استفاده دفاعی IT در یک بازار تازه ی آسیب پذیر : بورس اوراق بهادار نیویورک، 1980-2007

New technologies enable entrants to create business models that threaten incumbents in a range of industries. This paper extends the framework of newly vulnerable markets to explore the dynamics of competition between entrants and an incumbent through a study of the New York Stock Exchange. For over 200 years, the NYSE has operated a physical market for trading securities. Beginning in the 1960s, it employed information technology to process increasing trading volumes and to disseminate data on stock prices and volumes. The Exchange invested heavily in IT for its trading floor, and defended it against electronic markets enabled by new technologies. In 2005 various pressures forced the NYSE into a merger with Archipelago, a leading electronic exchange. The NYSE’s latest market system, Hybrid, launched in 2006, is the first at the NYSE that enables investors to bypass the trading floor completely. Despite the new technology, its share of trading volumes fell. This paper documents four eras of IT management at the exchange, presenting a detailed 27-year history. The evidence shows that while IT investments helped the Exchange defend floor trading and its market share for a number of years, it finally had to adopt the technology of all-electronic exchanges.

The development of a new, technologically-enabled business model can make an existing market newly vulnerable to competition. Clemons et al. (1996) present a framework for analyzing these newly vulnerable markets that arise under the following conditions: • Contestable – a market in which new entrants can offer similar or superior services to the dominant, incumbent firm in the marketplace using innovative, new technology, especially information and communications technologies. • The incumbent’s profitable customers subsidize unprofitable ones – an opportunity exists for a new entrant to take advantage of average cost pricing, and target profitable customers in a market, leaving the incumbent with less profitable customers or those who require more complex products and services. • Fixed investment and barriers to exit – earlier capacity investments, and exit barriers for incumbent firms can make it difficult or impossible for them to withdraw from unprofitable or more costly-to-serve market segments. Past studies have used the framework of newly vulnerable markets to examine the impact of information and communications technologies on online music and online news (Clemons et al., 2003), on electronic travel distribution (Granados et al., 2008) and on credit card issuance (Clemons and Thatcher, 2008).1 In past research, new entrants were able to capture market share relatively quickly as incumbents failed to respond fast enough or appropriately to the new threat (Tushman and Anderson, 1986, Henderson and Clark, 1990 and Chandy and Tellis, 2000). The purpose of this paper is to extend the newly vulnerable markets framework with two propositions that address the dynamics of competition: 1. The speed with which the incumbent loses market share is inversely related to the extent that it applies information and communications technologies to defend its market position. In other words, the more IT is used in supporting an incumbent’s newly vulnerable market position, the slower the entrants’ inroads. 2. There may be a delay, but at some point the entrants’ new business model and innovative use of technology will force the incumbent to radically modify its model, or to adopt the entrants’ model in order to survive. In this paper we examine how the New York Stock Exchange utilized information technology to defend its newly vulnerable business model of a physical floor for trading stock and an intermediated, “specialist” system against new entrants providing fully-electronic markets. The NYSE was able to defend this model for a number of years until a precipitous drop in market share and a change in management forced it to totally revise its business model. The case supports an extended, dynamic theory of newly vulnerable markets in which IT investments by the incumbent can slow the inroads new entrants make.

How should incumbent firms react when their markets become threatened by entrants with IT-intensive business mod- els? The extant theory, the newly vulnerable markets framework, establishes three conditions that enable entrants to make rapid inroads against incumbents – contestability, cross-subsidies, and high fixed investments. The theory predicts that established players will be unable to sustain their market position under these conditions when entrants apply innovative IT and new business models. We have added two propositions concerning how swiftly the entrant overtakes the established player. The practical implications are that incumbents can defend a business model for a sustained period of time, as the NYSE did. Furthermore, incumbents can affect the timing of the radical changeover through their use of IT in supporting the established business model. As an incumbent, the NYSE successfully used IT for many years, quite possibly for too long, to defend its floor market. The Exchange invested about $2 billion after 1990 to provide systems that helped to sustain trading on a physical floor with the specialist system. The analysis shows that the NYSE’s investments in information technology provided it with the ability to maintain its physical trading market with adequate reliable capacity, and keep its share of trading volume at over 80% for over twenty years despite aggressive competitors. The Exchange benefited from this investment through the added capacity it created to process trades, and through sys- tems that supported the individual trader roles at the heart of its physical market. Around 2005, however, it was clear that a transformation in trading had occurred, and the NYSE needed to develop a new strategy to survive as a trading venue. While difficult to prove, it appears the NYSE’s competitive position in trading would be better if it had responded and invested more aggressively in transformational IT prior to 2005. The NYSE case demonstrates the dual role of information technology in newly vulnerable markets. In one role the tech- nology enables new entrants to attack the legacy business models of dominant players. IT’s other role is to provide the capa- bilities for incumbents to defend their business models if they choose to do so. An incumbent might opt for this path because it believes that the new entrant’s model will fail, or because the incumbent feels its model is superior. Eventually one tech- nology and one model will emerge to become dominant. The challenge for managers is to know when to use IT and other resources to defend their business model, and when to recognize it is time to change that model in response to a major tech- nological transformation in their industry. For the strategic manager, IT can be applied to sustain an established – but newly vulnerable market – even while entrants apply IT to overtake the incumbent firm