Alphabet, the parent company of Google, has made an equity investment of $1 bln in the CME Group, which is a Chicago-based futures exchange operator. A separate deal has simultaneously been struck between the two companies to move the trading systems to Google Cloud.
A 10-year partnership deal is to start next year with the shift of CME trading infrastructure to Google Cloud. It is being seen as a big win for the cloud business of Alphabet while it is facing stiff competition from the same of Microsoft and Amazon.
Apart from enhancing the cloud business, Google will benefit from stepping into the financial services segment. More investments are on the card in its cloud computing services.
The $1 billion investment is non-voting convertible preferred stock for the CME, which will benefit from easy access to its services from more participants. Moreover, the streamlined IT infrastructure and optimized costs would be added advantage.
Amazon similarly undertook a program with the Aquis Exchange of London and Singapore Exchange in 2021 and showed the shift of share trading to the clouds equipped with reduced costs and potential outages.
Cloud computing companies are experimenting with various ways to increase the potentiality of their services and enhance growth in the segment. Simultaneously, they are focusing mainly on cost reduction. It is believed more financial companies would come up with similar deals.
Alphabets main revenues are generated from its online advertising and the cloud business adds just a small percentage to the total. The company is looking for ways to increase the revenue from the segment believing a huge demand for the service could be on the card in the near future.
Microsoft and Amazon too are working separately to attract more customers to their cloud platforms. Competition among the three giants is neck-to-neck. It is too early to judge who will emerge as the market leader.