News of the switch was revealed by William Zeitler, senior vice president and group executive of IBM server group in a keynote speech at LinuxWorld in New York today.

E*Trade, which provides financial services online to more than three million US households, is moving its entire IT architecture to Linux, says Zeitler. The move is expected to simultaneously streamline E*Trade's technological architecture while at the same time providing up to three times the user capacity.

IBM is now engaged with 25500 Linux customers worldwide, says Zeitler, with solutions ranging from Web serving to some of the largest supercomputers in the world doing genomic analysis. He says almost all of the mainframe processing capacity IBM sold in the fourth quarter of 2001 was for Linux. IBM itself is running the free operating system internally on more than 800 servers.

In the financial services sector, Linux is being implemented on a large scale at the New York Stock Exchange and Banco Mercantil in Brazil. IBM was also hoping to parade Salomon Smith Barney as another big Linux convert at the conference.

In his speech, Zeitler predicts that the innovation of Linux and the open movement will transform e-business, ending forever the days when vendors can use a proprietary platform to retain control over customers.

Dan Kusnetzky, IDC's VP of system software research, says the growing importance of Linux as a server operating environment has been a consistent trend since 1997. He adds: "IBM is clearly responding to customer needs by throwing its weight behind this platform as it sees increasing use in important applications throughout the enterprise."

IDC recently forecast that 2002 will be a "break-out year" for Linux as a viable alternative for enterprise use.