Taking the Next Step in CTRM Cloud Solutions

TAKING THE NEXT STEP IN CTRM CLOUD SOLUTIONS

WHITE PAPER

© Commodity Technology Advisory LLC, 2014

Introduction IN THE LAST DECADE, A QUIET REVOLUTION HAS OC-CURRED WITHIN THE E/CTRM (ENERGY/COMMODITY TRADING AND RISK MANAGEMENT) SOFTWARE CATE-GORY AS VENDORS AND USERS HAVE INCREASINGLY ADOPTED THE CLOUD-COMPUTING MODEL. THIS MOVE HAS BEEN DRIVEN BY DEMAND LARGELY FOR MORE AFFORDABLE E/CTRM SOFTWARE AS REFLECTED BY A LOWER TOTAL COST OF OWNERSHIP. INCREASING REGULATORY AND SHAREHOLDER SCRUTINY HAS MEANT THAT EVEN SMALLER COMMODITY TRADERS NEED TO ABANDON SPREADSHEETS AND SIMILAR UNSTRUCTURED AND DIFFICULT TO AUDIT TOOLS IN FAVOR OF MORE ROBUST SOLUTIONS. HOWEVER, EVEN THE SMALLEST ‘OF COMMODITY TRADING COMPANIES HAS PRETTY BROAD AND COMPLEX REQUIREMENTS MEANING THAT THEY ACTUALLY STILL REQUIRE A FULLY-FLEDGED APPLICATION TO MEET THEIR NEEDS, BUT ONE THAT FITS WITHIN A BUDGET THAT REFLECTS THE SIZE OF THEIR BUSINESS.


A ComTech Advisory WhitepaperTaking the Next Step in CTRM Cloud Solutions

E/CTRM IN THE CLOUD

It is important to note that it’s not just the small-er commodity traders that see the potential ben-efits of a cloud-based solution either. Recent ComTech research1 suggested that, in general, all buyers of E/CTRM software are increasingly open to considering alternatives to the tradition-al “on premises” implementation model. While a small, but committed, minority continue to resist anything but the traditional on-premises imple-mentation approach, the overwhelming majority of respondents will consider cloud deployment for a variety of vertical application areas in and around commodity trading. However, the same research suggested that only 16% of those who responded to the sur-vey already used a cloud-based E/CTRM solu-tion. It also showed that just around half would seriously consider E/CTRM in the cloud as a procurement option though the final decision was often still more likely to lean toward a tra-ditional installation. Beyond a general softening of overall objections, the sluggish global econo-my has been driving increased interest in cloud-based E/CTRM, as the potential for substantial cost savings for the acquisition and implementa-tion of cloud solutions (versus that for traditional software) is attractive. General perceptions regarding software delivery in the cloud have improved over the last few years. A majority of the survey respondents

held favorable or improved views of the model; almost certainly in part due to increasing exposure to cloud-based products gener-ally in both the consumer and commercial markets (including on-line exchange trading, on-line banking, CRM solutions and even iTunes). However, the most pressing issues associated with cloud delivery remains potential security issues, concerns about loss of control over their data, and perceptions of dif ficulty in integrating with cloud based or web delivered software applications. In reality, the security issues related to E/CTRM deploy-ment in the cloud may be somewhat overwrought. With the advent of on-line exchange trading and trade reporting, most companies today already have significant volumes of trade data “floating around in the cloud”, and with the new regulatory reporting re-quirements, that volume of trade data sitting outside of a trading company’s firewall will only increase. There will be a continuing acclamation to, and acceptance of, cloud-based applications/data storage as web-based trading and reporting becomes even more common. That being said, data security should always be a critical concern to users of E/CTRM systems, regardless of whether that data is in the cloud, in an in-house server room or sitting in a box on a trader’s desk. The attraction of cloud-based E/CTRM software is not limited to ease of deployment. The ongoing cost benefits are also quite attractive as it potentially significantly reduces the need for expensive implementations, upgrades and maintenance activities as well. Web-based means users have instant access to the full range of functionality from your Web browser. There are no long, costly installations or expensive servers and databases to buy and support. E/CTRM in the cloud has potentially positive implications for speed of implementation, cost of ownership, operational flexibil-

In recent years, consumer and business cloud-based applications have begun to catch on and that familiarity does seem to have benefited the E/CTRM in the cloud market as well, as customers are now much more familiar with the benefits than they were 5 years ago.

1 | CTRM in the Cloud, Commodity Technology Research Report, January 2014 (Sponsored by Aspect Enterprise, Brady PLC and Generation 10)



DELIVERING THE BENEFITS

In order for E/CTRM software to cater for a broad enough set of users to be commercially viable, it has to also be extremely configurable. Unfortunately, this configurability often translates into complexity that increases implementation times and the difficulty in supporting the application; in turn, driving up costs and increasing the operational risks associated with customized software. Simply supplying E/CTRM in the cloud doesn’t necessarily help reduce this com-plexity either and the market is well equipped with stories of implementation over runs and even failures for both on-premises and cloud based solutions. Addressing the risk of such occurrences, As-pect’s AESthetics technology, which has now been running for several years, involves a series of initia-tives designed to reduce this complexity, expediting

As one of the earliest in the cloud vendors, Aspect has gained a level of expertise and insight into cloud deploy-ment and into accruing the promised business benefits beyond that of most E/CTRM vendors. The company has recently launched a program called AESthetics, designed to remove the complexity from E/CTRM implementation and customization around cloud-based applications. In addressing this need, AESthetics hits at one of the biggest difficulties with E/CTRM software; one that has historically been a dilemma for creators and users of the software category alike.

implementations and support. One of these initiatives is to decompose existing business applications into more discrete and granular compo-nents, which along with best practice business process maps created by the company, can be used to help companies assemble the com-ponents into any workflow to meet their users’ business requirements. Aspect Enterprise Solutions has also developed and uses a series of Work Benches to represent common activities among commodity trad-ing companies, including for example, Reference Data Management, Contract Management, Credit Management, Transaction Capture, Deal Confirmation, Risk Management, Physical Delivery, Settlements and Accounting. The company builds and releases such Workbenches with each new release. The idea is that by configuring the component applications, common business activities and best practice business processes and workflows, users can create and access an application that is truly per-sonalized to their business and create an experience that Aspect terms

ity, trading safety, and ef ficiencies. Rapid deploy-ment is provided out of the box, with customized configurations depending on the complexity of the requirements. Buyers however, must be careful and check the label. Taking a client/server E/CTRM application, hosting it somewhere and then screen scraping it with Citrix is not SaaS nor hosted in the cloud. Such a mode of deployment may not bring the envisaged cost and business benefit as it may not of fer the vendor the ability to reduce costs associated with implementation

and support. To really provide those benefits, the E/CTRM needs to be written specifically for such a delivery mechanism; the right architecture and technologies are key. One vendor who, perhaps more than any other, has innovat-ed E/CTRM in the cloud is Aspect Enterprise Solutions. The com-pany started of fering its ETRM solutions in the cloud 14-years ago and has continued to do so ever since in the broader CTRM arena for metals and agricultural commodities. The company has enjoyed considerable success with this model and counts some 500 com-panies as clients for its web-based E/CTRM and data management tools.



A BROADER PARTNERING APPROACHNot only does the AESthetics approach work at progressively making the software easier to adopt but, as importantly, it makes the software easier for third-parties to work with as well, ensuring that there is a depth to choice of third-party consulting resources to assist users during implementation and for long-term support. While Aspect realizes the benefit of an increased sales channel via these 3rd party resources, the value to customers comes for the breadth of companies that assist in the support-ing Aspect’s solution. To this end, the company has also designed and launched an innovative partner

program recently called APP, which by partnering with many of the top services and technology companies across commodities, and regions globally, Aspect is able to extend best practices, innovative tools and optimum cost efficiencies to customers. The APP is designed to drive improvement and increase their client’s return on investment throughout the software’s lifecycle, from initial acquisition through implementation, support and maintenance. By pooling strengths in core competencies, best business practices and tools, and supported by localized services companies, clients can realize greater success via this partnering program.

Traditional Install AspectCTRM

3 year license/12 users $400k $540k

Implementation $600k $50k

Enhancements/Reports $160k $0

3-year S&M $160k Included

3-year DR $200k Included

3-year IT Support $300k Included

“MyAspect”. Utilizing AESthetics, users can config-ure the Aspect solution as opposed to needing cus-tomization through code development. Ultimately, AESthetics essentially helps to reduce complexity while increasing usability and makes this repeatable across many users of the solution. It cre-ates system stability and flexibility helping Aspect to meet its promise of an “exact fit in record time”. Furthermore, the approach also allows the company to build indirect sales channels using system inte-grators and regional consulting firms, while provid-ing the user with a degree of self-sufficiency as it is possible to outsource the client configuration to third parties and IT teams within user organizations potentially saving time and tens of thousands of dol-lars in professional service fees. Aspect AESthetics is about solving the configurability/complexity problem in the context of cloud-delivered E/CTRM software. As previously stated, configurability and complexity are often two

sides of the same coin, increasing costs and timescales for implementa-tion and increasing the risk of project failure. In order to fully realize the value of cloud delivered E/CTRM, users must still be able to configure their solution to meet their business requirements, without hindering the ability to quickly implement, and bring into full production, the new-ly acquired solution. Not achieving these goals would ultimately defeat the purpose of the cloud model and the potential business benefit of a lower TCO.

Table 1 | Comparison of AspectCTRM Deployment versus Traditional On- Premises deployment

(Simplified from Aspect website content)



SUMMARYCloud vs. on-premise deployment of E-CTRM solu-tions is still debated by internal management and IT teams, but adoption is well underway from all busi-ness segments, large and small. This shift started several years ago within this space. Aspect was one of the first vendors to offer E/CTRM software in the cloud over a decade ago, and it continues to be the leading innovator in this increasingly accepted tech-nology segment. Given the company’s long history and componentized approach to technology devel-opment, and backed by their innovative AESthetics program, Aspect has learned how to optimize the delivery of cloud-based E/CTRM for users, ensur-ing that the perceived business benefits are fully realized.

ABOUT

Commodity Technology Advisory LLCCommodity 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, who’s combined 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:

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Taking the Next Step in CTRM Cloud Solutions