Till date, Bloomberg LP has been the undoubted leader as the messaging service provider among Wall Street financial institutions. However it appears as if the reign is about to see a dent in the dominance with Goldman Sachs (NYSE: GS) entering into this niche. Let’s take a closer look at what is happening.
The Ongoing Market Scenario
Bloomberg's rise began in the 1980s when it became a prime source for data and analytics about bonds. Since then, Bloomberg has been the supreme owner of various applications in data, trading and news with a whopping price tag of $20, 000 a year for banks and financial institutions subscribing to it.
Thomson Reuters, which has been a rival to Bloomberg in news, data and analytics, has a chat system having more than 200,000 users in its directory, compared with Bloomberg's 320,000. However, Bloomberg terminal’s versatility as an entire package remains undisputed despite of it being costly.
In a Reuters report, Jefferies analyst Dan Dolev rightly said- "Bloomberg is a very tough ecosystem to break. "People say it is the most expensive social network system in the world."
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- GS 15-Year Financial Data
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But considering the present sluggish market movements and high regulatory costing; banks and other financial institutions are now trying to manage their operational costs for eliminating daily trivial expenses. And Goldman is trying hard to devise a terminal similar to that of Bloomberg LP, thus, initiating a break in the market monopoly.
Goldman’s Project At Initial Stage
Goldman Sachs has been in the quest to find an alternate solution to Bloomberg's messaging program for a decade. This gave birth to a project named BABEL in early 2013.
The Babel project was spearheaded by Goldman’s Chief Information Officer R. Martin Chavez, who spent much of his professional life building technology for the Wall Street banks. Darren Cohen, the head of Goldman’s principal strategic investments group stepped in lately when it was decided that it would be easier to steer the project BABEL to success by buying stake in a start-up company which already had the technology and expertise rather than getting into in-house R&D.
Perzo’s new technology seemed to be the bright spot for Goldman’s venture.
Perzo Offers Color To Goldman’s Competitive Mood
Perzo Inc., a Palo Alto California-based startup founded by David Gurle, offers applications such as Perzo similar to the Bloomberg LP terminal. Perzo was founded in December 2013, has more than 7,000 active users and is adding an average of 100 new users per day. Perzo’s applications come for free and its free messaging system encrypts every message using a three-layer encryption system bringing collaborative features to the table.
Perzo’s application offers more advantage than the Bloomberg terminal as it is "open-source," meaning customers can plug it into their systems and customize the messages as per their likes. On the contrary, Bloomberg customers have to buy the entire terminal, and can't just buy the messaging system and adapt it.
Wall Street major, Goldman Sachs Group is heard to be close to buying volume stake in the chat and instant messaging start-up Perzo Inc. in its venture for an alternative to Bloomberg LP. On similar lines several banks and asset managers are considering an investment in Perzo, including Morgan Stanley, BlackRock Inc and Maverick Capital Ltd to name a selective few.
Perzo’s Future Still Under Clouds
Though the market giants are quite hush hush about their interest in Perzo and have refrained from any kind of public comment regarding their association or interest in Perzo, it is evident that all the Wall Street bigwigs would not brainstorm on Perzo without the intention of enticing financial gain.
For banks and financial institutions messaging is critical in this tech era. If we are to do a post-mortem of the criticalities involved in the messaging system of large financial institutions it can be divided into a two pronged security critical project.
First, the messaging system should be foolproof as sensitive information is being transmitted through the application. Second, the application should be easy to monitor so that the regulatory bodies can have an eagle eye view of all the financial data being moved ensuring the bank’s compliance to the securities trading regulations.
Truly, there is something in the budding stage being devised by Goldman that could dent the USP of Bloomberg but it could be too early to make such a statement. Time will actually suggest whether Perzo is really turning into the major rival of Bloomberg.
Bloomberg LP is reigning the financial data-matrix world and is like the unparalleled king of this niche domain through the years. The company has also gathered volumes of experience in its arsenal. Now, whether the entry of the Goldman can fire a storm in the financial world is a wait and watch exercise. Time can only foretell if it’s going to be an end to this monopoly in the existing financial domain or if this is just a passing breeze.