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Trading Technology

10:15 AM
Greg MacSweeney
Greg MacSweeney
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IT Matters

Three years ago, Nicholas Carr created a firestorm when he hypothesized that information technology would become a commodity, like telephones, and that IT no longer would provide competitive advantage.

Three years ago, Nicholas Carr created a firestorm when he hypothesized that information technology would become a commodity, like telephones, and that IT no longer would provide competitive advantage. His article in the Harvard Business Review caught many by surprise -- maybe just for the fact that somebody would actually write down what many were already thinking. The debate raged for months, with both sides -- especially those who thought Carr's hypothesis amounted to technology blasphemy -- becoming quite animated.

Three years later, little has been resolved when it comes to IT's place in the competitive business landscape. Is Carr's theory correct? Partially. But IT may not emerge entirely as a commodity as quickly as some think. As highlighted in this special issue of Wall Street & Technology, technology -- used innovatively and correctly -- is a competitive advantage. The profiles in the 2006 edition of WS&T's Gold Book stress just how important cutting-edge technology is to Wall Street firms. And with Reg NMS set to change the way the markets operate, all financial institutions need to invest in technology not just to keep pace, but to move ahead of the competition.

Whether or not Carr's prediction proves correct and IT (as we know it) becomes a commodity, one thing is certain: The competitive-advantage lifecycle is becoming shorter. Today's newest trading algorithm offers an advantage for only a short time before a competitor releases a rival product. It was only a few years ago when Credit Suisse first offered a trading algorithm to clients and gained a long head start on its competition. Likewise, other innovative technologies seem to have a viable shelf life of only a few months. This trend should force every executive to ask: "How much should a firm invest in technology under the auspices of creating competitive advantage."

But the better question really is where to invest. Since it is evident that Wall Street -- which already was heavily reliant on technology -- will become even more dependent on the latest, fastest and most innovative technology as the markets continue to become more electronic, firms need to make sure that their investments are going to the new technologies that really will provide a competitive advantage. The 30 executives profiled on the following pages offer a broad view on what they think the wise investments will be over the next year. They share their views on the most-pressing business issues, trends and, yes, how technology will provide a competitive advantage. On Wall Street, IT does matter.

Greg MacSweeney is editorial director of InformationWeek Financial Services, whose brands include Wall Street & Technology, Bank Systems & Technology, Advanced Trading, and Insurance & Technology. View Full Bio
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