Reflections

2023 is the year I (and many others) fell out of love with Hyper Growth.

In the technology industry, the last few years of hiring sprees and layoff cycles (sometimes in the same year), with catchy phrases the likes of “you got to spend it to make it” and “fake it till you make it” has caused much fatigue especially amongst the B2B sector. It’s been proven time and time again the race to zero, just to gain market share means everyone loses.

In 2024, I expect the companies that have a more balanced approach will not only be profitable but innovate more too. Through more balanced growth, companies can retain staff, avoid burnout or damaging morale through layoffs, and focus on the long game of running a profitable business, while being able to spend on research and development.

Why is there such little innovation in front office technology?

The buzz around artificial intelligence has dominated most of 2023. But when thinking of practical use cases and implementations of the technology as it stands, it is coming up short. Given most front office technology stacks are now pretty dated, or written in older programming languages the benefits remain to be seen. In 2024, I will be exploring more practical use cases for AI, and hope that we can start to see some real-life cases of it’s application in our sector.

Fixed Income technology was the other dominating talk track of 2023 – but monetization remains a key issue for vendors and the pressure is on. Not necessarily to show value in the technology itself, but definitely to recoup investment, which has been significant. Meanwhile, the so-called incumbents such as TradeWeb and MarketAxess continue to innovate themselves, with much deeper pockets. I expect the stalemate to continue into 2024, with consolidation amongst vendors (Axe trading being bought by TT), or some completely exiting the business.

Getting smart about Tech Spend

The buy-side and the sell-side squeezed hard in 2023 – this meant vendors reducing revenue from the sell-side but not picking up the lost revenue from the buy-side. I have always thought we would move to a model where technology is predominantly paid for by the party utilizing it, as you would expect with any software, but we don’t seem to be headed in what my mind was an inevitable outcome. Part of the reason might be because the technology itself needs to be repriced. Vendor woes were compounded by Buy-side firms reducing their broker list, and creating proprietary technology to control parts of their workflow.

Yet, the numbers you see being spent on technology at large buy-side firms are not insignificant. I hope in 2024, some bold moves from the buy-side on getting smart about their tech spend will be necessary and required so the squeeze doesn’t continue, and provides some relief.

Fragmentation of locations to continue….

Middle East got really hot this year. With Florida, and Lisbon being some of the other winners. What we’ve learnt is, in the war for talent in the Hedge Fund space, location flexibility is one of the many perks to be offered. So, the vendors follow, with a need to opening offices in the same places where clients or prospective clients are based.

This also brings to light the complex infrastructure needs for funds and for vendors. In 2024, being in the “cloud” is no longer a nice to have (why are we still talking about this?), but rather a need to have to be able to serve a fragmented client base, that cares about speed and time to market.

Have a good holiday everybody. See you in 2024.