David Solomon, Chief Executive Officer of Goldman Sachs & Co., listens during the Milken Institute Global Conference in Beverly Hills, California, the United States, on Monday, April 29, 2019.
Kyle Grillot | Bloomberg | Getty Images
Goldman Sachs enters the cloud computing business.
The bank gives hedge funds and asset managers access to its pool of market data and software tools in an offer that was developed with Amazon’s cloud division, CNBC has learned exclusively.
The move, the result of a two-year partnership with AWS, puts 152-year-old Goldman in the unusual position of being a cloud service provider for Wall Street, according to executives at the two companies. It’s part of Goldman CEO David Solomon’s drive to leverage technology to better serve customers for the company’s Marketing division, a trading juggernaut that has helped drive the company’s results this year.
“Customers of the company will have access to our decades of experience and data aggregation that should enable them to improve their business decisions from both a speed and an efficiency perspective,” Solomon told CNBC last week in a telephone interview. “We believe this strengthens our position as a leader in the market.”
The new service, called GS Financial Cloud for Data with Amazon Web Services, will help wealth managers save time by allowing their developers to focus on trading instead of spending time digging through records and focusing on one Leaving patchwork of legacy software to analyze. said the companies. It will also “lower the barriers to entry” so companies can use advanced quantitative trading techniques, Goldman said.
Goldman’s co-chief information officer, Marco Argenti, said the industry is struggling to keep up with the increasing demands of the latest investment techniques. Over the past decade, quantitative trading firms that have absorbed assets have grown while traditional hedge fund managers like John Paulson and Leon Cooperman have closed to outside investors.
For example, a hedge fund customer who wanted to record the correlation between a stock and the exchange rate could take months to compile, cleanse, and calculate the data, Argenti said. Instead, analysis can be done in minutes by developing applications on data feeds and analysis tools that Goldman uses itself, he said.
“If there had been something like that, we would have used it, but we had to build it ourselves because there really is nothing else like it on the market,” said Argenti. “All you have to do is put the interface together and integrate it into your application, and then everything else is done for you.”
“Work backwards”
The product, unveiled at the AWS re: Invent conference in Las Vegas on Tuesday, is the latest sign of the unusually close ties between the tech giant and the leading Wall Street company.
That relationship began more than a decade ago when Goldman began porting parts of its computing workload to the cloud, according to Adam Selipsky, who returned to Amazon earlier this year as head of AWS.
It’s been a fruitful relationship: Goldman relied on AWS to quickly build its Marcus consumer finance business in 2016 and its Apple Card operation three years later. Goldman, meanwhile, is lending to Amazon retailers and advising Amazon on its acquisition of Whole Foods in 2017.
In the conversations between the two companies, Goldman was interested in understanding how Amazon was transforming computing services it originally built for itself into AWS, Selipsky said. (Goldman developers referred to the effort as Project Alexandria, according to the companies.) One technique Amazon taught Goldman was a concept called “work backwards,” where the tech giant writes a press release and FAQ before starting a project, to convince managers of its importance, he said.
“We have many customers asking us to help them with what Amazon did with AWS,” Selipsky said in a telephone interview. “When we started talking about Goldman’s data and analytics capabilities in the financial services space, the collaboration ideas came up pretty quickly.”
Amazon pioneered the cloud computing category, which enables companies to rent computing power and a range of services instead of running their own server fields. This has enabled companies to accelerate software cycles and help them keep pace with changing consumer demands. AWS now accounts for the lion’s share of Amazon’s operating profit.
“Explosively beneficial”
Over the past several years, Amazon has worked with industry leaders to build industry-specific cloud services in areas such as manufacturing, health, and life sciences. For example, Amazon is working with Volkswagen to develop an industrial cloud platform to move 124 factories to a single software platform.
“If you take a step back, Goldman is not just a bank or a financial services company, it’s now a software company,” Selipsky said. “We’ve been a software company for a few years and we’ve figured out how to showcase the powerful capabilities of Amazon in a way that is explosively beneficial to customers.”
Executives declined to provide details on how Goldman and AWS would share the revenue from the joint venture, but Solomon told CNBC that he saw this as a way to further anchor the company with retail customers. Goldman plans to monetize the service through the trading and funding opportunities that will result from it, he said.
“This improves the experience of our institutional clients and gives them access to our data and information,” said Solomon. “We get paid for this because we get more out of their wallets, because the overall experience and services we offer give us more exchanges and more opportunities to trade with them, fund them, and do things like that.”