Current Dislocation Event will Change the Vendor Landscape

As 2016 winds down to a close, we are beginning to see the undeniable signs of the ‘dislocation event’ that has been occurring for the last 12 to 18-months.

What is a dislocation event? Well the model was devised over a decade ago by us and is explained in great detail in our two books on ETRM software that can be purchased on Amazon. However, in short, when events create an environment of change and uncertainty in the market, procurement slows resulting in strains on the various vendors. The fall of commodity prices combined with rising costs and complexities (such as the regulatory demands placed on commodity traders in recent years), has resulted in some changed requirements, uncertainty about requirements, and a need to reduce costs. In turn, this has slowed procurement across almost all CTRM software user segments. The impact that this has is to disrupt the technology adoption curve and essentially create a new market with suddenly changed requirements. The effect on vendors is threefold;

1. Some vendor have the ability – financial, technical and functionally – to wait out the downturn and will survive and thrive in the new market,
2. Some vendors lack the capability to make the changes required and either become stranded vendors serving a much smaller niche market, go out of business or are acquired,
3. New opportunistic vendors enter the market either from peripheral software markets or as start ups.

Of course, this time around, there has been an innovation in technologies too so that cloud and web-enabled solutions represent the next generation of solutions.

So, what do we see?

In the last few weeks, I have been inundated with new vendors calling to get information about entering the market. These are sometimes cloud-based start ups, vendors from the financial services side and new platform plays. The latter I find most interesting because these are new development platforms in the cloud that either offer enterprise risk and integration capabilities and/or rapid development capabilities to build CTRM solutions. These tools, if successful, could revolutionize the build side of the software segment. I will be writing about some of them in the coming weeks.

Certain vendors do seem to be gaining market share and those are generally cloud-based and often targeting specific commodities with specific functionalities. This is a trend that we expect to see continue. The dominant vendors such as OLF, Allegro, and others have all announced solid cloud initiatives in recent months and others like Brady, have been pursuing a cloud model for some time. Triple Point, meanwhile, since its acquisition by Ion, has virtually disappeared in terms of visibility, sales and marketing and might end up a casualty. We also get the sense that some other vendors are experiencing difficulties too.

As we look to 2017, we all hope the market will pick up. Indeed, we have forecast to occur in our market update issued earlier this year. When it does pick up again, it will be a different post-dislocation market.