CTRM – A Growing Replacement Market?

Over the years, I have advised many clients and interested parties alike that replacing an implemented CTRM solution is a very difficult thing to do. Even though the installed solution is 10 versions back, no longer supported by the vendor that no longer exists anyway, it’s working – just. Held together by rubber bands and sticky tape, the solution simply has had too much money, time, sweat, and tears invested into it for anyone to really want to try the process all over again. As vendors were acquired, went out of business or products were discontinued, users would grimly hold on to what they had in the belief that it was better ‘the devil you know than the devil you don’t’. Sure, there were some replacements of course there were. However, all the research and all the experience I have has shown that these were far fewer – much fewer – than anyone might imagine.

I recall working for TransEnergy back in the late 90’s and having any number of poorly implemented clients who were unhappy with the solution. I will point out in TransEnergy’s defense and that of the good, professional and enthusiastic people I worked with there, that quite often, the blame lay with the client or the implementor who had cut corners, not followed advice and so on. Sometimes, the issue was on our side as we faced a rapidly moving market, the need to sell software to fund the business and with rapid growth, came the need to train people of highly complex software. In the end, they got put on client site prematurely. There were a number of customers threatening to walk and it was my job at that time to defend our installed base. We worked diligently and hard to save several and turn them into satisfied customers. At that time, there were around 12 customers and one brave but rather weary guy was running around implementing 6 of them! It was a stressful yet fun time in my career. I learned a great deal. We succeeded in staving off threatened replacements in all cases but one even though perhaps, in the end, the solution was suboptimal. To explain how bad it was at times I can tell you that I was once physically held against an oak paneled wall by a large Texan EVP in cowboy boots and a blue suit by my lapel and told to ‘fix it’ or he would ‘fix me’. This was actually my first day at TransEnergy and fortunately, it got better from there! Happy memories, but I digress….

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The one customer that we lost was lost not due to how our ETRM performed or not or wether we were giving good service. It wasn’t replaced because the user was still knee deep in manual processes, spreadsheets and so on. Nope – we lost it because the CEO was best friends with the CEO of our competitor and he decided that no matter what we did, he was going to switch. You see, back then, replacing a competitor’s solution, no matter how poorly it performed, wasn’t something anyone normally did. So replacement rates were very low. We saw a 1 in 5- to 6-year cycle and even longer until a couple of years ago.

However, things have changed in just the last couple of years. Replacements seem to be happening more frequently. In part, this could of course be that CTRM has reached a point of maturity where replacements are really needed in order to upgrade to new architectures and more modern technology stacks. I believe that it is also related to the growing adoption of cloud hosted and cloud deployed solutions which have a lower initial cost and offer a different accounting treatment for ongoing usage fees. Not only are replacements more viable and with greater frequency but I think it is also true to say that quite often these smaller vendors are replacing larger vendors and gaining market share in the process.

Plainly, the demise of certain vendors like Triple Point who since the acquisition by ION have largely disappeared (though ION is certainly more active now) has forced some replacements. When the vendor can’t deliver an upgrade that actually works for several years, users are forced to change. However, I would still argue that many Triple Point users even though told the product was end of life or they were experiencing support difficulties, would have stuck with it, applying rubber bands and sticky tape if it wasn’t for the impact of rapidly advancing technologies and the need to reduce costs through adoption of these new technologies. The technology shifts have in some instances created a brick wall for ongoing development and support in the sense that there are no skills in the employment market and that technology is holding the larger integration story back. Take for example Power Builder. Triple Point isn’t the only example either. One could also point to the IRM installed base sold to Kisters by OLF recently and many other examples.

What all of this means is that we now see a more robust replacement market for CTRM software. This ought to keep vendors on their toes and will help drive market activity to support further innovation and development. It is certainly reflected in our recent market sizing exercise. The uptick in replacement activity is also another aspect to the market dislocation event we have witnessed in recent years and will inevitably cause further M&A activity and perhaps even the disappearance of products and vendors. It is dynamic times in the CTRM world!

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