Microsoft has signed a deal with the London Stock Exchange Group (LSEG) that will see it take a 4% stake in the British company for an undisclosed sum in return for the LSEG committing to spend $2.8bn on cloud products over the life of the ten-year partnership. The deal will see all the London Stock Exchange’s data moved to Microsoft’s Azure cloud platform, and closer integration with Microsoft 365.
The partnership will include data infrastructure improvements, next-generation productivity, data and analytics modelling built within Microsoft Azure, as well as AI initiatives, according to Microsoft, describing it as a “step-change in services for customers across the financial markets value chain”.
LSEG owns and operates the London Stock Exchange, on which it is also listed, and has technology and share indexing subsidiaries. Its revenue for the first half of 2022 was £3.73bn.
Which LSEG services will be hosted in the cloud by Microsoft?
Refinitiv Workspace, a desktop platform owned by LSEG and specifically designed for financial services experts, will be integrated with Microsoft Teams as part of the deal that will also see “compliance built in for the first time” and full integration with Microsoft 365 software.
The entire data platform owned by LSEG, including the parts it purchased when it acquired data and analytics giant Refinitiv for $27bn in January 2021, will be moved to Azure.
Workspace and Teams will include a wider variety of in-app experiences than are currently available, including more detailed trend analysis and risk-building scenarios – while also meeting the security, privacy and compliance requirements of the financial sector.
It will also be fully integrated with Excel, allowing clients to create financial models and run data analytics within the Workspace platform but with Excel-derived tools, which Microsoft says will allow people to “work seamlessly between LSEG Workspace and Microsoft 365”.
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“The initial focus will be on delivering interoperability between LSEG Workspace and Microsoft Teams, Excel and PowerPoint with other Microsoft applications and a new version of LSEG’s Workspace, accessed entirely within the Microsoft 365 suite, to be added in the future,” the company explained.
Microsoft and LSEG will also develop new analytics and modelling capabilities using Azure Machine Learning that will be available to help financial institutions make more sophisticated cross-asset and sustainable investments than is possible with traditional data analytics tools. "Businesses that rely on analytics will be able to scale without the need for complicated processes and systems that often require extra servers, hardware, and employee resources."
Refinitiv deal key to Microsoft London Stock Exchange agreement
Refinitiv is a major factor in the new agreement. It was previously owned by a consortium of Blackstone and Thomson Reuters, and the 4% of shares in LSEG being purchased by Microsoft are coming from this group. The share deal is expected to be complete by the end of the first quarter of 2023 and the partnership agreement for digital transformation will last a decade.
“Organisations across the capital markets value chain are facing an increasingly complex operating environment with macroeconomic headwinds, stricter regulatory controls and traditional revenue sources becoming more challenging. These conditions are putting greater pressure on firms to reinvent business models and do more with less,” said Microsoft’s Judson Althoff, executive vice president and chief commercial officer, in a blog post on the deal.
“However, their legacy platforms, siloed information, limits on scale and data overload hinder their ability to deliver the best client experience, insights and tools. This requires a digital transformation approach underpinned by modern cloud and AI technology.
“LSEG has already started to address these issues for their customers, and through this strategic partnership, we will accelerate that transformation.”
Althoff says capital markets rely and run on data, so by improving the quality of and access to data from LSEG new products can be developed to serve those clients and drive wider transformation.
“This strategic partnership is a significant milestone on LSEG’s journey towards becoming the leading global financial markets infrastructure and data business and will transform the experience for our customers,” said David Schwimmer, CEO of London Stock Exchange Group.
The money spent on digital transformation is set to be at least $2.8bn over ten years with $306m spent between 2023 and 2025. Further spending will depend on the success of the early efforts and demand for professional services. Microsoft says the partnership could generate about $5bn in additional revenue over the decade due in part to further market opportunities from new products.
