webinar: why commodity analytics is the next big thing for trading, risk, & supply chain
TRANSCRIPT
Webinar: Why Commodity Analytics is the Next Big Thing for Trading, Risk, & Supply Chain
Patrick Reames Founder and Managing Partner,
Commodity Technology Advisory
Michael SchwartzEVP & Chief Marketing Officer,
Eka Software
USA | India | United Kingdom | Australia | Canada | Singapore
Agenda
• Commodity market tech spending trends• Technology solution trends• Why commodity analytics now• How Commodity Analytics Cloud enables fact-based decision
making
Join the conversation: @EkaSoftware
CRITICAL TRENDS IN CTRM TECHEKA WEBINAR – JUNE 29 2016
© 2016, COMMODITY TECHNOLOGY ADVISORY, LLC
ETRM/CTRM TECHNOLOGY TRENDS
Commodity Market and Tech Spending Regulations are Impacting Systems Cloud, Cloud and more Cloud A Return to “Grow Your Own”? Changing Landscapes of Tech Providers and Buyers Analytics a “Must Have”?
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Seeing significant belt tightening in many sectors of the industry as commodity prices drag bottom, regulatory and other costs increase and profits are squeezed
IT is always among the first cost cutting casualties and this time is no different
The market for “full” CTRM solutions has not grown as projected and recovery will be dependent upon commodity market improvements
New systems are still being purchased, but there is pressure in all areas of costs from license to support
Buyers that are in the market are often seeking alternatives to the traditional approach of “soup-to-nuts” vendor supplied CTRM solutions
COMMODITY MARKETS IMPACTING TECH SPEND
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Source: Bloomberg.com
Bloomberg Commodity Index 06/28/16
Increasingly invasive regulatory regime in the west: D-F, REMIT, EMIR, MiFiD2 and equivalents
Regulations are impacting systems and processes Trade Reporting Data Retention Risk Management Portfolio Management Capital Adequacy Market Abuse Market centralization
More connections, more data, greater reporting…
REGULATION INCREASING COMPLEXITY
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Increased costs and risks - direct and indirect (staff, systems, business processes, fines and penalties, reputation)
Growing pool of regulatory solutions, tools and add-ons have emerged to address specific market requirements
Not just regulatory though - outside and internal auditors, stakeholders etc. will also expect more rigor, including KPI’s
Treasury management becoming more critical - protecting balance sheet and meeting lender/debt holder requirements
Greater amounts of data are being held longer - data management, analysis and visualization are becoming more critical capabilities in addressing regulatory and stakeholder inquiries
REGULATORY AND MORE
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General economic environment has resulted in cost cutting and deferred projects; however, this is NOT the entire story: The near demise of Triple Point and some notorious project failures have also resulted in increased
due diligence and are slowing the buying cycle
Buyers are focusing more on track records – successful implementations, completeness of the solution and reliability of vendors
This trend is only likely to deepen given current environment, including geopolitical concerns impacting commodities markets - Brexit, unreliability of growth in Asia, etc.
More and more buyers are looking at “non-traditional” solutions, including cloud and hybrid homegrown/vendor
BUYERS ARE BEING MORE CAUTIOUS
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“CLOUDY” DAYS
Adoption of cloud solutions increasing – estimated 15% annual growth v. 3% for “traditional” software
Fits with current economic environment Reduced up-front
expenditures Lower internal IT Different accounting
treatment More options - Growing
number of true “in the cloud” solutions from multi-tenanted to hosted in the cloud
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Lower Total Cost of Ownership Lower entry cost – server and system costs
Lower demand on internal IT resources Lower implementation costs
Faster deployment Ease of version upgrade
More secure backup, recovery and cyber security Relatively easy to replace if or when necessary
3.4 3.5 3.6 3.7 3.8 3.9 4 4.1 4.2 4.3
Perceived Benefits of SaaS and the Cloud
Difficulties in integrating with other sys-tems
Lack of control
Loss of agility for competitive advantage
3.5 3.6 3.7 3.8 3.9 4 4.1 4.2 4.3 4.4 4.5
Perceived Negatives of SaaS and the Cloud
BUILD IS MAKING A COMEBACK
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Why would you build? Why would you buy?
Top tier – multi-commodity, global merchants/traders looking at build – no solution on the market to cover all requirements.
Many adopt hybrid approach – combining components of vendor solutions with homebuilt – willingness to consider smaller vendors if vendor risk can be addressed.
Is there a growing disillusionment with commercial systems?
38%
32%
30%Yes definitely consider custom
Yes, but probably buy
No, we would not consider custom
IT prefers this approach
We are too different
Avoid generic functionality
We know our business requirements best
To have total control over functionality
1 2 3 4By the time delivered, requirements changed
There are adequate commercial solutions
Impossible to free up business resources
Keeping it current to requirements
Too costly to build
We are not an IT organization
1 2 3 4
Despite ongoing M&A activity and market size growth, ComTech market sizing studies indicate that the top 6 vendors market share has eroded (from 71% in 2014 to 65% in 2015).
Some of this is attributable to the near demise of Triple Point but not all…. Top Tier is shrinking – banks, utilities and others left commodity trading or scaled down operations
considerably Reduced budgets and general cost cutting Many large established vendors have been late to the cloud and are essentially providing hosting
services Emergence of ERP vendors with Commodity Management capabilities taking market share Still more than 90 vendors in the space – some of the smaller, more modern technology players are
gaining ground The CTRM vendor market is undergoing a shift, with many of the large vendors moving
down-market to preserve market share and find growth…and in the process, reducing functionality and capabilities to better compete on price.
CTRM VENDOR TRENDS
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Despite cost pressures, regulatory mandates, increasing market risks and need to improve bottom-line performance are driving the need for improved analytics – predictive analytics, sentiment analysis, beefed-up risk metrics, optimization etc.
In the recent ComTech 2016 CTRM Vendor Perceptions report, 50% of the respondents ranked “Comprehensive Analytics” as a critical or important capability for their company.
Data management and analysis tools are becoming a “must have” capability for a growing number of trading and marketing companies.
How much of this will ultimately be met by ETRM/CTRM vendors remains to be seen, but the trend is increasingly to extract these functions as an enterprise-wide layer that can provide improved processing performance, improved analytics capabilities, and improved visualizations not reliant on the underlying CTRM architecture.
ANALYTICS ARE BECOMING A “MUST HAVE”
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The fall in commodity prices (driven by over-supply/lower demand) is driving the big picture, squeezing profit from many commodity trading entities; the regulatory environment is not helping either, adding costs, complexity and uncertainty.
These two factors are driving many of the current tech trends – cost cutting, buying cycle lengthening, increasing popularity of cloud, hybridized solutions and increased interest in analytics.
Despite the ‘gloom’ and uncertainty generated by the media, the overall tech market (so far) remains active with bright spots in certain segments. However, the larger CTRM vendors are facing increasing pressure to pivot to lower cost solutions that address a wider market, and with over 90 vendors, competition is fierce.
For tech users/buyers, there is no singular approach or vendor - just more requirements and options that need to be addressed with lower budgets – will require innovation and an openness to new tech approaches.
SUMMARY
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CONTACT
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19901 Southwest Freeway, Suite 140Sugar Land, TX 77479
Phone: 281.207.5412Cell: 832.687.4736
Patrick ReamesManaging Partner
USA | India | United Kingdom | Australia | Canada | Singapore
Eka Software Solutions: Company ProfilePosition: Global leader in on premise & cloud served Smart Commodity Management solutions
Founded: 2004
Employees: 315
Global Offices: 7 offices. 3 development & support centers• North America, APAC, Europe
Investors: Silver Lake Partners - GP Group - Nexus Venture Partners
Customer Base: >50 leading global enterprises on 4 continents• Cargill, EDF Trading, Twin Eagle, Rio Tinto, Mitsui, Bunge, BMA, Graincorp, Viterra, Louis
Dreyfus, COFCO, CBH, Boliden, Tata Steel, Pinnacle Foods, Just Energy, REG
Solutions: InSight Commodity Management (CM) Platform (ETRM & CTRM)• End to end financial and physical transaction management – Energy, Ags, Metals, Bulk• Cross asset trading and position management • State of the art enterprise risk management
Commodity Analytics Cloud• Analytics specific to commodities – Commodity Intelligence Engine• Multiple data sources internal and external to Eka (including competitive E/CTRM) • Prebuilt apps
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Accenture and Microsoft Study – Digital Trends in O&G
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• Short term focus is to lower costs and longer term is to create value
• Investment continues and is expected to increase
• Digital is enabling companies to reduce costs and better manage operations through new capabilities such as advanced analytics
• Companies need to quickly improve their capabilities, including maturity in analytics
• Increased use of cloud to unlock the value of digital
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Why is Analytics and Fact-Based Decision Making a Challenge
1. Many commodity market problems are unique and require complex logic to get to the answer. Which software can do this for me?
2. Existing options are expensive and time consuming to implement. We’ve already spent so much, do we have to spend significant sums again?
3. To make meaningful and timely decisions, large volume data needs to be integrated from multiple sources and processed. What technology choices do I have?
Most companies have already invested in ERP, CTRM, Treasury, CRM, Accounting, Business Intelligence, etc. – but still rely on spreadsheets to get to answers.
Traditional options are to customize ERP or CTRM or write custom applications. But these are transaction systems, not analytics systems, so customizing them ends up being more expensive & less effective.
Integration projects are expensive and risky. And to process large volumes of data quickly, existing options will require large computation capability driving costs even higher.
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How Commodity Analytics Cloud Solves These Problems
CONNECT• Data from multiple sources• Internal applications, external sources,
spreadsheets
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Key Product Features
Commodity Intelligence Engine• Algorithms, models, analysis engine
Apps• Examples: Position Consolidation, Procurement,
Plan Performance
Monitors• Brings focus on key areas instead of combing
through all data
Self Service• Intuitive visualizations and app design
Sharing• Share insights and ideas with team members
Data Ecosystem• All data required for analysis in one place
Connectors• Bring in data from 3rd party apps & data sources
Data Preparation• Mapping and transformation that relates raw
data to what the engine needs
Speed• Process millions of data entities in seconds
Mobile• Available on mobile devices including tablets
and phones
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Apps For Your Industry - Examples
Commodity Analytics Cloud Apps are a powerful component of our commodity management platform.
• Make faster, data-driven, fact-based decisions• Answer critical business questions• Arm users with confidence to make the right decisions at the right time
Commodity Trading
Energy Agriculture Manufacturing/CP
Metals &Mining
Bulk Commodity Sites
• Position Consolidation
• P&L Explained• Accounts
Recon• Trader
analytics
• Flash P&L• P&L Explained• Accounts
Recon• Position
Consolidation• Trader
analytics
• P&L Explained• Accounts
Recon• Position
Consolidation• Trader
analytics• Production
simulation
• Procurement• P&L Explained
• Raw Material Margin
• Inventory optimization
• P&L Explained
• Plan performance
• Plan diagnostics
• Stockyard optimization
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Use Case: P&L Attribution
• Why is it hard:• Data is spread out among different systems and requires many excel sheets,
macros, and man hours to consolidate and gain a holistic view• Interdependencies between factors complex to parse• Difficult to gather and analyze data on a daily/timely basis so a large portion of
change put in an unexplained bucket• Although many E/CTRM systems have P&L attribution modules, in the real-
world attribution is done in spreadsheets
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P&L Explained - Easy Upload of Data from Multiple Sources
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P&L Explained - Flexible, User-Defined, 5-Tier Hierarchy
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P&L Explained - Intuitive, Graphical Interface
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P&L Explained - Sort, Filter, Group, and Drill to Trade Level
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Commodity Analytics Cloud – Next Generation Analytics
• Blend data from internal and external sources
• Use commodity specific algorithms and models
• Gain insights with business specific apps
• Empower users without reliance on IT or team of BI specialists
• Make timely, data-driven, and fact-based decisions
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Questions?
Michael SchwartzEVP & CMO
Webinar Recording:https://www.ekaplus.com/resources.aspx