I can't answer with respect to working in a software house, but working in an Investment Bank can provide just as many technical challenges and career opportunities as I imagine you would get in a software company.
I'll start with the technical challenges (my favourite part of the job); the closer you get to developing front office applications (applications used by traders), the challenges will get more difficult and the pressure for bug free code will be greater. You will often have complex business logic to develop in a well though-out, OO designed manner while still thinking about the "more important" stuff, such as performance, reliability etc. You will be able to use most open source software in any way you want (depending on each firm's policy) and you will often have to justify this use to your colleagues, leading to stimulating debate and improved decision making.
Alongside the technical challenges, you have the stellar career prospects and the opportunity to go as far as you could want to in your career. If your happy being a programmer with an extensive knowledge of financial instruments, you are capable of doing that. However, if you want to move up the ranks and start to manage a team etc, there are plenty of opportunities to do this too. Granted, this is the part of the job that most people don't look forward to and this can be difficult in an Investment Bank because it can sometimes come down to personal loyalties and networking over the course of many years, but for a programmer who wants that kind of environment, Investment Banking will provide that for you.
These are just some of the positives of working in an Investment Bank. There are negatives too, which have been mentioned before such as being treated like a cost centre and not being looked after like you would be in a software company (decent keyboards, high end PCs etc) but I definitely wouldn't cast aside a career in an Investment Bank because you think it won't be a good techy place to work. The technical challenges are some of the most difficult you will find anywhere else but you will have to put up with some of the internal politics in return for that.