I don’t want to overstate my case, because we clearly have seen some technology advancement in this space over the last decade, including incremental improvements in areas such as processing speeds and to some extent, usability. Still, CTRM systems continue to look a lot they did, and user continue to interact with them very much in the same manner as they did, more than 10 years ago.

Is it possible or even practical to bring some of these consumer oriented technologies into the CTRM space?  Is there a business case for technological innovation in CTRM? Can we improve the ways deals are discovered, consummated, recorded, managed and accounted for, and in the process improve trading margins and reduce costs?

Can we improve the human machine interface (HMI) to a point where users don’t have to use mice to press a drop down selection box or use a keyboard to type data into a form on a LCD screen?  Can we leverage the technologies that underlay “massively multi-player on-line game” platforms to create better, more interactive marketplaces for commodity trading?  Can we utilize the experiences and technologies that underlay social media sites like Facebook to create virtual business environments in which not only deals, but other forms of information exchange, such as confirmations, invoices and payments flow seamlessly between and amongst counterparties?  Can we move the yet unfulfilled promise of mobile computing into CTRM and truly untether traders and trading support personnel from their desks and trading floors?  Can the “cloud” be useful in distributing applications and workloads to truly virtualize trading floors and improve collaboration across geographies, markets, and cultures?

It’s not only a question of what can technology do to improve the business of CTRM, it’s also a question of what is needed from technology suppliers to meet emerging needs in this industry over the next decade and whether innovation can better meet those needs rather than just a continuing evolution of the same basic tools.

We’re inviting market participants to express their views on these questions and more during CommodityPoint’s 2012 CTRM Technical Conferences. Our first event will be held in London in May and our second will be in Houston in July (yes, July in Houston…and yes, we know about the heat.  Don’t worry, we will have air conditioning).  We’re starting to flesh out the agendas for those events and we’re inviting the users of CTRM products to be speakers.  If you’re a user of the technologies of CTRM, we’d like to hear your ideas (as a presenter at one of our events) about what’s needed to meet the emerging business and regulatory requirements of this market and/or what can the technology providers, service companies, and even your peers, do in the area of helping to bring real innovation to this market over the next decade.

So again, if you’re interested in sharing your thoughts and ideas as a speaker at either our London or Houston event, please feel free to contact either Mark Tredway or myself for more information.  For more information about the CTRM Technical Conference Series, you can visit the events website here.

Note: Please excuse the somewhat variable audio as we are still ironing some technical bugs in our production process.

Part 1

Part 2

The University of Houston’s Bauer School of Business launched their ETRM Systems course in the spring of 2010 with 18 students. Since that time, the program, founded and still lead by industry veteran Ed Bell, has grown steadily and has attracted considerable attention both on and off campus. According to Mr. Bell, “We’ve been pleased and gratified with the success of the program. We’ve seen significant and consistent growth in enrollment each semester, growing from 18 students in our inaugural semester, to 50 the next, then 70, and now more than 100 in this just concluded class.” He further noted that the spring 2012 semester currently stands at 10 MBAs and 121 undergrads, with a couple of weeks left for enrollment.

“Of course it’s gratifying to see the excitement within the school for our program; however, I believe the truest measure of our success is the increasing value of the course in helping our students find careers in their chosen fields.” In this area, he points to success in developing relationships with many of the CTRM/ETRM product vendors, consulting companies and major energy firms. “We’ve been very happy that we’ve been able to develop terrific relations with industry as a result of this course offering. These relationships have given our students the opportunity to interact with leading technology firms and energy companies during their time in this class, interactions that have resulted in job offers and new careers for many of our students.”

This senior/grad level course, MIS 4397/7397 in the university catalog, provides students a fundamental understanding of the functionality and complexities of the systems used for managing physical energy trading in the North American markets and, by extension, a good understanding of the industry those systems reflect. The students get hands on experience in using ETRM software, the GasPro system which has been donated and supported by Data Management Solutions and their president, Frank Pena. Using that system, they get exposed to critical processes such as contract management, deal capture, natural gas nominations and scheduling, and accounting. Additionally, they gain insight into the methodologies and issues related to selecting and implementing complex supply chain and trade management solutions (in fact the course utilizes one of CommodityPoint’s books, “Selecting and Implementing Energy Trading, Transaction and Risk Management Software“ as part of their course materials).

Building on Success

As the program has grown and has continuously pushed the school and faculty to meet demand, Mr. Bell has continuously worked to build capacity, both in technology and teaching staff. The school is recruiting more teaching resources with appropriate/relevant experience, and has hired two additional adjunct faculty with energy IT experience, specifically in the area of configuring and installing ETRM systems. These new resources will provide additional teaching depth under Mr. Bell’s guidance and will help in establishing classes beyond the current course, which is a general introduction to the industry.

Additionally, Mr. Bell is in the early stages of planning a series of courses of interest to technologists— including topics such as pipeline and utility systems for gas management, reporting and compliance issues in energy—especially in light of Dodd-Frank; and the technical side of finance and accounting as it applies to energy operations. “Presently, we are looking at the success we’ve had with a straightforward introductory course and thinking ‘what should be next in a sequence of courses that will further build a credible and respected course of the study that prepares students go to work in the industry?’”

“If I were to summarize our goals for the future of this program, they would be fourfold: 1) continuously improve our ability to deliver a world class educational experience in the area of energy trading technologies, 2) continue to grow and deepen our relationships with industry, including both the leading providers and consumers of these critical technologies, 3) continue to place students in good paying, stable and solid careers, and 4) establish capacity for true energy related research,” said Mr. Bell. In the area of research, he notes the following areas for potential focus: infrastructure planning, critical infrastructure maintenance and security, high-performance computing in energy, cloud based computing and transitional issues, and market data and other related ancillary systems requirements.

Another area of interest for Mr. Bell is to move the course outside of the classroom. “One thing I definitely want to work on is packaging our capabilities to deliver our courses online. I believe we can reach a much larger audience and leverage our time and presence in Houston if we do so. The University of Houston already offers a number of online courses and I think it’s inevitable that we move that direction.”

This course is providing a win-win for both the students and industry— energy trading and marketing firms, along with vendors and service providers, are able to bring on board new employees that have significant exposure to, and understanding of, the critical IT architectures of the industry; and new graduates of the program find intellectually rewarding and well paying careers.

We at CommodityPoint are committed to supporting this valuable program and we encourage other industry participants to do the same.

So, we would really appreciate hearing your thoughts about, and experiences with, the various products and vendors that support energy and commodity trading activities around the globe.  The short electronic survey won’t take you long to complete and the final report will be freely available for you to check how your views match up with others.

To begin taking our survey, please click on the following link:

www.utilipoint.com/2/2011_CTRM_VPS_TY.

We do ask that you enter your name and contact details to help us validate your response. All replies are confidential.

Note: Responses from persons employed by, or associated with E/CTRM software vendors will NOT be considered.

The press release provides some insight into the rationale for such a deal.. “Open Link is a pioneer in the energy trading and risk management (ETRM) software industry and well positioned as the software expands to cover a greater number of commodities. The SolArc acquisition adds expertise in logistics associated with physical commodities that trade in bulk.” Word on the street has been that OpenLink has been making significant investment in the C-Motion product, but a lot of work remained to be done in order to meet the requirements of several of their customers, including  a few of the largest global crude and bulk commodities trading companies.  It appears that Solarc’s expertise in that space is one of, if not the, primary drivers for deal.

While no purchase price was disclosed in the announcement, in the discussion of a new $50 million revolving facility for OLF, Moody’s did say “Approximately $25 million of the revolver  is expected to be drawn to fund the SolArc acquisition in late 2011 along with mezzanine debt and equity.”

I’ve not been shy about stating my belief that acquisitions in this space in which one heads-up competitor buys another can be very difficult to capitalize on and realize full value from the deal (and clearly OLF and Solarc are direct competitors in several markets).  Despite numerous attempts by various ETRM/CTRM vendors, there has never been a practical, programmatic method that has allowed any ETRM/CTRM software vendor to quickly move an acquired customer over to the acquiring company’s products. Without that ability, the acquiring company must continue to maintain the competitors products indefinitely, or force the acquired customers to undertake a costly implementation to move onto the acquiring company’s products – a move which will invariably make those customers explore all potential options, including looking at options offered by the other vendors in the market.

Nonetheless, I do have great respect for the leadership of both of these companies and I am sure that they have mapped a strategy to address the complexities of such a deal.  If they can pull this off by pulling these two market leading companies together, it will absolutely be a formidable combination and will almost certainly ensure that OLF can maintain their status as the largest ETRM/CTRM software provider in the world for the next several years…unless, of course, Triple Point has something up their sleeves…

As I noted in my presentation at the event, their solution is very timely in that the rapid evolution of the energy markets, combined with the emerging Dodd Frank regulations, are driving a number of medium and large scale energy companies to undertake “rationalization” programs – that is trying to improve cross asset/cross portfolio information exchange and aggregation, while simultaneously reducing the complexity of the technical architectures within their trading organizations.  The ability to do that is dependent upon being able to deploy a solution that can, in real-time, link multiple CTRM/ETRM systems, operational systems, asset management systems, and market information; and provide the sophisticated analytics on an intraday basis that are required in order to optimize positions and assets; all the while meeting the emerging reporting regulations that will come with DF.  The ECRAA approach seems to fit that bill pretty well.

Solarc’s president and founder, Brad Anderson, highlighted many of the new customers the company has signed in the last year, including Marathon, Con Agra, Vattenfall, QEP, True Oil (aka 88 Oil), Kolmar, Kuwait Petroleum, and others. The company has seen good sales activity in all their covered commodities and across most geographic regions. In fact, Mr. Anderson pointed out that half of the company’s business is now comprised of companies that operate outside the North America, or have significant operations in both EMEA and North America.

For me one of the highlights was the appearance (via video) of Joe Bastardi, who recently left his role as lead forecaster at Accuweather to form his own company WeatherBell Analytics, where his title is now chief forecaster. I’ve been a huge fan of Joe’s for a number of years and was an avid reader of his blog and reports at Accuweather. While he has a terrific sense of humor which he exercises in his talks and writings, he takes a very pragmatic approach to weather forecasting and is no fan of the concepts and theories behind manmade global warming, having been a critic for a number of years. In fact, during his presentation at Ascent, he stated that he believes we are entering into a period of sustained cooling, one that could last a decade or more and could prove very costly…interesting stuff…

Perhaps the biggest news out of the Ascent meeting was the preview of Solarc’s new product, tentatively named Solarc Compass. This new product sits atop the company’s RightAngle system and provides a rich graphical interface that really is different than anything currently available in this space – the primary screen is a GIS based view of a user’s crude and/or liquids assets (such as tank farms), displaying real-time inventory and trading positions. It allows users, via that same screen, to manage transport among those facilities/positions and create new transactions. Though the demo was admittedly limited in scope and by time, from what I saw it seems that Compass is one of the first products that has not only moves away from the spreadsheet view of the position management, but does it in a way that seems to provide real value in that the graphical interface reduces complex tables of data down to easily consumable visual information and provides interaction capabilities that can significantly improve user efficiency. The new product is due for general release November 1st.

At CommodityPoint, we have often asked when the market would take a significant leap forward in the way organizations measure and control risk. Commodity players that have participated in our research around the topic of risk management have expressed dissatisfaction with the modeling assumptions contained in their “off the shelf” financial models. In fact, many have decided to build home grown modeling solutions.

When I asked Dr. Boesch what his objective was, he responded, “Our vision has 3 key objectives that will create an advantage specifically for our RightAngle customers over their peers: 1) a top tier risk dedicated system that unifies physical and financial risk management, 2) Wall-street-caliber financial modeling of commodities and derivatives, and 3) well separated and efficient components that allow real-time or “tic by tic” reporting of Greeks, P&L and P&L attribution.”

I pressed SolArc on their strategy in terms of what is the difference between what they provide now versus their upcoming releases. Mr. Gunn told us that, “ SolArc Right Angle provides all the key risk reports now whether they need mark to market, Greeks, trade P&L, basis reporting, P&L attribution or Var. Our goal is to create an instant answer to those questions. Running these reports in batch mode that takes 10 to 15 minutes is not enough. Customers need that information instantly and they need it with a “sharper pencil” than they have now with an off the shelf financial model.”

Fears that the US and other economies are set to slide back into recession and the general level of stocks of crude are helping push down the price as expectations of demand are lowered accordingly. However, as mentioned earlier, Asian demand shows no signs of slowing in the immediate future although, a sustained recession in the west would damp Asian growth too as there would be less demand for consumer goods.

It’s quite fascinating to be sat here watching developments. One has a sense that something really has changed (broadly speaking). When I am asked about E/CTRM market growth, I am always bullish but back that up with “unless something completely unexpected occurs’…. well, maybe that unexpected something is happening right now and if it is sustained, it may prove to be a disruptive event in the E/CTRM software procurement cycle……