Microsoft Corp. today announced that it has inked a cloud computing deal worth at least £2.3 billion, or about $2.8 billion, with London Stock Exchange Group plc.

Microsoft Corp. will acquire a 4% stake in LSEG as part of the transaction. Scott Guthrie, executive vice president of the technology giant’s cloud and AI group, will join the LSEG board as a non-executive director.

“Our partnership will bring together the industry leadership of the London Stock Exchange Group with the trust and breadth of the Microsoft Cloud — spanning Azure, AI, and Teams — to build next-generation services that will empower our customers to generate business insights, automate complex and time-consuming processes, and ultimately, do more with less,” said Microsoft Chief Executive Officer Satya Nadella. 

Under the terms of the agreement, LSEG will spend at least $2.8 billion on cloud services from Microsoft over the next 10 years. The stock exchange operator expects to spend most of that sum after the first five years. According to LSEG, the initial $2.8 billion budget may increase over time as its usage of Microsoft services grows. 

The first focus of the partnership is the exchange operator’s financial data business. The business is based in large part on assets that LSEG obtained through its $27 billion acquisition of Refinitiv, which closed last year. Refinitiv provides financial data such as stock price updates that financial institutions use to inform investment decisions. 

LSEG plans to migrate its data platform to Microsoft’s Azure cloud platform along with multiple other internal workloads. The goal, according to the companies, is to organize LSEG’s datasets in a “cloud-based data architecture.” The exchange operator will adopt Microsoft’s Azure Purview and Azure Synapse services to support the effort. 

Azure Purview is a data governance service that companies use to manage business information. The service can automatically organize files such as financial datasets by category, as well as make them accessible to users via a centralized interface. Azure Synapse, the other service that LSEG plans to use as part of the project, is a cloud-based analytics platform.

LSEG’s Refinitiv subsidiary offers an application called Workspace for financial professionals. The application enables users to access Refinitiv financial datasets, as well as run analyses on those datasets to find investment opportunities. 

LSEG plans to integrate Workspace with Microsoft 365, the productivity suite previously known as Office 365. Workspace will be integrated with Microsoft Teams to let financial professionals from different companies collaborate with another. A planned connector for Excel, in turn, will make it possible to access Refinitiv financial data from the spreadsheet application’s interface. 

Banks and investment firms develop financial models to automate tasks such as stock price forecasting. Through the partnership with Microsoft, LSEG hopes to ease financial model development for customers. LSEG engineers will create prepackaged software components to spare customers the hassle of building everything from scratch. 

Microsoft’s engineers will help LSEG with some of its software development projects through a planned co-development initiative. Additionally, the companies will explore opportunities to develop financial infrastructure that can streamline how “market participants interact with capital markets across a broad range of asset classes.”

LSEG expects to incur £250 million to £300 million in costs through 2025 as part of the initial phase of its collaboration with Microsoft. In the longer term, LSEG expects that the partnership will “meaningfully” grow its revenue by supporting the launch of new products.

Some observers have reservations about the deal, especially since LSEG is already a Microsoft cloud customer and it may not be an exclusive. Martin Peers at The Information noted that “Microsoft and Google’s willingness to make equity investments to win cloud deals seems a poor-quality way to drive revenue.”

The announcement of the partnership comes about about a year after exchange operator CME Group Inc. inked a similar cloud deal with Microsoft rival Google LLC. The 10-year deal will see CME Group move its technology infrastructure to Google Cloud. The search giant, meanwhile, agreed to acquire a $1 billion stake in the exchange operator.

Image: Microsoft