Goldman Sachs’ Digital Journey

Case: Goldman Sachs’ Digital Journey

Q1. Was it a good idea for Goldman Sachs to open up its systems to clients and competitors? Why or why not?

Goldman Sachs’ CIO Martin Chavez was the man behind the idea to open up the internal systems to its clients and competitors. The plan was to offer some of Sachs’ trading technology to the competitors as an open source software, meaning it would be free and available to the ecosystem to use. This was an essential step in Chavez’s strategy to transform Goldman Sachs into a “technology company”.

In 2013, Sachs started offering its clients access to the in-house data analytics and risk management online business platform, Marquee, and one of the applications based on Marquee called SIMON. This step allowed competitors to buy securities from Goldman Sachs and other issuers, also this ensured clients could buy securities in denominations as low as $1000.

This was a good idea for Goldman Sachs’ as they more than doubled its sale of equity-linked notes as well as saved a lot of time for themselves. As earlier, clients had to call up the products desk and had to go through reviewing models on the phone which consumed a lot of time.

Also, this idea paved a way for Goldman Sachs’ to be viewed as a fintech company, which is offering their technology platforms to the clients and competitors, like Facebook and Google.

Q2. How is a platform business different from a product business? Can Goldman Sachs' become a platform business?

The key difference between platform and product is that a platform is an ecosystem which includes a core asset, whereas a product is an offering that works on the ecosystem and helps in monetizing the core asset. Platform business is both consumer and developer oriented whereas, the product business is only consumer oriented. Platform business develops revenue on the basis of transactions done whereas in product business, the consumers bear the entire cost.

Yes, Goldman Sachs’ can be a Platform Business as the clients and competitors recognize the potential of the in-house technology on which Sachs’ operates on. If the clients and competitors are offered the same technology as open source they will be more than willing to operate on them, hence adding more diversity to the revenue stream of Sachs. This can be seen in the case of in-house data analytics tool Marquee, how client and competitors were willing to use the platform and applications such as SIMON, which were built on the MARQUEE platform.