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Bloomberg Moves to Tighten Its Grip
Bloomberg looks to lock in its customers further through third-party partnerships in areas ranging from STP to CRM. by Victor Hendrickson
Bloomberg has also struck deals with Siebel Systems and Oracle for customer relationship management (CRM) and most recently with Algorithmics for risk management. Its part of our overall initiative to offer an all-in-one solution, says Doolin. With multiple data sources integrated into the Bloomberg platform, Doolin says a key draw for customers is the minimization of transferring data between systems. One industry observer comments that perhaps Bloomberg is finally evolving into a pure Open Bloomberg, the name of a company initiative announced in 1998. One of the original Open Bloomberg goals was to provide the ability to link thirdparty data to the Bloomberg, but it did not aim to offer a partners applications or analytics. Behind the Open Bloomberg name, the company also transformed itself into a software provider, a change from its traditional and costly proprietary workstation installations. This allowed Bloomberg to save costs on infrastructure and to exit the hardware business. The Bloomberg terminal is now simply a connection to a desktop. But because Bloomberg has relatively little experience with external systems, Doolin notes that one hindrance has been the difficulty of implementing outside hardware with the internal Bloomberg systems that deliver solutions across the Bloomberg connection. She adds that clients have thus far been very receptive to the initial phases of the pre-integrated solutions. The new services will be available to customers of the Bloomberg Professional trade order management system and at no additional charge to the monthly flat fee of $1,285 per station (for multiple desktop installations). Bloomberg will pay the vendors on an application service provider (ASP) basis. While Doolin says that customers have been asking for Bloomberg to provide more tools over its terminals, one industry analyst, who asked not to be named, believes the company is looking to make firms even more reliant on the Bloomberg than they already are, as well as increase market share. It is estimated that terminal revenues accounted for 93 percent of Bloombergs total revenue in 2001. The analyst also questions whether Bloomberg will be able
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With Mike Bloomberg in office, Bloomberg L.P. is not simply sitting back and living off the vision of its founder, as many had expected. The company is actually breaking from tradition by adopting a strategy of partnering with third-party solution providers. The initiative appears to be an attempt to keep users on the Bloombergand off other systems. Through its partnerships, Bloomberg is now beginning to offer pre-integrated applications over the Bloomberg terminal in a sort of one-stop-shopping approach, says Gail Doolin, who is on Bloombergs buy-side business development team. Last year, Bloomberg announced its relationship with vendors Eagle Investment Systems and Tradinglinx to provide buyside straight through processing capabilities, but Bloombergs third-party integration strategy is not limited to STP.
2002 Risk Waters Group. All rights reserved. Reprinted by permission
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ILLUSTRATION BY TONY LATHAM/STONE/GETTY IMAGES
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Bloomberg Moves to Tighten Its Grip
to continue offering the added services without raising its monthly fee or charging additional fees for their use. In any event, the new offerings should help Bloomberg survive in the increasingly competitive OMS marketplace. Ron Dembo, founder and CEO of Toronto-based Algorithmics, believes everyone benefits from these alliances. He says financial firms can overcome cost and internal infrastructure obstacles by leveraging Bloombergs alliances with the outside vendors. Youre minimizing the infrastructure that traders need in order to use applications, he says. This is especially the case when you have people in remote locations. In addition to its order management system, Bloomberg also provides a fully integrated back-office processing system as part of its package. Such a service could cost millions of dollars traders, Doolin says. Its not confined to the risk managers desktop or in the back office. Bloomberg currently offers parametric value-at-risk and scenario analysis. The new tools will include more market risk functions, collateral, credit risk and asset-liability management tools. Algorithmics, on the other hand, gains access to markets where it has had low penetrationsell-side institutions and second-tier investment management firms. The risk applications will be delivered using a customized graphical user interface (GUI), similar to Algorithmics Riskwatch product, developed specifically for Bloomberg users. Regarding the other alliances, Bloomberg will support the Siebel 7 product to provide customers with broker desktop CRM solutions. Bloomberg plans to integrate its market data and analytics applications, along with its OMS and port-
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Youre minimizing the that need in order to use applications,
says Ron Dembo, Algorithmics.
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to develop, depending on the size of the firm. To get an idea of whats in it for the third-party vendors involved, Bloomberg has 700 trade order management system users, 60 percent of whom are sell side and 40 percent of whom are on the buy side. And the OMS is currently the fastest selling product for Bloomberg. Algorithmics head of global sales for the alliance, Jason Nabi, has said that by the end of 2003, he expects around 50 percent of Bloombergs current OMS users, plus 200 new clients, to use Algorithmics services on Bloomberg. Nabi says 100 new and existing Bloomberg clients are currently in the pipeline to implement the services. Dembo adds that his goal is to bring in one-third of his firms total revenue via such ASP partnerships, and he aims to position Algorithmics as the central repository for all risk data delivered by Bloomberg. Bloombergs current risk management offerings are not much more than basic analytics, and customers are demanding more tools. This brings risk to the front end, to the
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folio management system, with Siebel 7. The Siebel 7 solutions present customer information, analytics, market and transactional data in real time on an enterprise-wide scale. (Lou Eccleston, former head of product strategy at Bloomberg, who worked on the Siebel deal, has since resigned to head up Siebels financial services unit.) As for the Eagle relationship, Bloomberg will use the vendor to deliver an STP solution. Bloomberg OMS clients will have access to the Eagle Pace and Eagle Star applications directly from their Bloomberg desktops. Eagle Pace is an investment data hub, warehouse and portfolio management system designed to integrate analytic and markets data with portfolio accounting and trade data across all asset types for buy-side investment managers. Eagle Star is a global portfolio accounting system. The deal with Tradinglinx, an ASP for electronic securities trade management, will allow Bloomberg clients to send allocations, delivery instructions, confirmations and affirmations of domestic and global equity and fixed-income transactions electronically to counterparties and settlement utilities.
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