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July 31, 1998

Is More Technology Good?

By Russ Lewis

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Some traders may resist these initiatives, viewing them as threats to their relationships. This dichotomy produces a dynamic tension for management trying to prioritize technology projects that meet the customer's and salesperson's needs. Prioritizing and resolving problems adds yet other dimensions of immediacy to the process.

Another issue is how the buyside is requesting connectivity. Sell-side firms must use one of five "standard" Financial Information Exchange, or FIX, formats to communicate. The problem is the standard that resides in a specific firm and not among other buy-side firms. No one vendor or organization owns the FIX protocol.

Technology Philosophy

Jefferies' goal is to provide its traders with the right level of technology. We try to achieve this by becoming true partners with our business units. We aim to act first as advisors, then as technologists.

Due to client and regulatory demands, technology is a large part of the expense structure. Business-unit managers must view technology as a strategic investment instead of a backoffice expense. Efficiency should not be the primary driver.

To be worthy of consideration, business managers must discard the mindset that technology must result in dollars saved through improved efficiencies. A technology investment should focus on more strategic goals, such as providing a competitive edge, meeting customer needs and increasing market share.

Why would a trader feel a new technology solution was a failure while a programmer may feel it was an unqualified success? Why such divergent views?

Traders who are good at building relationships and are fully accountable to their clients frequently work under time pressure. By the same token, technologists view their craft as an art form and focus more on product issues than people issues. Technologists tend to take a product view instead of a solution view of the deliverable. In other words, the product worked fine but the network caused the problem. The user only knows that the technology doesn't work.

Technologists don't expect their products to be 100 percent perfect once out of the box. They expect, and consider it common knowledge, that a burn-in period is needed for each new application. Depending on the complexity, this period can last months. Time is a relative thing. Technologists measure time with a calendar. Traders measure it with a stopwatch.

Need to Change

What's the big deal about technology? Why do we now need to change the way we work together? For one thing, competition and the markets are driving the change. Technology is an important tool to help facilitate the evolution of our industry. In the future, firms that make the smartest use of their technology investments will be more responsive to their clients and adapt better to changing market conditions.

To this end, technologists at Jefferies first seek to understand the problem, knowing that a solution may not involve technology. Then a very focused approach to investment is made to insure that technology dollars are being spent on strategic initiatives. Too many times, technology dollars are wasted. Time, effort and resources are spent on what can be done rather than on what should be done.