The Emergence of the Mega Vendor?

Over the last 25 years or so, the talk around the virtual ComTech water cooler will occasionally turn to the topic of “which vendor or vendors, if any, will emerge as the big fish in the ETRM/CTRM pond?”

Many years ago, we saw Caminus making moves in that direction via a string of acquisitions of various competing products, only to ultimately be acquired itself by Sungard, who was then positioned to virtually own the market…but, that never happened. The difficulties of acquiring so many overlapping products and trying to make coherent sense of it all was simply too much for the company, and a not insignificant number of customers of the various acquired products. Unable to consolidate the various competing products to gain operational efficiencies and present a coherent product message to their client base, Sungard eventually stumbled and fell back – providing a handful of vendors the opportunity to gain market share by filling the resultant void, particularly OpenLink, Triple Point and Allegro.

At ComTech, we usually talk of a group of the top 5 vendors, those that combined account for more than 50% of the total revenue of the space; but, despite any individual company making that list, the reality is that the market has continued to be wide open for competition and any one of those vendors could fall back or be displaced (i.e. Triple Point).

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Further, buyers of E/CTRM products operate in any number of diverse markets and transact a wide variety of commodities…and the breadth of requirements across these markets simply cannot be addressed with any one solution or current vendor.  As such, we continue to see more than 100 software vendors addressing some portion of the market – from 5 or 10 person shops developing products for small ag producers in Southeast Asia – to the largest vendor like Openlink and Allegro who are often locked in head-to-head battles to win the business of the largest energy companies in the world.

The growing adoption of cloud solutions has further shuffled the deck of software vendors as well, providing opportunities for fairly recent start-ups like Molecule, and new growth opportunities for legacy cloud vendors like Aspect and OATI.

All that said, it does seem that things may be changing, and we many just be at the point that one or two mega-vendors may soon take the top of the market that was once the domain of our previously mentioned top 5.

The first is, of course, Ion. With the acquisition of Triple Point, Aspect and OpenLink, Ion’s Energy & Commodities Division now dominates the E/CTRM space in terms of customer base and revenues at a scale that this market hasn’t seen before.  And with the ability of the Energy & Commodities Division companies to leverage a range of other solutions from within Ion (including treasury, shipping, and more), Ion is seeking to become a one-stop provider for commodity companies’ needs across trading, risk and finance. As we’ve mentioned before, Ion is not repeating the mistakes of Caminus or Sungard – they are not seeking to push customers to any particular “go forward” solution.  In fact, they don’t care what products you buy, as long a you buy them from Ion.  With a history of continuous growth via acquisition, it seems likely that we see Ion pursuing additional targets in the space.

Possibly not yet as obvious as Ion is FIS. FIS bought Sungard Energy & Commodities a while ago and has developed a coherent product strategy that targets market tiers and segments with three specific E/CTRM solutions (FrontArena, Aligne and XDM). Additionally, like Ion, FIS also has a whole host of other solutions that they can bring strategically to commodity firms, ranging from real-time risk analytics with their adaptiv product, financial commodity trading with Kiodex, and a number of other products in treasury and finance space. Though FIS has become a multi-billion dollar business largely through selling solutions to the financial services space, with their increased interest and focus in the energy & commodities markets, it may prove to be the natural competitor to Ion.

A third mega vendor is now lurking on the edges of this market…SAP. Unlike the other two, SAP has focused not on trading, but has come into this market from the ERP/supply chain side, servicing larger companies with both its ERP solution and its Commodity Management solution. And, as our recent blog article suggests, it has been able to increasingly up-sell their energy and commodity clients a number of incremental products that are expansions of capabilities beyond either traditional CTRM or CM, including Hana (an cloud based in-memory database) to SAP Leonardo with its AI, ML and blockchain capabilities. With over 130 licensed customers for its CM solution, SAP could emerge as a mega vendor in the space.

Of course, it is not game over, but it certainly has changed. Each of Ion, FIS and SAP face any number of challenges to overcome before any winner could be declared, particularly with vendors like Allegro who fields a very broad and capable product set, a solid sales force and sales process, and clear and resonating marketing message (and not to mention a willingness to grow via acquisition as well). Then there are the other 95+ vendors, ranging from fairly sizable entities like Brady and Eka, to the smaller but focused vendors like Enuit, Pioneer, Generation 10 and Trayport Contigo.  In fact, ComTech expects many of these smaller vendors will do quite well in the near-term as the recent M&A activities and the increasing focus on the cloud changes the market dynamics.

Meanwhile, looming in the distance somewhere in the future is potentially blockchain. And that could change everything…

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