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All excellent points. And here is the one that really sucks for all of us:
some existing profitable brokerage (Etrade, Ameritrade, etc.) will probably
wind up throwing just enough in stock options at TT "management" to get a
buyout and the Cruz brothers will once again be laughing all the way to the
bank. And then you really can count on the standalone BS2000i getting the
boot.
Kent
----- Original Message -----
From: "Bob Fulks" <bfulks@xxxxxxxxxxxx>
To: "Patrick Gamble" <pgamble@xxxxxxxxx>
Cc: <omega-list@xxxxxxxxxx>
Sent: Monday, March 26, 2001 9:41 AM
Subject: Re: Some general questions
At 9:24 AM +0100 3/26/01, Patrick Gamble wrote:
>The choice is between leveraging their existing base by trying to
>catch hold of the brokerage fees paid by users of Tradestation, or by
>spending dollars on fixing legacy software for which they see no big
>new market.
>
>You seem to think they should choose the second, because that's what
>suits you. Silly boys.
You seem to think that the only option was "fixing legacy software"
and continuing to try and sell it with slick ads on CNBC.
Almost all software companies are trying to convert to "services" and
"subscription based" models so there is nothing wrong with that
objective. But I can think of many ways to do it without entering the
brokerage business.
Think of all the things that TradeStation users would pay a monthly
fee for, such as:
> Good data (real-time, historical, etc.)
> Good support
> Solid software with evolutionary enhancements
> Good training on trading techniques
> Good training on EasyLanguage programming
> Trading systems that really work
> Semiautomatic and automatic order placement with lots
of brokerage services
> Good accounting reports for tax purposes
> ....
Now think of all the disadvantages of the new business model:
> Huge liability for losses if the data is bad or the
software has bugs
> Alienating all brokerage services by competing with them
> Alienating all data providers by not supporting their data
> Overcoming customer's resistance to changing brokers
> Alienating the existing customer base by discontinuing
the product they use to make a living
> Brokerage services are quickly becoming a commodity with
very low commissions. Those you make money do it with very
sophisticated financial management rather than commissions.
> ...
Then look at the technical and managerial challenges of making
it really work:
> With data-on-demand how do bad ticks get fixed?
> How can there be enough server capacity to handle fast
markets and "Greenspan moments" reliably?
> Can Omega really change from the "one-time sale to the
naive newby" mentality to providing the quality products
and services required to keep customers paying the monthly
fees?
> ...
Perhaps it will work. We all hope so. But it sure seems like
a high-risk strategy to me...
Bob Fulks
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