THIS TENTH ANNUAL JMIS SPECIAL SECTION ON STRATEGIC AND COMPETITIVE information technology reflects a growing understanding of the relationship among advances in information systems and critical issues in distribution, disintermediation, and electronic commerce. The three papers selected represent a wide range of research methods, including intensive case study in a single organization, computer simulation, and closed-form analysis. They address very different questions, including successful leadership of a company threatened by disintermediation, simulation analysis of the performance of alternative trading systems, and financial analysis of the optimal use of portfolio balancing systems. All, however, compare the performance of attackers and defenders in industries faced with profound transformation due to the introduction of electronic alternatives to established markets.
The first paper, Rosenbluth International: Strategic Transformation of a Successful Enterprise, by Eric K. Clemons and Il-Horn Hann, is a case study of a successful travel agency under assault from airlines and electronic Web-based ticketing services. The company first had to understand and accept the seriousness of the threat; it had to acknowledge that it no longer represented the airlines' lowest-cost distribution system, and thus that airlines would do everything they could either to slash its commissions or to disintermediate it entirely. The firm next had to accept that its corporate customers the source of the bulk of their profits would not remain loyal unless Rosenbluth remained the best available alternative and the highest source of value. Rosenbluth, as the most successful of the traditional corporate agencies, might experience the greatest reluctance to reject its past and might experience the greatest difficulty in achieving a strategic transformation. In brief, the firm would have to accept that their fees were too high, the value they added was too low, and their suppliers and customers were prepared to abandon them. This case study examines how a successful transformation was indeed achieved.
The second paper, Next-Generation Trading in Futures Markets: A Comparison of Open Outcry and Order Matching Systems, by Bruce W. Weber, compares the performance of traditional futures trading systems (open outcry markets in circular tiered pits) with alternative systems based on electronic order matching. Simulation modeling and analysis, as used in the paper, enable objective comparisons between trading mechanisms. Ultimately, through enhancements, and the design and tuning of screen-based market alternatives make them significant threats to established markets.
The third paper, Information Systems for Optimal Transaction Implementation, by John T. Rickard and Nicolo G. Torre, shows how an alternative electronic equities market, by allowing fully accounted trading costs to approach zero, allows optimal portfolio trading strategies to be implemented for the first time. Since trading costs can by definition never approach zero in labor-intensive floor-based markets, with intermediaries risking capital in order to earn returns, such alternative trading systems once again represent a threat to traditional established markets. Unlike in the paper by Weber, however, here the threat comes less from the design of the market and more from the alternative trading strategy that the model allows to be fully implemented for the first time.
All three papers are substantial modifications and extensions of work originally presented at the Thirty-Second Annual Hawaii International Conference on System Sciences in January of 1999. All of them have been informed by discussion during HICSS sessions.
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