Young: sticking to Bloomberg principles

Like Apple under Steve Jobs, Bloomberg has a long-held reputation for being a ‘closed’ sort of company, reluctant to compromise its products or its ways of working.

The deal is straight: for a fixed fee, you get the Bloomberg service, providing news, market data and analytics, and other information content that anyone operating in the markets would need. For a long time, this came as a stand-alone terminal – Bloomberg supplied the hardware, and even the Ethernet cable at one time – and that was that. Rival information providers supplied data feeds that could be used with market data distribution systems, had add-on premium services and encouraged an ecosystems of third-party application developers to emerge.

Continuing the Apple analogy, the rivals were more like the free-wheeling Google Android market, with Reuters perhaps in the role of incumbent industry giant Microsoft.

So when, in November this year, Bloomberg announced its App Portal, through which third-party applications could run natively in the Bloomberg environment, market data industry watchers were a little taken aback.

“It is a massive change for the Bloomberg community,” says Stanley Young, chief executive at Bloomberg’s enterprise products and solutions. “It really is the first time that we have allowed third-parties to interact with the Bloomberg API, and not just as a widget on a screen, but as a function of the terminal that integrates with other functions. It acts in every respect as though it is a Bloomberg application.”

Why now – decades after rivals were doing the same thing? “I think we recognise that the world is moving on and that Bloomberg doesn’t have a monopoly on innovation. Although we believe that the Bloomberg community is second to none, we also believe that there is a point in time where the technology allows for people to build very sophisticated applications very quickly and to have that fully integrated with our data is a phenomenal opportunity for us and for our clients.”

There are boundaries, though – there will be no order or execution management systems, for instance. Or anything that competes with existing functionality, or compromises the performance and security of the platform. Or that Bloomberg thinks doesn’t add value or won’t be used by many clients.

Young sees Bloomberg’s relationship to the developer community almost as a consultative role. “These are mathematicians, physicists – even sociologists – and they may have a great idea, but they have no understanding of how to take it to market, which we obviously do,” he says. This means that Bloomberg will work with them in introducing clients to help develop the concepts and improve the application, for instance.

“We have opened the Bloomberg terminal to enable innovation, and innovation takes many forms. There are those who can articulate very well, know what the market wants, create the product and launch it, and there are those who create a dialogue between innovator, end-user and the facilitator of the dialogue – us – to take a concept, refine and develop it further and then launch it. We’re in the middle of that process,” he says.

The addition of third-party applications also takes Bloomberg further away from its purist single-price policy, as there is a premium to be paid for the additional functionality, but Young says the company has already been moving in that direction. “As Bloomberg has developed we have also developed other business models where, for example, there is a transaction fee for executing on Tradebook, our broker dealer, and some of the other trading solutions. The model has diversified away from one fixed fee,” he says. “What we are open to is the idea that people may want more; they may want a slightly different flavour of something. The terminal and its user base – and our ability to distribute to every key desktop in the world – has a value that we now want to monetise with third-party applications.”

In some ways, the arrival of Young earlier this year was another indicator of a cultural shift at the company, where senior management has been in place almost since the beginning. Young was an outsider, having spent the previous three and a half years as chief executive of NYSE Technologies (where, incidentally, he was replaced by Jon Robson, a market data veteran who was head of the enterprise division at Thomson Reuters).

“I think that over 30 years, Bloomberg has been constantly evolving, but it has stuck to certain principles and tenets that were clearly defined early on, but, now that I am on the inside, I find that it is tremendously innovative and constantly thinking about the business model,” he says. “Bloomberg always operates in a sort of box, but within that box there are tremendous thought processes and ideas going on.”

Other factors are also driving this change, not least of which is the fact that Bloomberg has long since shaken off the role of the pretender to Reuters’ crown as the market leader. “As we understand our ability to influence global financial markets, and also as the markets have evolved, our clients are asking us to do more and more. People think of us, quite rightly, as a data and analytics company, but it has always been Bloomberg data, or contributed data. Take the Enterprise Data Management business that we acquired recently, Bloomberg PolarLake. That’s a technology that we bought because it was hugely innovative but it also illustrates how Bloomberg is evolving.”

The acquisition of Dublin-based PolarLake – one of the few examples of Bloomberg ever making an acquisition – will take the company into the EDM market, competing against vendors such as Asset Control and GoldenSource, and that means structural changes.

“It comes under me as a business, but it is a completely separate operating entity,” says Young. “It has to be arms’ length from Bloomberg proper because it will be aggregating competitors’ data with our own data. Bloomberg Data Solutions will be a client of Bloomberg PolarLake, just as Telekurs, S&P, Thomson Reuters and others will be, to enable it to offer a pricing aggregation service to clients. It will give clients a rules engine to apply their own rules – it takes the client’s rules and applies them to the aggregated data.”

Young agrees that wouldn’t have happened in the past when the company was only interested in selling Bloomberg data. “We are turning ourselves into a workflow provider to the industry,” he says: “We have always been a workflow provider in the front office, but we are extending that from the terminal to support other parts of the business, which I think is an example of Bloomberg using its infrastructure and capabilities to offer more to the industry.”

Even so, Young says that this quite radical move still fits in the box defined by the tenets laid down by the company founders 30 years ago. “We bought an enterprise software company and we are turning it into a software as a service company, and we are following the true Bloomberg style – we are not a software company, we are a solutions-based managed services company, and in that way we know we can control the service right to the desktop of the end-user.”

It also means that the service will be much simpler to implement for users compared to the products and services of the existing EDM supplier. So much so, in fact, that they might be well advised to consider the fate of the market-dominating information providers of 20 years ago who underestimated the attraction of Michael Bloomberg’s simple fixed-price, one-size-fits-all model of the dealer terminal to their cost.