A tale of two titans: Microsoft vs. Bloomberg

Since Bloomberg and its ubiquitous Terminal took hold of Wall Street more than three decades ago, companies of all sizes have tried to disrupt the data giant’s business—with limited success. From Thomson Reuters and Eikon, to Money.Net, to Symphony, the idea of a so-called “Bloomberg Killer” has become oxymoronic, as buy-side firms have not been willing to part with their precious Terminals, despite the lofty $20,000-plus price tag.

But—and there is always a “but”—there is another heavyweight competitor that could have the artillery to pry Wall Street from Bloomberg’s grip. Maybe it’s the caffeine talking, or maybe I’m reading too heavily into some of the conversations I’ve had over the last few months, but if any company has a hope in hell of taking on Bloomberg, it would have to be Big Tech. Or might an acquisition be in the cards?

Bloomberg Terminal’s data and analytics tools have been a fundamental part of buy-side and sell-side trading desks for decades because of the community that has been built—especially through Bloomberg Chat—that connects asset managers to one another, and to broker-dealers. That’s not easily replicated, though many have tried. Just ask Symphony, which has struggled to lure asset managers onto its platform since its inception and is now pushing to diversify its product suite to carve out a market beyond the collaborative tool space.

A senior executive at a data analytics firm nicely summed up Bloomberg’s network in two words: “the church”—the place where the industry congregates.

This is where Microsoft comes in.

A former Microsoft employee recently told me, “There’s a very bizarre sort of love–hate relationship between Microsoft and Bloomberg.” Naturally, my ears perked up.

The last year and a half have been pivotal for Microsoft in building out its network of users. Since the Covid-19 pandemic began, users across financial services have flocked to messaging and videoconferencing apps like Microsoft Teams to connect with colleagues and peers. According to Statista, Teams, which launched in 2017, has almost doubled its worldwide users in the last year, growing from 75 million in April 2020 to 145 million in April 2021. The Bloomberg Terminal serves roughly 325,000 users.

Although Microsoft does not offer the swath of trading services and data that Bloomberg does, the buy side is devoted to Microsoft Excel spreadsheets and if more buy-side firms are increasingly comfortable with Teams’ communication and collaboration services, this growing user base could become a game-changer, because unlike previous Bloomberg Killers, Microsoft actually has the capital to innovate quickly and to make massive purchases.

If the cattle are already drinking from the well, half the herder’s battle is already won.

Gauging the appetite

My view that Microsoft could be a legitimate Bloomberg challenger is shared by others.

The former Microsoft employee says Microsoft was first seen as a credible rival to Bloomberg at the beginning of 2019 when it started to extensively build out Teams. The move, the former employee says, caused some cracks to form in the relationship between the two firms. Another source with close ties to Bloomberg also agrees that Microsoft is classed a competitor.

“When Bloomberg’s bread and butter is messaging, and if Microsoft is making messaging, you better believe you’re not going have the happiest of conversations,” the former Microsoft employee says.

In May, I interviewed Craig Wellman, director of financial services at Microsoft UK. I asked him if the tech giant had any interest in developing a communications and workflow platform catered to financial services, one that would resemble a Bloomberg or Symphony model. At the time, he said that a devoted Microsoft offering doesn’t exist today, but that Teams could be scaled to meet those needs.

“Our customers love the way Teams augments collaboration, workflow, apps, and productivity into one home and are increasingly curious as to how this concept can develop to also accommodate or replace the many operational applications that run in any business into one place, creating simplicity and greater efficiency,” Wellman said. “We continue to listen to and work with customers to better understand individual requirements and build on these using our capabilities and platforms such as Teams and the Cloud for Financial Services.”

The former Microsoft employee says that in early 2019, several tier-2 investment banks approached Microsoft with the idea of building a competing platform to Bloomberg. Microsoft was hesitant for a number of reasons, the former employee says.

“The thing is that you could not use Teams by itself on Wall Street; you need to have a lot of overlays and things built on top of that. And so you had certain investment banks and other fintech companies say, ‘What if we could build [out] Teams to compete with Bloomberg?’” the former employee says.

Wall Street can’t simply wake up one day and start using Teams instead of Bloomberg. The product offerings as they stand today are vastly different. Teams offers communications and workflow tools whereas the Bloomberg Terminal is a hub for data and analytics, buying and selling, news, communications, and a multitude of asset-class-specific services. Teams would need to join forces with other Wall Street heavy hitters—whether it’s a consortium of institutions or teaming up with say, London Stock Exchange Group’s Refinitiv—to build out a platform worthy of being a tempting alternative, and, while they’re at it, slap a cheaper price tag on the service to sweeten the deal.

There are some signs that Microsoft is moving in this direction. In February, the Big Tech firm announced its integration with data provider FactSet to allow Teams users to access and share FactSet financial data within the communications platform.

The uphill battle

I would be remiss if I didn’t mention the challenges of getting a project like this over the line, even for a company like Microsoft.

As mentioned earlier, Microsoft had its reasons in 2019 not to directly take on Bloomberg. There’s the obvious one: having to compete with one of the biggest information businesses on Wall Street. Then there’s the time and effort of adapting to a heavily regulated industry, and last but not least, there’s the challenge of successfully operating a messaging app that supports federated communications.

However, Microsoft has made progress in developing federated communications abilities over the last year.

In March, the tech giant wrote in a blog that it was providing users of Teams or Skype for Business with the capability to connect their tenants with external users outside of their organizations. In other words, the tech giant has begun to roll out capabilities to support federated workflows, such as calls, chats, and meetings, between different organizations. Previously, it only supported messaging and collaborative work between team members within any one company.

But building the tech is one thing; governing it is where things get interesting.

For instance, Bloomberg has strict rules against members on its chat platform using inappropriate language or sending abusive messages to other parties on the network. Breaching these restrictions can result in a user getting kicked off.

Slack, another rival messaging platform acquired by Salesforce in December, encountered its own issues with policing abusive activity on its app. On March 24, the firm rolled out a new feature called Slack Connect Direct Messages (DMs) but on the evening of the launch, Slack had to scale back some of its DM capabilities as some users pointed out they were allowed to write abusive messages when inviting other users to the network.

“You have to make a decision about what is allowed, and I think if you make it just freeform, and you say anyone can write anything to anyone, you’re going to have corporations that don’t want to use this platform because it’s ripe for abuse,” the former employee says.

Microsoft’s Wellman confirmed that although Microsoft’s suite of solutions does not include capabilities that could alert to or monitor abusive activity, that functionality could be developed.

Microsoft can do tech—its history and record speak for itself. But in order to make that tech suitable for financial services, it needs to be up for the challenge of setting strong governance frameworks and meeting the bespoke needs of the heavily regulated industry—something it has never really done before, until recently. In February, the company announced it was offering more targeted services to the industry through its cloud business—a clear shift in its usual one-tech-fits-all approach. 

It is notable that Microsoft pitches itself as a firm that won’t compete with a bank or financial institution. This is core to its branding strategy, and how it differentiates itself from Amazon and Google. Sources have told me the phrase, “You can trust us. We won’t compete with you,” appears on one of the first slides of Microsoft’s presentations to clients.

But—again, there is always a “but”—if you ask me, that doesn’t rule out Microsoft competing with major tech firms in financial services. 

I wouldn’t bet against it, anyway.