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Value Study: Investing in

E/CTRM in Turbulent Times

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The only constant is change echoes an astute observation by the Greek philosopher, Heraclitus, some
2,500 years ago. Those of us who are engaged in the world of commodities are continually reminded of the accuracy of his observation, particularly recently, as commodity prices collapsed led by crude oil. In fact, our industry
is continually impacted by changes in the regulatory environment, supply/demand balance, global economic environment, technology developments, political intervention and more.
Recently, BP noted in its annual Energy Outlook1, Todays turbulence is a return to business-as-usual. Continuous change is the norm in our industry. The energy mix changes. The balance of demand shifts. New
sources of energy emerge, such as shale gas, tight oil,
ultra-deepwater oil or renewables. Economies expand
and contract. Energy production and consumption are
affected by disruptions, from wars to extreme weather.
New policies are created to address climate change or
bolster energy security.

Change is the very lifeblood of the commodity
trading world, creating opportunities for profit for those

who are swift and responsive enough to act. Good traders make money
in up or downwards moving markets, provided they are armed with up-tothe-minute data and the analytical tools needed to identify, analyze and
manage their trading decisions. However, depending on market direction,
other market participants might be caught in a more problematic situation
and experience cash flow and/or profitability issues should price movements undermine their naturally long (producers) or short (consumers)
positions. Nonetheless, if the company has the right tools at its disposal
to track up-to-the-minute changes, and properly and effectively manage its
exposure to those changes, then value can be protected and in some situations, profits might be made.


As of today, commodity prices have dropped dramatically while the costs of doing business have increased
in many areas, such as regulatory compliance. In this
environment, it is more difficult to make money and
companies are increasingly focused on cost containment. As the market enters into the other side of the
so-called commodity super cycle, most forecasts indicate several years of over-supply and lower commodity
prices; a situation exacerbated by a stronger US Dollar. Despite this, companies that produce, consume, or
trade commodities still need to manage transactions,
risks, cash flows and all of the other complexities that
are part and parcel of the commodities world.

At any time, but particularly under the current
market circumstances, having the right personnel, pro-

cesses and systems is key to success. An ETRM or CTRM system isnt a

luxury; it is an essential business tool - a must have piece of software to
help effectively manage the complexities of a rapidly changing business. A
capable E/CTRM solution will deliver the requisite analytics and analysis
to ensure that the right decisions are made on time to minimize costs or
increase profits. While total cost of ownership and the value of accrued
business benefits from an E/CTRM software solution are often difficult
to measure, the fact is that these systems are truly mission critical to any
business in the commodity trading and management industries.

Under todays market conditions, some may be tempted to cut costs
or defer expenditures by delaying new procurement projects or even upgrades to existing E/CTRM software. However, in tougher market conditions, the ability to properly manage transactions, exposures, risks, and
regulations accurately and in a timely manner becomes even more imperative.

1 | BP Energy Outlook 2035, February 2015

Commodity Technology Advisory LLC, 2015, All Rights Reserved.

Value Study: Investing in E/CTRM in Turbulent Times

A ComTech Advisory Whitepaper


The benefits provided by a modern and well-deployed E/CTRM solution are wide and varied, but
unfortunately, not often measured. They include the

Focus on core competencies A pre-packaged solution along
with expert guidance from the vendors expert staff, frees up user staff
to stay focused on business processes and delivering value.


The availability of a golden copy of data in a single E/CTRM streamlines regulatory compliance, reduces the cost of building data extracts
for externally managed compliance processes, and helps ensure full
and accurate compliance with mandates.

Automation of complex and routine tasks and business processes eliminates manual processes and
reduces costly errors. A reduction in training and
support costs can also be achieved by consolidating
those processes onto a single platform. Users and
their companies benefit from the shared knowledge
provided to them as a part of a vendors user group.
Todays leading E/CTRM solutions will also provide
the necessary tools and analysis to assist inoptimizing physical assets, improving operational efficiencies and improving profitability.

A good commercial solution can help mitigate many
forms of risk exposures, including price, credit, legal,
regulatory and operational risk all supported by an
audit trail of actions.


Improved and robust analytics result in better decision making.

The comprehensive coverage of physical and financial instruments available in the leading commercially available systems expands the range
of products that user companies can offer to their customers, and with
quicker time to market. Having consolidated data on one platform with
advanced reporting capabilities allows businesses to better understand
the profitability of their individual clients.



A singular, comprehensive solution can deliver a significantly better user

experience as compared to spreadsheets or disparate homegrown solutions, helping to minimize data entry errors and improving productivity.

A vendor supplied and supported solution can provide advanced and newly required functions and
features more quickly as compared to outdated or
disparate homegrown solutions, ensuring the business has the capability to respond quickly and appropriately to opportunity and mandates.

Plainly, these are just a few of the benefits that might be gained using
one of the better commercially available E/CTRM solutions on the market. In the end however, the actual benefits that may be accrued will
depend on the capabilities of the commercial solution, the quality of that
vendors support and the quality of the deployment/implementation.

Commodity Technology Advisory LLC, 2015, All Rights Reserved.

Value Study: Investing in E/CTRM in Turbulent Times

A ComTech Advisory Whitepaper


Undeniably, OpenLink is, by many measures, the
leading vendor in the E/CTRM software space. In
particular, OpenLink has the largest installed base
of any commercial E/CTRM vendor, including most
of the larger, blue-chip commodity players globally.
Consistently, OpenLink is seen by users as providing
the best in class E/CTRM software solutions in general, and across a wide range of specific categories.2
The companys clients do report that they do accrue
significant business benefits by having available a
high-end analytical platform that can help uncover
profit or identify opportunities for cost reduction in a
volatile and challenging market.

For example, a European oil producer client
had been relying on a patchwork quilt of commercial
solutions, spreadsheets and homegrown software
prior to their implementation of OpenLink three
years ago. In the increasingly complex and stringent
regulatory environment to which they were exposed,
and based upon the recommendations of their external auditor, the company sought a replacement


After selecting and implementing OpenLink, the
customer realized many significant benefits including:
// Achieved greater operational and financial
transparency, addressing regulatory requirements and avoiding potential regulatory and
audit issues,
// Acquired a platform on which the company
could add derivative trading on top of the
physical business, helping to more effectively
manage exposures and forward price risks, as
well as accruing some tax benefits,

// Streamlined various business processes based on best practices provided by OpenLinks consulting staff,
// Achieved a golden copy of operational and financial data; proving the company a real-time reporting capability that has helped
the company adapt to business changes and reduce IT costs,
// Positioned the company to add natural gas transactions on a
single platform.

In the end though, for this customer, the OpenLink system decision
wasnt about costs as much as about having a comprehensive and
robust mission critical system in place to support their business
through change.
Another OpenLink oil company customer
in North America has seen a number of
business benefits including;
// Improved business process and communication flow as well as
better cooperation within the company,
// Reduced reliance on spreadsheets and improved controls
across and within various business units,
// Improved ability to respond to market changes through a single
view of the business, improving accuracy and timeliness of decision making,
// Improved operational visibility across the business resulting in
improved cooperation and a clear view of processes and responsibilities,

In fact, the companys key user recommends that other companies

continue to invest in technology and systems even in a turbulent
market saying, the industry has always gone through up and down
cycles and waiting for an upswing for IT investment could mean that
you are implementing at a time that you need improved capabilities
or a new system the most.
Some other specific examples of business
benefits that various OpenLink users
have experienced include,
// Reduction of confirmation time for trades by 75% and a saving
in headcount of 30% through improved efficiency,

Commodity Technology Advisory LLC, 2015, All Rights Reserved.

Value Study: Investing in E/CTRM in Turbulent Times

// Reduction of 5-year total cost of ownership

by approximately 30% when comparing the
costs of legacy internally developed systems
versus OpenLink software,
// Optimized physical power generation assets
resulting in a saving of millions in fuel costs
// Reduced risk of fines and penalties for
non-compliance with regulations, and
// Identified and eliminated significant errors in
homegrown risk analytics that could have cost
the business significantly.

A ComTech Advisory Whitepaper

Though often difficult to quantify or even measure, the fact remains

that implementing a leading commercial E/CTRM solution such as
those from OpenLink, can result in a reduced total cost of ownership,
improved operational performance, and real risk mitigation. However, in this market environment, perhaps the most important benefit
that accrues is improved ability of user to react, proact and respond
to industry change and volatility in a more timely and effective manner, protecting company value and improving profitability.

As the fundamental conditions of commodity
transacting continue to change, visibility across
all aspects of the business must improve. While
some might be tempted to cut costs or defer expenditures by delaying new procurement projects
or even upgrades to existing E/CTRM software,
the ability to properly manage transactions, exposures, risks, and regulations on a timely basis
becomes even more imperative in turbulent markets. Ensuring that businesses processes are
both streamlined and auditable; providing traders
with up to the minute trading intelligence; providing management with key performance indicators
required for strategic decision making; and equipping risk managers with the analytical tools they
need is even more important under such circumstances. A commercially provided E/CTRM solution will assist the business by,

// Providing improved market awareness driven by data and a vigilant eye on macro trends. Strategies must be formulated around
those macro trends and managed on market data and the real-time or near real-time analysis delivered by the software,
// Improving internal visibility, as profit is made or lost on daily decisions. The E/CTRM provides the more accurate and timely position management, risk management and business intelligence
support that is key to ensuring that opportunities are exploited
and risks addressed,
// Ensuring regulatory compliance at a time when regulators are
quick to move, as once on their radar, businesses will be subject
to increased scrutiny for a very long time. The E/CTRM solution
can help to develop a culture of compliance and improved visibility for regulators helping to avoiding punitive and damaging
enforcement actions.

The chances of success in this market now, and into the future, are
increasingly dependent on the mission critical trading technologies
deployed by the business.

2 | CTRM Vendor Perceptions Report, Commodity Technology Advisory LLC, 2014

Commodity Technology Advisory LLC, 2015, All Rights Reserved.

ABOUT OpenLink

Founded in 1992, OpenLink is the global leader in Transaction Lifecycle

Management (TLM) software for the commodity, energy and financial
services industries. OpenLinks products address portfolio management,
trading, risk management, and operations processing for both financial
and physical assets.
Owned by leading private equity investment firm Hellman & Friedman, OpenLink is
a global software and services business that has grown both organically and through
strategic acquisitions, to achieve revenues in excess of $300 million. The company
serves over 500 clients, including 12 of the worlds largest commodity and energy
companies, 9 of the largest financial institutions, and 13 of the largest central banks.
OpenLink has 1,200 employees in 12 global offices on five continents, with headquarters outside New York City and field offices in Houston, Manhattan, London,
Berlin, Vienna, Toronto, So Paulo, Mexico City, Singapore, Dubai and Sydney.
OpenLink has received numerous industry awards and recognition,
including citations as the industry leader in Commodity/Energy Trading
and Risk Management (C/ETRM) systems, and first-in-class ranking by
Energy Risk magazine, with analyst firms Gartner and Chartis citing
OpenLink as a leader in Financial platforms.

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, whosecombined 60-plus years in the
energy and commodities markets, provides depth of understanding of the market and
its issues that is unmatched and unrivaled by any analyst group.
For more information, please visit:
ComTech Advisory also hosts the CTRMCenter, your online portal with news and
views about commodity markets and technology as well as acomprehensive online
directory of software and services providers.
Please visit the CTRMCenter at:
19901 Southwest Freeway
Sugar Land TX 77479
+1 281 207 5412
Prague, Czech Republic
+420 775 718 112
Email: info@comtechadvisor