Comment: Technology is no longer a fast-track to riches

A high speed fibre-optic and wireless link connecting Chicago with Tokyo on the far side of the Pacific Ocean is due to go live this year. Called Go West, this is no ordinary communications link. It will not carry domestic traffic. It has been created by trading firms on Wall Street to transmit trading data between Chicago, LA and Tokyo.

When it comes to trading shares and futures, fractions of a second can make all the difference. So several trading firms have united to invest in their own data network to give themselves a commercial edge. They have taken this step because the existing high speed data networks are no longer a differentiating factor.

Automated trading by computers connected by high speed data networks and switches revolutionised share-dealing more than a decade ago. Trading networks have continually put the squeeze on data link latency, which is now sub-10 milliseconds. The result was a huge opportunity for dealing firms to make hay. Those that used the technology best made the most money.

Cryptocurrencies

But today everybody and anybody can have access to the technology and trading speed is no longer the exclusive path to profit. So trading firms hope to find a new edge by investing in their own “super” network. You can guess that Go West will be used for trading in cryptocurrencies, such as bitcoin. Cryptocurrencies are another technology innovation used by trading firms to find a differentiator on the money‑making treadmill.

But this has an important message for businesses beyond the City of London’s Square Mile. Technology eventually loses its potency as a commercial differentiator. Technologies such as high speed wireless data communications and the internet of things (IoT) are so inexpensive and easy to deploy that they are becoming universally available. As a result it becomes increasingly difficult for companies to find ways of differentiating their business models using these new technologies alone. This can be seen in business sectors from automotive to retail, power distribution to share-dealing. Firms are flailing around like those blazer-wearing share traders of old, trying to grab a technological edge over their competitors.

The reality is that it is getting increasingly difficult for firms to do this when the technology for creating an IoT network, for example, is so cheap and easy to use that anyone can do it. One option is to find special connections between diverse technologies in different business sectors. This is leading to the current trend in cross-industry alliances and mergers. The hope is this could give firms the secret-sauce and an edge over less progressive competitors.

But the fundamental problem remains. Technology may not be the short-cut to business success it was once thought to be.

Richard Wilson, consultant editor, Electronics Weekly