As we’ve noted in various reports and posts, the market for CTRM products has been moving away from the traditional monolithic solutions that dominated the market for decades, to cloud-based solutions (often multi-tenanted applications) that offer lower acquisition and deployment costs. This trend has been accelerated in 2020 as the COVID pandemic forced companies around the globe to move to a distributed work-force model, exposing weakness in both their technical infrastructures and business processes that relied on direct person to person interactions, such as those found on trading floors.
As large-scale implementation projects ground to a halt with the lock-down, and companies canceled or indefinitely suspended new CTRM selection projects, no vendor was left unaffected. In fact, every vendor I’ve spoken with has said they have lost many of the sales they were confident of winning (or had in fact even won) in the first and second quarter of the year. However, several of those same companies have also said that since mid-year, many new opportunities have emerged, and new deals have been signed that were not even on the radar earlier in the year (in a market where sales cycles can traditionally last a year or more).
Molecule is one of these companies that have found surprising success, and for a number of reasons. With a latest generation technology platform, a multi-tenanted deployment model and growing focus on an almost always reliable power market, the company has continued to grow on pace with previous years. In late December, Sameer Soleja, Molecule’s founder and President told us, “We’ve had a remarkable year actually. Like other technology vendors, the first half of the year was difficult with a lot of prospects evaporating almost overnight, and our late-stage sales funnel essentially collapsing. However, since the early in the third quarter, our (sales) funnel has recovered several times over…and by the end of the year (2020), our revenues will be up somewhere between 30-50% over 2019.”
Sameer noted that the interest is coming not only from the smaller firms like hedge funds (a market segment that has been a large contributor to their previous success), but they are now competing for business, and often winning, with larger, and in some cases, global scale trading firms. “With the roll-out of Elektra, our packaged solution for physical power trading companies, we are now winning deals to supply dedicated capabilities to companies that have been and, in some cases, continue to be users of large legacy solutions.” When asked what is driving that interest from these firms, he noted “These are companies in which something has changed – they purchased assets, entered into a new market, or started trading RECs – and are looking for a solution that can be quickly deployed and provide them the capabilities they need.” He also noted that as much as 50% of Molecule’s late-stage sales pipeline is made up of large national or multi-national trading companies.
Sameer also noted that he believes much of their inbound interest is driven by 1) easing market uncertainty about 2021 as the election has passed and COVID vaccines are becoming available; 2) consolidation at the top of the CTRM vendor space has left technology buyers concerned about the ability of the largest firms to respond to a changing technology and functionality landscapes (he notes his customers are saying, “Our businesses are changing and the large vendors are not”); and 3) large companies looking forward three to five years and seeing that at some point their technology direction is going to outrun their current technology provider…”Where will we be in 5 years? Are we supposed to be running software written in 2003?”
Its difficult to argue with his thinking. Technology change is accelerating, and older platforms will need to either rebuild in newer tech or face extinction. Though many of the legacy vendors have successfully redeployed to hosted-in-the-cloud platforms, the advantage in a rapidly changing market would appear to be with more agile companies like Molecule whose technology base is a few years, not a couple of decades, old. Of course, technology doesn’t always sell the system if it’s not capable of addressing a prospect’s functional needs. In this vein, Molecule has also done well by focusing their development activities toward building deep capabilities in discrete complex markets – such as they have with Elektra for the power markets.
It will be interesting to see how they leverage that success to continue to grow the breadth and depth of their platform.