The Boys Are Back in Town
This article originally published as a ComtechAlert newsletter – sign up for your ComTechAlert here.
For the last 18-months, I have been working on the ‘end user’ side of the industry. It was fun. Nevertheless, it also convinced me of the need for reliable data, quality analysis and information.
As I searched for things such as best practice approaches to risk management or even information on trading house organizational structures, I discovered a gaping hole. When I turned my attention to IT and started to seek benchmarks of IT costs, I could find nothing of value. When we started to look for an ETRM solution, I realized that a basic system that catered for a certain set of vanilla requirements simply didn’t seem to exist on the market in the form and at the price point needed. Perhaps just as importantly, I understood with even greater certainty than ever before that there really are massive cultural buying differences between say North America and Europe. In short, it was a useful excursion into the hard end of the commodities trading world.
In fact, right now, one of the biggest challenges facing the industry in here in Europe is regulation. EMIR, REMIT, MAD, MIFID2 and a host of other strangely labeled regulations are coming into force. The issue seems to be that, in many instances, the details of these regulations have yet to be determined and this causes a good deal of uncertainty. Another side of the same issue is arguably the prospect of new taxes, charges and fees, in particular, the financial transaction tax proposed by some EU member states. Does it apply to commodities? How will it work? There is no doubt in my mind that these are all conveniently timed efforts to kill the so-called speculators (and timed to raise cash for over spent and indebted governments). The problem is that these regulations and taxes are often, in my opinion, poorly thought through and could end up damaging the entire industry.
From the vendor’s point of view, it is a time of both challenge and opportunity. The challenge is in the form of trying to deliver solutions to uncertain and poorly defined problems while the opportunity is to broaden the footprint of the software solution and find ways to differentiate in a highly competitive market. This, against a backdrop in which the uncertainties created by these issues could also soften immediate and near-future demand and, being overly negative perhaps, kill a lot of the business altogether. However, the vendor’s are a hardy lot. They have seen and met such challenges before.
For buyers and potential buyers, the claims and counterclaims of vendors can often be confusing. The recent and continuing set of mergers and acquisitions among vendors added to that confusion amid uncertainty over the future support of various platforms. The need to keep costs down on the IT side (since transaction costs are rising and profitability is being impacted), also means seeking out greater value.
Set all of this against other issues that are changing the business and it all adds up to a very challenging moment in the development of our industry. Issues such as the rise of renewable energy (breaking down historical price trends, for example), the increasing need to better manage complex commodity supply chains, the need to manage costs generally, and the changing landscape of markets (market coupling, for example), to name just a few.
Commodity Technology Advisory is uniquely positioned to address many of these areas. On the end user side, it offers buyer seminars to educate and inform on the vendor landscape, buying cycle and implementation project. Its focus is also on helping prospective buyers to fast track to long or short lists of vendors cost effectively and efficiently. Its research is designed to help address information needs and to establish best practice. Its services to vendors designed to inform, identify strengths, hone messaging, and much more besides. I invite you to visit our website at http://www.comtechadvisory.com to learn more.
After my time on the hard end of the industry, I have returned with I think, a better idea of what products and services an analyst firm should be offering its clients. I am glad to be back and particularly to be working with long-term colleague and friend Patrick Reames who also has 30-years of experience in this industry and a bunch of new ideas too.
As Thin Lizzy famously sang when we were a lot younger – The boys are back in town!
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