Three Reasons Buyers are Spoiled for CTRM Choice

Buyers of CTRM software have more choice than ever in todays vibrant market despite the M&A activity. Here are three reasons why.

The cloud and SaaS is finally with us in CTRM.

ComTech and its predecessor undertook research into CTRM in the Cloud a few years ago and discovered that many in commodities were simply not ready.  An 80% majority preferred a typical on premises installation primarily because they want their data to be secure and that meant residing in a database under lock and key in their office. As the cloud and SaaS took off in other industries and application areas however, those attitudes have changed to the point where cloud and SaaS are now sought after. With this shift in attitude has come the realization that to truly take advantage of the benefits of cloud, the CTRM software needs to be cloud-native. As cloud technologies have emerged and matured so too have things like rapid application development approaches, changes in licensing and support options and in technologies across the board.

Rapid shifts in technology always help to reduce the barrier to entry into a software market and the CTRM software market has proven no different. As cloud emerged, some saw an opportunity to develop new CTRM solutions and so there has been – and will continue to be – a steady stream of new entrants in terms of vendors and/or products. Meanwhile, vendors with older products and an installed base simply can’t respond and adapt as quickly as they have legacy code and users to bring along.

Relatively newer vendors have been quick to adapt and offer cloud-based software that are least partially cloud native like Contigo, ComFin, Agiboo, Pioneer, Gen10, and FIS for example. Others that have come to market like Fendahl, Inatech, Commodities Engineering, and Molecule, for example, have adopted new technologies from the outset and then there is a raft of even newer entities like Satoshi, CTRMCloud, CTRMCubed and so on, who are still emerging or yet to emerge. These join companies like SAP, Eka, and Gen10 who have committed to the cloud and developed new versions of their software already with others like ION OLF also moving in that direction.

The technology shift has enabled more competition and created a new paradigm in which these new competitors can sustain their business which is lower cost, pay as you go and similar (see point 3 below).

Disaggregation of the Monolithic CTRM

The shift in technology has also facilitated a new approach to the old problems of CTRM. How do you deliver a solution that caters for a large enough market to be commercially viable? We call this class of software CTRM, yet in reality no commodities company has exactly the same set of requirements and at best, most CTRM solutions have been historically only an 80% fit to requirements meaning enhancements or suboptimal implementations for many. Now with the emergence of newer technologies the monolithic CTRM solution of the past, with a huge cost and risk to implement and support, is no more! Ecosystems of Apps, dApps and API’s is now the vision in the industry with vendors like Gen10 and EKA potentially leading the way. Here, the idea is to build or buy discrete Apps or dApps for specific purposes – European power trade capture, risk analytics, PnL reporting, for example along with horizontal components like reporting databases or risk overlays like TRADESPARENT, for example to construct an ecosystem of agile, lower cost components that can morph and grow with the business.

This approach also provides users of monolithic CTRM solutions with an option to continue to leverage their costly investment while adding new functionality and greater agility by adding Apps and Dapps around the monolithic solution. This may even offer a medium or longer term replacement strategy but most of all, it provides an extra layer of choice for users.

Cost

For many smaller firms with commodities exposure, CTRM has simply proven too expensive an investment. These usually smaller entities have instead relied on Excel and other tools to help manage their businesses. Licensing a chunky piece of software even for a smaller number of users- with an upfront perpetual license fee, costly and fairly long, risky and complex implementation, and annual S&M fees was simply too much for these potential buyers. Now all has changed. Most of the vendors will now offer all inclusive monthly user fees such that the system can be paid for as it is used as a business expense. Some of the cloud SaaS offerings offer very affordable monthly user fee structures that can be paid quarterly, for example. This keeps the upfront costs down (though some implementation costs should, of course, be expected in most instances) and allows users and vendors some flexibility in structuring a deal. This also expands the choice of smaller user firms.

 

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