What Does Tomorrows CTRM Look Like?

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The $1.6 billion Commodity Trading and Risk Management (CTRM) software category continues to change and evolve rapidly, driven by the many and varied issues that those in commodity industries face. Today, the CTRM software category is being forced to move from one that is mostly about managing trading transactions after the fact (capturing volume and price, managing the delivery and then producing an invoice), to something dramatically different.

Multiple issues now face those operating in the commodity industries and the confluence of these issues is driving many of the changes in CTRM software. For those who need to manage physical commodities and their supply chains, the issues are magnified further due to the complexity of tracking and managing those physical commodities with stock, quality characteristics, paperwork, movement and much more. There is more data, more regulation and more risk. CTRM software must incorporate much more functionality to support the modern supply chain.

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What Does Tomorrows CTRM Look Like?

  1. 1.                                 Sponsored  by                   Commodity  Technology  Advisory  LLC   Houston  TX  and  Prague  CZ   www.comtechadvisory.com   What  Does  Tomorrow’s     CTRM  Solution  Look  Like?       White  Paper  
  2. 2. Commodity  Management                                                                                                                                                                                                                    A  ComTech  Advisory  Whitepaper     ©  Commodity  Technology  Advisory  LLC,  2014           2       Table  of  Contents   Introduction  .................................................................................................................................................................  3   Delivering  Flexibility  and  Agility  in  CTRM  .....................................................................................................................  4   Generation  10  –  Building  Solutions  ..............................................................................................................................  5   Agility,  Flexibility  and  User  Engagement  ......................................................................................................................  6   About  Commodity  Technology  Advisory  LLC  ...............................................................................................................  7          
  3. 3. Commodity  Management                                                                                                                                                                                                                    A  ComTech  Advisory  Whitepaper     ©  Commodity  Technology  Advisory  LLC,  2014           3                 Introduction     The  $1.6  billion  Commodity  Trading  and   Risk   Management   (CTRM)   software   category   continues   to   change   and   evolve  rapidly,  driven  by  the  many  and   varied   issues   that   those   in   commodity   industries   face.   Today,   the   CTRM   software   category   is   being   forced   to   move   from   one   that   is   mostly   about   managing  trading  transactions  after  the   fact   (capturing   volume   and   price,   managing   the   delivery   and   then   producing   an   invoice),   to   something   dramatically  different.     Multiple  issues  now  face  those  operating  in  the  commodity  industries,  including:   o The  need  to  process,  store  and  manage  vast  quantities  of  structured  and  unstructured  data,     o Ensuring  compliance  with  numerous  new  and  onerous  regulatory  requirements,     o Responding  to  structural  change  in  the  industry  such  as  the  exit  of  the  banks,  for  example,   o The  emergence  of  an  array  of  new  trading  instruments  and  markets,     o The  move  to  exchange-­‐based  and  exchange-­‐cleared  transactions,  and   o The  need  to  reduce  costs,  increase  efficiency  and  maximize  profits.     The  confluence  of  these  issues  is  driving  many  of  the  changes  in  CTRM  software.    For  those  who  need  to  manage   physical  commodities  and  their  supply  chains,  the  issues  are  magnified  further  due  to  the  complexity  of  tracking   and  managing  those  physical  commodities  with  stock,  quality  characteristics,  paperwork,  movement  and  much   more.   There   is   more   data,   more   regulation   and   more   risk.   CTRM   software   must   incorporate   much   more   functionality  to  support  the  modern  supply  chain.     In  the  future,  CTRM  solutions  will  necessarily  need  to  offer  users  real-­‐time  analytics  and  provide  them  with  the   tools   they   need   not   only   to   manage   and   report   transactions,   but   also   to   help   identify   trading   opportunities,   “If   you   can’t  get   a   user   to   engage,   you’re   not   providing   them   with   the   collaborative   tools   they   need   to   be   the   best   at   their   job.   If   they   aren’t   collaborating   on   a   unified   platform,   it’s   going   to   be   difficult   to   measure   performance,   monitor   activity   and   provide   the   real-­‐time   business  analytics  they  need  to  get  an  edge  on   the   competition.  That   edge  comes   in  the  form   of  intelligence,  efficiency  and  risk  control.”     Richard  Williamson,  CEO,  Generation  10  Ltd.  
  4. 4. Commodity  Management                                                                                                                                                                                                                    A  ComTech  Advisory  Whitepaper     ©  Commodity  Technology  Advisory  LLC,  2014           4     address  operational  risks,  effectively  manage  and  optimize  supply  chains,  ensure  compliance  with  regulations  and   provide  trading  intelligence.     The  tremendous  drivers  for  change  that  we  see  impacting  commodity  markets  mean  that  all  companies  must  take   immediate  action  to  improve  their:   • Market  transparency  –  a  need  to  develop  market  awareness  driven  by  data  and  maintain  a  vigilant  eye  on   macro  trends.  Strategies  must  be  formulated  around  those  macro  trends  and  managed  on  market  data   and   real-­‐time   (or   near   real-­‐time)   analysis   of   that   data   in   multiple   formats   and   from   many   sources,   including  quite  possibly  even  various  forms  of  social  media.   • Internal   transparency   –   profit   is   made   or   lost   on   daily   decisions.   Accurate   and   timely   position   management,   risk   management   and   business   intelligence   support   are   key   to   ensure   opportunities   are   exploited,  costs  kept  under  control  and  risks  addressed.   • Regulatory  transparency  –  regulators  will  be  quick  to  move  and  once  on  their  radar,  businesses  will  be  the   target  of  scrutiny  for  a  very  long  time.  Developing  a  culture  of  compliance  and  improving  transparency  for   regulators  is  crucial  to  avoiding  punitive  and  damaging  enforcement  actions.   The  chances  of  succeeding  in  the  broader  commodity  industries  in  the  future  are  increasingly  dependent  on  the   trading,  trade  management  and  supply  chain  management  technologies  deployed  and  utilized  to  address  these   big   challenges,   including   CTRM,   data   aggregation   and   analysis,   trading   surveillance,   business   intelligence   and   reporting.     Much   like   the   traders   who   earn   their   living   in   these   unsettled   markets,   the   technologists   that   produce   CTRM   software  are  also  being  challenged  like  never  before.   Delivering  Flexibility  and  Agility  in  CTRM   The  common  factor  to  being  successful  in  meeting  these  challenges  is  to  deliver  CTRM  software  that  not  only  has   the  required  functionality  but  that  is  also  both  flexible  and  agile.  However,  when  it  comes  to  software  of  any  kind,   these  terms  are  overused  and  therefore  somewhat  meaningless.  Providing  agility  and  flexibility  is,  in  part,  about   the  technology  and  architecture  chosen  to  deliver  the  functionality.  Today,  those  applications  best  able  to  deliver   these   attributes   are   generally   highly   modular,   web-­‐enabled   applications   that   make   use   of   service   oriented   architectures.  Consideration  must  also  be  given  to  the  user  interface  to  ensure  that  it  is  not  merely  configurable,   but  that  it  can  truly  be  personalized  by  each  end  user  without  the  need  for  programmer  involvement.  It  must  also   be  graphical,  intuitive  and  engaging  to  the  user.  Finally,  the  application  must  be  able  to  deal  with  data  in  multiple   formats  and  to  help  the  user  extract  the  maximum  value  from  that  information.  However,  even  when  all  of  the   above   is   true,   it   might   all   be   for   naught   if   the   software   vendor   takes   the   traditional   approach   to   delivering   software.   In  the  traditional  software  delivery  mechanism,  a  vendor  releases  upgrades  to  the  software  periodically.  In  the   fast-­‐moving  world  of  CTRM,  there  might  be  4  to  6  incremental  releases  per  year.  Each  incremental  release  needs   to  be  tested  and  then  implemented  by  the  user  and,  after  a  while,  the  users  inevitably  fall  behind  on  the  release   cycle.   In   extreme   cases,   the   end   users   fall   so   far   behind   that   they   lose   their   support   (most   vendors   will   only   support   a   fixed   number   of   previous   versions   of   their   software).   Given   that   fact   and   the   unavoidable   conflict   between  the  vendor’s  prioritizing  of  certain  new  functionality  to  drive  sales  rather  than  meet  the  specific  needs  of   individual   customers,   the   inevitable   happens:   Users   are   forced   to   create   spreadsheet   workarounds   to   give   themselves  much-­‐needed  new  functionality.  Suddenly,  the  use  of  spreadsheets  outside  of  the  system  –  the  very   problem  that  the  new  CTRM  solution  was  designed  to  fix  in  the  first  place  –  begins  to  flourish  once  again.     Surprisingly  perhaps,  another  issue  is  the  commercial  structure  of  the  software  licensing  deal.  Most  software  has   historically  been  licensed  on  a  one-­‐off  basis  and  the  users  then  pay  a  percentage  of  that  initial  license  fee  for   annual  support  and  maintenance.  Add  more  users  and  perhaps  you  will  pay  an  incremental  license  fee.  Ask  for  
  5. 5. Commodity  Management                                                                                                                                                                                                                    A  ComTech  Advisory  Whitepaper     ©  Commodity  Technology  Advisory  LLC,  2014           5     enhancements  and  you  will  likely  pay  an  incremental  fee  for  the  delivery  of  custom  software.  You  might  also  need   to   pay   additional   fees   for   implementation,   data   conversion,   testing   and   training.   This   model   doesn’t   support   flexibility  and  agility.  Rather,  it  simply  perpetuates  the  status  quo  that  is  described  above.  New  subscription-­‐based   models,  however,  offer  both  the  means  and  the  incentive  for  vendors  to  be  more  flexible  and  more  agile  –  and   perhaps  even  more  customer-­‐focused  as  well.   The  delivery  of  true  flexibility  and  agility  in  a  CTRM  solution  requires:   o CTRM  software  that  is  built  with  the  right  tools  and  technologies  on  the  right  architecture,   o a  user  interface  that  is  graphical,  intuitive  and  truly  capable  of  being  configured  by  end  users  without  the   need  for  programming  assistance,   o The  ability  to  store  and  manage  multiple  types  of  data  and  to  be  able  to  easily  analyze  the  data  to  identify   and  extract  trends  and  useful  intelligence,   o The  capability  to  be  deployed  rapidly  and  in  a  manner  that  allows  for  continuous  customer  feedback  on   which  the  vendor  is  able  to  act  rapidly,  delivering  enhancements  efficiently  and  without  the  need  for  long   testing  and  implementation  cycles,  and   o That  the  commercial  terms  of  the  deal  be  designed  to  encourage  and  support  such  flexibility.   Generation  10  –  Building  Solutions   Generation  10  has  been  around  for  more  than  a  decade,  quietly  building  and  marketing  solutions  for  a  broad   range  of  clients,  initially  in  the  world  of  cotton.  The  interesting  thing  about  cotton  is  its  complexity.  If  you  can   handle   cotton   properly,   other   commodities   hold   no   real   surprises,   regardless   of   whether   they’re   bulk   or   containerized.  In  2009,  although  still  a  relatively  small  and  niche  company,  Generation  10  decided  to  completely   re-­‐engineer   its   software   and   invest   in   building   an   all-­‐new   product   set   from   the   ground   up.   Along   the   way,   Generation   10   used   its   track   record   and   experience   in   delivering   solutions   in   the   cotton   world   to   decide   on   architectures,   tools,   structure   as   well   as   functionality.   What   it   was   looking   for   was   the   ability   to   be   agile   and   flexible.   The  company  chose  a  web-­‐based  architecture  and  built  its  own  technology  platform  –  the  G10  Framework  –  to   serve   as   the   foundation   for   all   of   its   products,   including   its   new   CTRM   solution,   G10   Commodity   Manager.   Generation  10  also  developed  a  new  highly  visual,  graphical  user  interface  and  analytics  tool  called  d3  Analytics.   The   G10   Commodity   Manager   is   a   multi-­‐commodity   and   highly   configurable   CTRM   solution   known   for   the   strength  and  depth  of  its  logistics  functionality,  which  provides  users  with  a  host  of  supply  chain  optimization   business  benefits.  Users  can  streamline  planning  and  scheduling,  utilize  capacity  more  efficiently,  identify  the  best   vendors   to   work   with,   and   manage   suppliers   more   effectively,   all   while   achieving   high   standards   of   care   and   customer   service.   Users   are   simply   in   a   better   position   to   gain   competitive   advantage,   optimize   workflows,   establish   metrics,   set   benchmarks   and   identify   trends   by   analyzing   performance   over   the   long   term.   It   also   provides  comprehensive  trade  capture,  risk  management  and  accounting  functionality  for  a  variety  of  products.   The   d3   Analytics   solution   provides   interactive,   visual   tools   to   help   users   identify   trends,   increase   operational   transparency,  set  benchmarks  and  achieve  goals.  Users  can  locate,  understand  and  act  on  information  much  more   quickly  and  efficiently.  When  combined  with  its  library  of  web-­‐enabled  components  and  bespoke  applications,  the   G10  Framework  allows  Generation  10  to  provide  customers  with  the  exact  capabilities  they  need,  rapidly  and   seamlessly.     All   of   its   products   have   been   designed   to   be   highly   configurable   and   personalizable   by   the   users   without   programmer   intervention.   “People   in   the   ‘Facebook   generation’   demand   intuitive,   flexible   tools   to   help   them   perform  their  jobs  with  a  minimum  of  fuss  and  a  maximum  of  cool,”  says  Richard  Williamson,  CEO  of  Generation   10.  Its  software  makes  it  easy  to  add  new  fields,  grids,  data  collectors,  dashboards,  work  flows  and  so  on  without   any  programmer  involvement  at  all.  
  6. 6. Commodity  Management                                                                                                                                                                                                                    A  ComTech  Advisory  Whitepaper     ©  Commodity  Technology  Advisory  LLC,  2014           6     In   addition   to   its   innovative   products,   Generation   10’s   unique   business   model   is   also   a   differentiator.   The   company  provides  flexible  software  solutions  and  services  via  agile  delivery  methods,  using  commercial  structures   that  include  the  use  of  the  software  with  continuous  upgrades  –  including  customized  upgrades.  G10  positions   itself  as  the  customers’  technology  and  analytics  partner  largely  due  to  its  team  of  data  analysts,  all  of  whom  have   hands-­‐on  experience  with  commodities.  The  team  regularly  meets  with  customers  at  their  own  facilities  to  better   understand  their  strategies  and  ensure  they’re  able  to  extract  the  maximum  value  from  their  data.  Functionality  is   delivered   rapidly   and   seamlessly   via   the   G10   Framework,   eliminating   any   temptation   to   resort   to   Excel   spreadsheets,  and  upgrades  are  delivered  continuously  via  the  cloud.   Generation  10  essentially  delivers  on  each  of  the  criteria  for  delivering  agility  and  flexibility  as  follows:   o Products  are  built  with  the  right  tools  and  technologies  on  the  right  architecture,   o It   has   a   user   interface   that   is   graphical,   intuitive   and   capable   of   being   truly   configured   by   end   users   without  the  need  for  programming  assistance,   o It  is  able  to  store  and  manage  multiple  types  of  data  and  can  easily  analyze  the  data  to  identify  trends  and   extract  useful  intelligence,   o It  has  the  capability  to  be  deployed  rapidly  and  in  a  manner  that  allows  for  continuous  customer  feedback   on  which  the  vendor  is  able  to  act  rapidly,  delivering  enhancements  efficiently  and  without  the  need  for   long  testing  and  implementation  cycles,   o It  designs  and  structures  the  commercial  terms  of  each  deal  to  encourage  and  support  such  flexibility.   Today,  Generation  10’s  clients  are  trading  cotton,  coffee,  cocoa  and  sugar  using  the  G10  Commodity  Manager,   which   is   helping   them   to   optimize   their   supply   chains   and   better   control   all   types   of   risk   (market,   credit,   operational  and  liquidity)  in  real  time.  Notable  clients  using  the  G10  Framework  and  d3  Analytics  include  the  US   Department   of   Agriculture   (USDA)   and   marine   insurance   specialists   Rekerdres   &   Sons   Insurance   Agency.   Generation  10  has  given  USDA  the  analytical  tools  it  needs  to  identify  long-­‐term  trends  in  performance  and  also  to   be  proactive  in  addressing  potential  problems  before  they  escalate  –  often  before  they  even  occur.  Meanwhile,   Rekerdres   &   Sons   uses   Generation   10’s   solutions   to   coordinate   highly   complex   processes   and   documentation   from  a  variety  of  stakeholders,  operating  on  different  systems  from  all  over  the  world.  “Generation  10  has  helped   usher  our  company  into  the  age  when  data  works  for  us,  rather  than  us  having  to  work  for  the  data.  The  more  the   system  can  anticipate  what  I  need  and  give  it  to  me  without  my  having  to  spend  time  looking  for  it  and  modifying   it,  the  greater  my  efficiency  is  going  to  be,”  says  Mr.  Brett  Anderhub,  VP  at  Rekerdres  &  Sons.   Agility,  Flexibility  and  User  Engagement   For  Generation  10,  it’s  not  just  about  delivering  software  that  does  what  it’s  supposed  to  do,  but  making  sure  that   it  keeps  on  delivering  as  it  is  supposed  to,  as  well.  By  building  agility  and  flexibility  into  both  the  software  and  the   business  model,  the  company  aims  to  ensure  user  engagement  with  the  software  as  well.  Its  focus  is  strongly  on   user   job   satisfaction   and   ensuring   continued   long-­‐term   usefulness   of   the   software.   “If   you   can’t   get   a   user   to   engage,  you’re  not  providing  them  with  the  collaborative  tools  they  need  to  be  the  best  at  their  job,”  Williamson   says.  “If  they  aren’t  collaborating  on  a  unified  platform,  it’s  going  to  be  difficult  to  measure  performance,  monitor   activity   and   provide   the   real-­‐time   business   analytics   they   need   to   get   an   edge   on   the   competition.   That   edge   comes  in  the  form  of  intelligence,  efficiency  and  risk  control.”   In  retooling  its  product  portfolio,  Generation  10  used  its  extensive  experience  in  the  complex  world  of  cotton  to   develop   a   truly   multi-­‐commodity   platform   designed   for   optimization   and   transparency.   It   focuses   on   business   logic,  user  engagement  and  “exceptions  to  the  rule,”  thus  delivering  the  agility  required  by  businesses  today,  in  an   environment  where  data  is  becoming  one  of  the  most  valuable  assets  a  company  can  possess.  They  have  created   a  suite  of  software  for  a  broader  commodities  world  that  appears  to  deliver  on  the  premise  that  CTRM  software   needs  to  be  about  real-­‐time  analytics  and  providing  users  with  the  tools  that  they  need,  not  just  to  manage  and   report   end-­‐to-­‐end   transactions,   but   also   to   help   identify   favorable   trading   opportunities,   address   operational   risks,   effectively   manage   and   optimize   supply   chains,   ensure   compliance   with   regulations   and   provide   trading   intelligence.  
  7. 7. Commodity  Management                                                                                                                                                                                                                    A  ComTech  Advisory  Whitepaper     ©  Commodity  Technology  Advisory  LLC,  2014           7                                   About  Commodity  Technology  Advisory  LLC   Commodity  Technology  Advisory  is  the  leading  analyst  organization  covering  the  ETRM  and  CTRM  markets.  We  provide  the   invaluable  insights  into  the  issues  and  trends  affecting  the  users  and  providers  of  the  technologies  that  are  crucial  for  success   in  the  constantly  evolving  global  commodities  markets.   Patrick   Reames   and   Gary   Vasey   head   our   team   with   a   combined   60-­‐plus   years   in   the   energy   and   commodities   markets,   providing  a  depth  of  understanding  of  the  market  and  its  issues  that  is  unmatched  and  unrivaled  by  any  analyst  group.  For   more  information,  please  visit  http://www.comtechadvisory.com.   ComTech   Advisory   also   hosts   the   CTRMCenter,   your   online   portal   with   news   and   views   about   commodity   markets   and   technology  as  well  as  a  comprehensive  online  directory  of  software  and  services  providers.  Please  visit  the  CTRMCenter  at   http://www.ctrmcenter.com.   ______________________________________________________________________________________________________   19901  Southwest  Freeway   Sugar  Land  TX      77479   +1  281  207  5412     Prague,  Czech  Republic   +420  775  718  112     ComTechAdvisory.com   Email:    info@comtechadvisory.com    

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