Impacts of low commodity prices on CTRM software
Commodity Technology Advisory
Question - We’re hearing that OPEX is under considerable pressure at a majority of energy and commodity trading shops, with some facing cuts as high as 30% versus 12 to 18 months ago. What advice would you give a CIO facing such cuts in their organizations?
Manav Garg, CEO & Founder, Eka Software Solutions
In today’s environment of low commodity prices, it is more critical than ever before to do more with less. Eliminating waste and trimming expenses wherever possible is necessary, and many companies have already taken steps along that path. Companies need to cut costs while still serving customers and successfully managing the business.
Operational efficiencies can be realized through the use of technology. Most companies have previously adopted some type of CTRM or ETRM software to manage commodities, but may also continue to rely on spreadsheets, at least partly. As E/CTRM has increased in functionality, companies will benefit from eliminating these in-between spreadsheets in favor of a fully integrated multi-commodity CTRM solution that supports all front, middle, and back office functions.
To read more please download Impacts of low commodity prices on CTRM software
ETRM – A Consultant’s View
Download: ETRM – A Consultant’s View
Commodity Technology Advisory: With the current macroeconomic environment in the commodities sector, what sorts of trends are you seeing there and how has that changed?.
David Edwards: There are a number of fundamental drivers in the new energy economy such as the changing generation mix, new technologies such as smart networks and batteries, changing market structures and linkage of wholesale markets, slow economic growth and changing capital sources with an increase in foreign capital. The result of many of these drivers on our clients has been intense balance sheet pressure, often leading to fundamental business restructuring. A number of large and medium sized energy companies have commenced quite radical re-organisation in order to cope, adapt better and be prepared to take advantage of the opportunities that are being presented. Obvious examples are EON, RWE and Vattenfall which have all announced major re-organisations in the past 12 months with major impacts for the wholesale and trading business units of these companies. A number of smaller players are also taking steps to restructure and implement quite strategic change, for example, consolidating sales and trading business units, divesting assets or looking to expand into new markets.
At the same time as thinking big, our clients also continue to focus relentlessly on the detail of driving down costs and improving the efficiency of their organisations. This has been a trend for the past few years and will continue for the foreseeable future. The latest Baringa Energy Trading Operational Efficiency Survey shows a clear industry-wide improvement in trading efficiency since the previous survey in 2013. Common areas of streamlining include more stringent assessment of the business case for implementation of new products and a big increase in the percentage of automatic trade confirmations. In general, energy trading firms are starting to embrace more structured and sophisticated approaches to operational excellence including programmes of lean process management and sustainable cost optimisation. In the context of energy trading, such programmes involve initiatives to focus “team by team” on specific functions such as settlement of non-standard products, a focus “end to end” on value chains that cut across multiple functions, such as new product approval or IT help desk ticketing, and finally a focus on “sustainability” which increases operational excellence capability in the organisation and delivers genuine cultural change to embrace continuous improvement.
To read more please download ETRM – A Consultant’s View
OpenLinks Henry Bonner on the Ags & Softs Market
Commodity Technology Advisory: What do you see as the issues driving procurement in ags and softs right now?
Henry Bonner: As many companies watch growth in sales, general, and administrative (SG&A) costs outstrip increases in revenue, controlling expenses has become an even greater priority. As a result, executives are under ever-increasing pressure to deliver productivity improvements, and almost all companies have sought to reduce costs, whether through traditional programs such as outsourcing, offshoring, and strategic sourcing or other one-off cost-reduction events.
One of the hottest topics being discussed right now is around Zero Based Budgeting (ZBB). ZBB allows top-level strategic goals to be implemented into the budgeting process by tying them to specific functional areas of the organization, where costs can be first grouped and then measured against previous results and current expectations.
We see continuing interest from organizations seeking to improve the quality of their position analysis across various parts of their organization, moving away from disparate systems and towards single solutions. Single platform solutions like OpenLink’s are better able to capture all of their exposures and support their operational and financial accounting needs. This functionality leads to improved transparency and better risk management.
To read more please download OpenLinks Henry Bonner on the Ags & Softs Market
2016 CTRM Market Update
Download: 2016 CTRM Market Update
Given the significant decline in commodity prices throughout the year in 2015, and impact that decline has had on the markets for CTRM/ETRM software, Commodity Technology Advisory LLC (ComTech) has recently completed an interim update to its biannual in-depth review of the CTRM software market space. This update is based upon an analysis of reported vendor results for 2015 and confidential conversations with several of the larger CTRM vendors regarding financial performance, unannounced deal closings and deal flow. Additionally, our analysis has factored in trends in the job market created by CTRM software and other sources of data.
Please note: This interim analysis is a topside adjustment to previously published forecasts and is not a comprehensive top-down analysis of the market as presented in our biannual CTRM Market Trends and Outlook publication.
To read more please download 2016 CTRM Market Update