I sat down recently with Patrick Reames, Managing Partner of Commodity Technology Advisory (ComTech), to record an episode of “Conversations with Leaders in CTRM Technology.” We discussed the highlights of our new research study, which examines the impact of low energy and commodity prices on the E/CTRM systems that so much of our industry relies upon. We also talked about the challenges companies face, the critical capabilities they’re using to address those challenges, and the value that provides in this low-price environment.
Three key trends emerged from the study that we discussed in our conversation:
- The number one challenge for E/CTRM users was dealing with disparate systems and integration.
Many companies come to FIS expressing much frustration around their current integration and reporting challenges. We’re focused on providing a framework that makes integration as simple as possible, and allows companies to scale and monitor that integration. But the latter can be a challenge for many IT departments. Besides providing the integration framework, we’ll also maintain the systems for companies to alleviate the pain of managing it in-house.
- Risk analytics and risk reporting were most often cited as the critical ETRM capabilities, with intraday trading not far behind.
This is not surprising given that the more liquid a market, the lower the margins. Many firms must trade up to 10 times more volume in order to generate the same margin contribution they achieved as recently as five years ago. Rather than simply accept that more work is now required to get the same outcome, these companies are looking for opportunities like short-term trading to increase margins. This requires intraday optimization combined with algorithmic and programmatic trading as key success factors for those who want to enter this market.
- Over 60 percent of respondents indicated their plans to pursue the hosted or managed services strategy to due to the current market conditions.
We’re working with many companies looking to turn their CAPEX and OPEX into more predictable and plug-and-play expenditure, while benefiting from economies of scale. However, hosting services may differ depending on the provider and may not cover the overhead of the internal resources required for management of the application, system interfaces and data feeds. These activities will still require a number of specialized internal resources to ensure the application continues to function as implemented. Here, a true managed services approach can yield significantly higher savings by reducing those resources. Such a holistic approach can help achieve economies of scale and realize significant savings. And more companies are realizing that.
The full report will be available in October. In the meantime, watch the video.
Tagged in: Comtech, Energy, Energy and Commodities, ETRM, Institutional and Wholesale, Report