides extensive support; and assistance with attracting talent and honing technical employees’ skillsets. Nevertheless, OSS does not come without risks, such as the risk that a manager may need to release its own proprietary source code or face breach of contract or copyright infringement liability. OSS may also pose greater security risks than commercial software, which means that managers must carefully assess the areas in which they seek to utilize OSS. This article, the second in a three-part series, analyzes the benefits of OSS, as well as the disadvantages and risks that it presents. The first article
discussed the basics of OSS, actions governments are taking to support it, relevant regulatory guidance and ways OSS is being used by fund managers. The third article will evaluate actions fund managers can take to mitigate OSS risks, including what policies, procedures and controls to adopt; ways to deal with third-party vendors; and due diligence. For a discussion of another growing technology, see our two-part series on implementing electronic signatures: Part One
(Dec. 21, 2017); and Part Two
(Jan. 4, 2018).