Wall Street giant Goldman Sachs Group Inc. is now a software
company, too.
The New York investment bank said it is spinning out a
collection of mobile-phone software it developed in-house into a
new venture. That entity will be managed and majority-owned by
Synchronoss Technologies Inc., a publicly traded software firm that
is increasingly trying to target business customers, the companies
said.
Goldman will take a minority stake in the venture in exchange
for its intellectual property on Lagoon, a program that gives
employees secure access to business applications on their mobile
phones, as well as its collection of Orbit apps that provide email
and other services remotely.
Goldman developed Lagoon about four years ago as the firm's
employees sought a way to access their work email from their own
mobile phones. The "bring-your-own-device" movement has since
gained traction at American corporations, with big companies like
J.P. Morgan Chase & Co. opting to reduce the number of phones
they provide to employees.
The deal marks the latest bid by Goldman to share—and wring more
profit from—the software platforms its engineers had developed
initially for internal use. It also lends support to Chairman and
Chief Executive Lloyd Blankfein's oft-stated contention that the
firm is as much a technology company as an investment bank.
R. Martin Chavez, the Goldman chief investment officer who
founded a technology startup in between stints at the firm, has
sought to foster a more entrepreneurial spirit among his some 9,000
engineers—while trying to burnish its credibility within a Silicon
Valley community often underwhelmed by engineers' place in the
pecking order on Wall Street.
Under Mr. Chavez's direction, Goldman began to contribute more
heavily to open-source software in 2013 and last year turned over
code on its messaging software to Symphony Communication Services
LLC, a startup backed by Goldman and more than a dozen other
financial companies. Goldman is now rolling out a suite of apps
that share with clients the firm's risk-management and securities
analysis.
Dow Jones & Co., the publisher of The Wall Street Journal,
is a member of Symphony Foundation, a group of companies that are
using the startup's open-source software to develop applications
that can be used on the messaging system.
"We're constantly asking ourselves about all of it," Mr. Chavez
said in July of the firm's plans for its internal developments. "Is
this software better for clients and the planet if it's inside
Goldman? Or is it better if we extend the platform to clients, or
in some cases does a spinout into open source or a company make
more sense?"
The new venture will enter an already crowded field for
mobile-app-management software. Companies such as Citrix Systems
Inc., VMware Inc., Mobileiron Inc. and Good Technology Corp.
already provide platforms to corporate customers.
Some of those firms have hit obstacles. Mobileiron's shares have
tumbled 65% since its June 2014 initial public offering. Good,
which had also filed to go public, instead agreed to sell itself to
BlackBerry Ltd. for $425 million last month.
Bridgewater, N.J.-based Synchronoss, which created a program
that allows employees to share files securely, began looking for a
partner that could develop mobile apps since last year, said
Stephen Waldis, Synchronoss's founder and chief executive. The
company had been in talks with Goldman for about nine months, he
said.
Mr. Waldis said his company will contribute its workflow
software to the new venture, which he expects will begin sales in
early 2016. Synchronoss will hold a majority stake in the new
entity, though it would consider bringing in additional investors
over time, he said.
Mr. Waldis said Synchronoss was drawn to Goldman's Lagoon
because of its security functions and ease of use.
Goldman's willingness to be more open with its internal systems
and software is a welcome development, said Steven Shreve, a
professor of mathematical sciences at Carnegie Mellon
University.
Financial firms have fostered a "culture of secrecy" that has
left them behind the curve in vying with the software industry for
engineering talent, Mr. Shreve said.
"We're looking at a generation of people who believe that
everything should be public," he said.
At Goldman and other firms, engineers have taken a back seat to
employees directly responsible for bringing in trading profits and
investment-banking and asset-management fees.
"If you're a technologist, you'd rather be at a place that
values tech," one former Goldman employee said. "They value traders
and bankers."
That may be changing, albeit slowly. Engineers accounted for
nearly 12% of most-recent promotions to partner and managing
director, Goldman's two most-senior ranks. A decade earlier, they
comprised just 5.5% of the lists.
And in early June, Goldman held what was the first global
town-hall meeting for its software engineers. Mr. Chavez was there
along with Mr. Blankfein.
On stage at the firm's auditorium in its downtown Manhattan
headquarters, Mr. Chavez asked Mr. Blankfein what he means when he
says Goldman is a technology company.
"I think of the sociology of a technology firm," Mr. Blankfein
said. "I'm thinking of the attitude of the lack of limits, the
entrepreneurialism of people who know…that one minute something is
impossible, and then the next minute it's impossible to imagine a
world where it didn't exist."
Subscribe to WSJ: http://online.wsj.com?mod=djnwires
(END) Dow Jones Newswires
October 27, 2015 20:25 ET (00:25 GMT)
Copyright (c) 2015 Dow Jones & Company, Inc.