2015 2020 CTRM Market Outlook

20152020 CTRM MARKET OUTLOOK

RESEARCH AND REPORT


20152020 CTRM Market Outlook

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Introduction and ScopeCommodity Technology Advisory LLC (ComTech), the leading analyst firm covering commodity trad-ing and risk management (CTRM) technology mar-kets, has recently completed its biannual in-depth review of the CTRM software market space in or-der to compile an estimate of the size of the global CTRM technology market and prepare an outlook for growth across the various component submar-kets that comprise it.

Readers of this report should be aware that in the development of this data, as in past years, we must delineate boundaries for the companies and applications reflected in the scope of the analysis. CTRM is a term that has been widely adopted by many technology companies. Traditional CTRM vendors have been expanding their reach outside of what has been widely and tra-ditionally accepted as core CTRM through acquisition of appli-cations that would commonly be viewed as tools for managing and optimizing supply chains and as such, without adjusting vendor reported results to eliminate these non-CTRM capabil-ities, we would be overstating the size of the market directly related to commodity trading and risk management capabili-ties. As such, for this report, ComTech has utilized a fairly rigid view of what capabilities are encompassed within the bounds of CTRM. The included capabilities (and associated services where applicable) for this report are:

/ Physical and financial commodity deal capture, contract manage-ment and origination

/ Position management and valuation

/ Tracking/managing of commodities logistics as they apply to functionality commonly deployed as a functional component of large scale CTRM solutions servicing gas, power, crude and bulk product movements

/ Confirmation, settlement and accounting of deals/transactions

/ Trader analytics and trading optimization tools

/ Commodity risk management and analytics including but not lim-ited to, VaR, EaR, limits management, credit risk management and PnL.

Products, functionality, and application modules excluded from this market sizing analysis include:

/ Logistical management capabilities not associated with core trad-ing requirements, such as truck, rail or ship tracking software

/ Treasury and treasury-oriented credit functionality

/ Production modeling or optimization software for industries such as oil and gas production, mining or agriculture

/ Applications for managing physical facilities, such as power gen-eration, mines, gas plants, pipelines, refineries, mills or other pro-cessing plants

/ The modules or functional components of ERP applications (such as JDE, SAP and Oracle Financials) that are not directly related to trading or commodity marketing activities

/ Applications intended only to manage financial products (which may or may not include financial commodities) and provide no ca-pabilities for capturing, valuing or tracking physical commodities

/ Supply chain management and optimization applications that cannot capture, manage or value traded commodities based upon their unique physical characteristics

/ Software products related to the metals recycling and waste man-agement segments.

In developing this market outlook, we have included the follow-ing commodity classes: natural gas, power, oil and oil products, coal, industrial metals, precious metals, agricultural commod-ities, softs, and others (including freight, RECs, and other mi-nor commodities). Establishing a definitive size for any market, particularly one as complex as commodity trading and risk management, is a difficult exercise and is impossible to complete with abso-lute certainty. Market sizing, being a forward-looking exercise, must be based upon numerous factors and assumptions. These assumptions include overall economic conditions, forces en-couraging new market entrants, historical buying patterns of existing market participants, technology drivers encouraging new purchases, and the number and capabilities of product vendors servicing the needs of the market. Despite these difficulties, we believe that our organiza-tions unique position in the market, that of highly experienced analysts focused exclusively on the intersection of the commod-ity trading markets and their requisite technologies, provides us the market vision and insight necessary to compile a reliable and accurate estimate of this unique and dynamic technology market.



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SUMMARY OF RESULTS 2014/2015ComTech estimates the value of the global market for vendor-supplied CTRM applications in 2014 was ap-proximately $1.01 billion, comprised of $210 million in license sales, $501 million in services, $267 million in support and maintenance, and $42 million in revenues associated with cloud deployed or hosted software. Utilizing these 2014 results, and based on current mar-ket conditions and estimated vendor results to date, we believe that the market in 2015 will show only a modest increase over 2014, with total estimated vendor revenues of $1,072 million. While license revenues will increase slightly over 2014, the largest absolute increase in value will be associated with ven-dor-supplied services.

While vendor supplied software makes up the majority (in terms of available technology revenues) of the market for CTRM applications, there still exists a number of companies that continue utilizing third party consultants or internal IT staff to develop and support their own custom solutions. ComTech estimates that these bespoke solutions accounted for approx-imately $273 million spent on the services of third party con-sultants in 2014, with a majority of those dollars being spent on continuing support and maintenance; and the remaining amounts being expended on development of new applications. These estimates do not include costs associated with custom-er resources assigned to the development or support of these bespoke applications (internal costs). Though adoption rates for vendor supported solutions will vary by industry segment and geography, ComTech does forecast

that vendor-supplied solutions will continue to see additional adoption (particularly in the metals, ags and softs commodity categories, and in the Asia Pacific region) and we believe the market for custom developed or bespoke solutions will not show any significant growth from year-to-year for the foresee-able future. In addition to 3rd party consulting revenues associated with the development and support of bespoke functionality, consultants and integrators also maintain a significant role in the implementation and support of vendor-deployed solutions. For the purposes of this market sizing analysis, ComTech in-cludes these dollars as part of the global CTRM market size. For 2014, we estimate some $326 million was spent by cus-tomers of vendor-supplied CTRM solutions for the services of these 3rd party consultants to provide assistance during the selection, implementation and integration of the newly acquired technologies. This estimate is somewhat flat to previous years as a number of very large projects that were initiated in 2011 and 2012 have now completed and there have been no new projects of similar size initated in the last two years. We have also observed a tendency to try to prolong the life of existing IT investments as a result of cost pressures in certain markets, such as Europe, and believe that this may have resulted in a slight switch from license to third-party service revenues. Ad-ditionally, we continue to see that more customers of vendor supplied CTRM solutions are engaging with third parties to assist in their acquisition and implementation projects and we expect to see increased spend in this category over the next several years. Based on historical activity and an increasing reliance on 3rd party implementation resources, we believe the expenditures for these consultants to be, on average, at least 3 times the amount spent on vendor supplied consulting resources. Including these associated services revenues, ComTech believes the total annual global market for CTRM products to be $1.62 billion in 2014, and we are forecasting the results in 2015 to be $1.68 billion.

Total CTRM Market by Rev Source

2014$ Millions

2015$ Millions

Vendor License 210 216

Vendor Services 501 533

Vendor S&M 267 273

SaaS/Hosted 42 50

Third Party Implementation 326 325

Non-Vendor Solution 273 282

Total 1,619 1,679

Figure 1 | Total Market Value by Revenue Component



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MARKET BY GEOGRAPHYGeographically, North America continues to be the largest market region for CTRM software solutions, with a mature commodity trading market, particularly in power, natural gas, oil, coal, agricultural commod-ities and metals. While there continues to be a num-ber of companies that maintain non-vendor systems, a large majority of the market for CTRM technology in North America is serviced by vendor-supplied and supported solutions. Europe also has a mature market in commodity trading, though less so than North America in terms of natural gas and

power. Western Europe, particularly the UK, Scandinavia and Germany have established liquid markets for gas and power trading and are relatively penetrated by commercial CTRM solutions. Central and Eastern Europe continue to be rapidly emerging energy trading markets, though often without full and consistent liberalization across the continent, the mar-kets in individual countries are relatively isolated in terms of trading activities and business practices. Given the relatively small size of these national markets, this localization has lim-ited the adoption of vendor-supported CTRM applications as few vendors have been willing or able to make the necessary investments in developing capabilities to address the unique local requirements in each country. Therefore, bespoke or in-

ternally developed CTRM systems are more common in the region. Elsewhere in Europe, established global commodity trading centers, particularly in the UK, Switzerland, and the Netherlands have a long history in trading agricultural prod-ucts, softs, and oil; and penetration by commercially supported CTRM systems is relatively high. The Asia-Pacific region, driven by high demand for com-modities to meet rapidly expanding economies, has become an increasingly active market for CTRM vendors, particularly those for managing oil and oil products, agriculturals, softs and industrial metals and ores. Within the last several years, CTRM

Figure 2 | Total Market by Commodity by Geography 2014

Figure 3 | CTRM Market Share by Geography 2014

North America$ Millions

South America$ Millions

Europe$ Millions

Middle East & Africa$ Millions

Asia/Pacific$ Millions

Total by Commodity$ Millions

Natural Gas 179 2 155 1 31 369

Power 181 3 175 3 37 399

Oil and Products 86 20 84 12 42 245

NGLs 100 1 3 2 1 107

Coal 9 1 10 - 4 24

Precious Metals 12 2 16 4 6 40

Other Metals and Ores 34 10 26 9 37 117

Ags/Softs 85 20 84 24 76 288

Other (Freight, Emissions, Etc.

8 - 14 3 4 30

Total 695 59 568 58 239 1,618



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Within the last year, a number of significant chang-es have occurred in the commodities markets that will impact market growth in CTRM. In particular, the collapse of oil prices in late 2014 has had an impact on several market segments, though particularly oil producers, and especially those in North America, stalling projects and reducing the outlook for new li-cense sales in 2015. However, with the fall in oil pric-es, there has been knock-on impacts across several other commodity classes as oil derived products (as such fuel for production and transportation) are a sig-nificant cost contributor to every other commodity. New market regulations, with implementation begun in 2012, have created much uncertainty in the market and appear to have reduced the number of entities trading commodities, particularly energies. The following assumptions were utilized in the develop-ment of the forward-looking market analysis:

/ Growth estimates reflects current consensus outlook for global economic growth of 3 to 3.5% per year for the foresee-able future. Though this rate has been revised upward when compared with recent years, much of the forecast growth is expected to occur in developing countries, regions in which there is little or no market for CTRM products. With a con-tinuing, though slower than expected recovery in the larger

MARKET OUTLOOK AND STUDY ASSUMPTIONS

economies, overall growth in the market for CTRM products is anticipated to be in line with earlier ComTech estimates.

/ All data is expressed in 2014 dollars there have been no adjustments for inflation or currency exchange rate changes over the period 2015 to 2020.

/ In line with previous estimates, ComTech currently believes the global market for CTRM licenses (including ASP/SaaS) will grow, on average, approximately 5% per year from 2015 to 2020

| Traditionally installed software license sales will grow by approximately 3.5-4.5% per year during that period.

| Growth in ASP/SaaS/Cloud will be approximately 15-17% per year reflecting a high rate of market adoption for cloud related technologies.

/ That being said, as the trend toward cloud continues, it is dif-ficult at this time to accurately forecast the full implications of this changing mix of perpetual license vs. annual license revenues with complete certainty.

/ A lower rate of growth from 2014 to 2015 primarily reflects reduced spending associated with the completion in 2014 of several exceptionally large deals done in late 2012. Based on early 2015 results compiled at the time of this analysis, we anticipate 2014 to 2015 license sales to show lower growth as compared to the later years in our analysis.

/ In general, we see future growth rates reflecting an increasing number of smaller deals as E/CTRM software is adopted in the cloud by smaller firms and a decreasing number of larger traditionally licensed deals as the top tier becomes saturated. We believe that an increasing number of deals will be made

vendors have found success selling products into the Singapore and Hong Kong markets, with national oil companies and large metals and agricultural trading companies being particularly active buyers of vendor systems. However, given cultural and language differences outside of the major trading centers in the region, western-oriented CTRM vendors have continued to have difficulties selling their products within the borders of the largest economies in the region, particularly China and Japan, and these markets are still dominated by custom developed solutions. Overall, while the outlook for additional sales in the

region remain strong, sales of new product licenses is not con-sistent from year-to-year and we expect this trend to continue for the foreseeable future. Despite this, liberalization of national power and gas markets is proceeding in various countries in the region, with Japan seen as a particular area of interest at the moment. In addition, more complex regulatory environments in the West have driven some trading operations to the area. As a result, the market is growing and we assume this market will continue to grow faster than in other geographic region.



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but at a lower average license value, slowing license growth rates. Additionally to this is a trend towards recurring revenue licensing models (lease, rental, monthly or quarterly payments etc.) on the part of many vendors in the space meaning that some of the revenues associated with a particular deal are pushed out into the future.

In addition to our current forecast assump-tions, there exist a number of potential market developments that could impact the outlook for the CTRM market in the coming years.

Should the global economy (and demand for commodi-ties) grow in excess of current forecast assumptions, the follow-ing market segments could show higher than forecast growth.

/ Agricultural markets and Consumer Package Goods (CPG) Increasing price volatility and growing awareness of the value of trading-centric solutions (driven in part by CTRM vendors) for direct, indirect and cross-commodity hedging could accel-erate adoption of CTRM capabilities/solutions.

/ Trading companies and fuels intensive industries, including transportation and logistics companies, processing com-panies Increased demand for oil and products could lead to higher prices/volatilities and could increase demand for CTRM technology solutions as new entrants come to the mar-kets and existing participants seek to improve risk visibility and/or grow via increasing trading volumes or by entering new markets.

/ Mining Mining has been in decline since mid-year 2012. However a strong increase in demand for metals, ores and coal could lead to increased mine development and a subse-quent increase in demand for CTRM solutions in this segment, particularly in Australia, South America and Africa.

/ Base metals and concentrates economic upturn will increase demand and increase price volatilities in non-precious metals trading/processing, attracting new market participants partic-ularly in the traditional market trading centers in Europe and in the import centric markets in the Asia Pacific region.

/ Should full market liberalization in the European Union ener-gy markets occur prior to 2017, growth in demand for CTRM products in that market could exceed 10%/year post liber-alization; however the current outlook does not support full opening of the EUR energy markets prior to 2018.

Additionally, we do observe a number of additional trends that may also impact our forward outlook as follows,

/ Increased interest in CTRM solutions for non-listed commod-ities such as diary and diary products, wool, and other raw materials. Historically, exchanges have introduced financial instruments for commodities in which there was trading and hedging interest and it may be that one or more of these com-modities becomes established over the next five years creat-ing additional prospective market for vendors,

/ The blurring boundary between CTRM and ERP is driven by a real need for better functionality around the buying and selling and hedging against price volatility of physical commodities and raw materials. Several ERP vendors now of fer commodity management extensions and some CTRM vendors have tar-geted the same market space. This trend could also result in a broadening of the market for CTRM software as more man-ufacturing and production companies adopt solutions globally helping to increase the size of the market faster than we have projected.



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5-YEAR MARKET OUTLOOK

REGIONAL REVIEWHigh levels of natural gas production in North America have had a significant impact on prices and volatili-ties for both natural gas and power, reducing trading activities across virtually all industry segments and limiting the entrance of new market participants. Given that the future outlook for natural gas prices is flat to todays market, it is very unlikely that this market will see much in the way of increased demand for CTRM solutions for natural gas or power during the study period. Most sales of new licenses for the energy centric market (including oil, products and coal) in North America will be for replacement of existing vendor supported systems that have been in production for five or more years, and for expansion licenses due to organic business growth. Non-energy CTRM

In developing our outlook for the global CTRM mar-kets, we reviewed the current and perspective market by commodities, geographies and industrial market segments; developing our topside outlook of the mar-ket based upon this granular review. In line with previous years estimates, we anticipate the total global CTRM market will grow by 4-6%, with our estimates

reflecting a midrange value of 5%. Within the revenue compo-nents that comprise this market, we anticipate that traditional installed software license sales will grow at modest rate of 3.5-4.5%, while increasing adoption of SaaS or cloud based solutions will see growth rates from 15-17%, a slight increase over our previous estimates for the market. Nonetheless, while cloud solutions will continue to increase in number of systems deployed, particularly in the low and mid tiers of the market, tra-ditionally installed solutions will continue to dominate in terms

of revenues generated for the foresee-able future. However, with a continuing push by vendors to migrate existing cli-ents and/or sell new clients on either cloud implementations or a lease/rent-al type licensing agreement (in part to ensure a predictable revenue stream for those vendors), the lines between license revenues vs. SaaS/Hosted/Cloud revenues will blur in the future.

license sales do show more promise for growth as we are seeing increasing adoption of CTRM for managing price and operational risks in the supply chains of agricultural, CPG and metals intensive industries. We expect growth in these markets will continue, contributing to an overall growth rate in the North American market on par with the global average of approximately 5%. Europe is continuing to face difficulties in its banking markets and much of the continent has been battling economic reces-sion since the global financial crisis of 2008. While there are indications that there may be an economic recovery in the off-ing, a number of factors (including continuing debt issues in several countries, insufficient capital for trade finance, delayed opening of the liberalized energy markets, and a regulatory en-vironment that is still unsettled) are creating headwinds that

Figure 4 | Total CTRM Market value



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we believe will limit the growth of the European CTRM markets to less than 5% through 2018. Despite indications that Chinese economic growth may be slowing, economic growth in the Asia-Pacific region is ex-pected to remain high in comparison to the rest of the world, and the region will continue to see increasing demand for all commodities. This demand growth, coupled with increasing adoption of solutions for managing market and operational risks, will result in increasing demand for CTRM technologies, particularly those for managing exposures along the global supply chains in ags, metals and oil products. However, we do note that the Asia-Pacific region continues to be a more price

MARKET BY SEGMENTIn terms of market segments, we anticipate the pros-pects for growth in any individual segment will be dependent upon their location and commodity re-quirements. Banks and financial institutions, particularly in North America and Europe, have been departing from commodi-ty trading and overall, those segments will show little or no

Figure 5 | Total CTRM Market by Commodity by Geography 2014

sensitive region when it comes to license fees generally. We believe the growth rate for CTRM in the region will average 7-10% during the next 5 years, exceeding that in other areas. While CTRM deals will continue to occur in South Ameri-ca, it has not yet matured into a predictable and reliable market for CTRM technologies. As much of the regions commodities markets are export oriented, and limited and very uneven economic growth (relative to other global economic regions) does not indicate an expansion of trading activities within the continent, we do not see significant prospects for growth in the CTRM markets in this region for the next several years.

growth in CTRM demand over the period. And though hedge funds have returned to the markets in limited numbers after the financial crash of 2008, the decline in global commodities prices will limit growth for the foreseeable future. Energy merchants and traders, despite the decline in oil prices and the lackluster gas and power markets in North America, are continuing to make investments in new CTRM



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Figure 6 | Total CTRM Market value by Industry Segment by Year

technology solutions, including replacement systems and expansion of existing solutions. With declining prices and in-creased volatility in oil and oil products, we expect that market will continue to attract investment, including new traders, and this market will continue to drive additional growth for CTRM products, particularly in the Asia-Pacific region. Smaller oil trading companies have also been active buyers of CTRM solu-tions over the last couple of years, particularly cloud deployed solutions, and we do expect this trend to continue. As previously mentioned, with low oil and gas prices in North America, regional scale oil and gas producers have mothballed CTRM acquisition/replacement projects and we expect lower activity in this market for the near term. Though global producers have also been impacted by lower oil prices, we do anticipate their scale will allow them to continue to in-vest in systems, though potentially at a reduced pace as com-pared to previous years. While the sudden decline in oil and liquids prices have affected many midstream operators, we do see continued spend in that market in North America as many new system purchases are intended to support facility development. Given the long lead time necessary for design and construction, these projects will continue for some time despite the near term impact of lower liquids prices. However,

should drilling continue to slump for an extended period, we would expect a lower spend in this segment until some recov-ery in oil or gas prices begins to stimulate new drilling activity.Utilities, including both power and natural gas, will continue to invest in upgrading and maintaining their trading/marketing capabilities, though the rate of growth for those expenditures is expected to be lower than the overall market. Several large agricultural and CPG companies commit-ted to very large CTRM deals (with licenses value of more than $10 million) in the period from 2008 to 2012; however, Com-Tech has previously noted that we believe these size of deals are an exception and we do not believe deals of this scale will become the norm in this market. In fact, since 2012, we are unaware of any single deal resulting in a license sale of greater than $5 million. Without the impact of these mega-deals, the total value of new licenses actually declined from $235 mil-lion in 2012 to $210 million in 2014. We do believe the 2014 results provide a more reliable baseline for forecasting and do not expect to see any additional exceptionally large deals to be signed in the foreseeable future. The global metals markets began slowing in 2012 as de-mand declined due to lower global economic growth. Despite earlier predictions of a near term recovery, the market for met-



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MARKET BY COMMODITY

Figure 7 | Total CTRM Market by Commodity / Inc. Vendor Revs, 3rd Party Implementation and Unadressed Market

Both natural gas and power-centric CTRM markets are primarily focused in North America and Europe, where active trading of the commodities is fairly widespread. Within the last several years, there have been sales of power and gas capable systems in the Asia-Pacific region, primarily to utilities and producers; however these sales have previously been the exception. None-theless, with market liberalization in several Asian markets, we do expect growth for gas and power ca-pable systems to increase in that geography.

als has continued to be soft. Without a broad recovery in the global economic outlook, particularly in the Chinese market, ComTech believes the metals trading markets will perform at or slightly below average compared to the wider global CTRM markets, at about 5% per year. Within the last decade, the market has increasing seen the rise of trading companies that have expanded their focus from a single commodity or single class of commodities (such

as energy, ags, softs, metals) and are now trading a broader portfolios of commodities. While these global-scale companies may be commonly identified with a particular class of commod-ity (such as Cargill in agricultural commodities), they are, in fact, trading a broad array of commodities. For this multi-class market segment, we anticipate the growth rate will be slightly higher than the market average, approximately 8% per year through 2020.

The North American natural gas market has continued to experience low prices for the last several years, and those prices are anticipated to remain low for the foreseeable future. Nonethe-less, we do anticipate that increased demand in other geographies should keep total demand for gas centric systems at about 4-5% growth over the period. Power prices are also expected to remain low and our outlook for growth in CTRM for power is somewhat lower at around 3% over the next 5 years. With the sudden collapse of oil prices in the fourth quarter of 2014, demand for oil centric systems has rapidly declined as traders, producers and refiners assess the impacts of the fall. How-



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ever, we believe this pause will be temporary as the market finds equilibrium and demand for oil and oil products systems will again show solid growth of 56% per year. CTRM for NGL trading, which is almost entirely centric to the North American market, has seen a strong increase in the last five years as massive increases in natural gas and oil production led to a boom in infrastructure development and strong growth in the midstream of the market. However, with falling oil and gas prices, we do anticipate a slowing of the market for NGL capable systems as current infrastructure development projects complete and the industry slows to match the slowdown in drilling. As such, the outlook for continued growth in NGLs is limited and we believe beyond 2015, the market will see year over year increase of about 34%. Coal producers and traders are continuing to suffer the ef-fects of a declining market for coal for power generation, particu-larly in the US and Europe, where environmental regulations are accelerating the closing of coal fired facilities and are effectively killing new construction. Though large coal fired projects continue to be developed in China and other areas of Asia-Pacific, the glob-al demand for steam coal is declining. Given these conditions we continue to anticipate that there will be no increase in demand for coal centric CTRM products for some time. CTRM for precious metals is a highly variable market from year to year, driven primarily by both the price and volatility of the gold markets. Precious metals prices have continued to fall over the

last two years and demand for new trading systems has been low. Further, as gold prices are driven by a number of influences out-side of physical supply and demand, it is difficult to forecast future performance of this market. In all, and based on past performance, ComTech believes that this commodity segment will produce a slight increase in demand (less than 5%) through 2020. As previously noted, demand for industrial metals has soft-ened over the last 3 years. We are, however, forecasting growth in CTRM for metals and ores to increase by about 5% per year as that market continues to adopt vendor supplied solutions in a maturing market. Despite recent low commodity prices, continuing demand for agricultural products and high levels of price volatility will keep demand for ag and soft centric systems relatively strong. Addition-ally, increasing adoption of CTRM products by agricultural and CPG market players will drive additional growth for technology in those markets. We anticipate that sales of CTRM capable systems will remain high as agricultural centric market participants continue to adopt to these systems to better manage price, currency, credit and operational risk associated with their long, global supply chains. However, it is important to note that the ags and softs market is more sensitive to price and that average license values in certain geographies and segments of this market can be as much as 25-35% lower than for other commodities. In all, we anticipate growth in this commodity segment will average as high as 9% per year over the next 5 years.



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To arrive at this market sizing estimate, ComTech uti-lized a bottom-up review of all known vendors of production solutions and tools that meet the previ-ously discussed criteria of CTRM technologies. While there are numerous vendors around the globe that do provide qualified (as it relates to this analysis) CTRM solutions, many of those companies also provide products and associated services that fall outside the established criteria, and those revenues have be excluded from this analysis. In developing the bottom up estimate related to CTRM vendor revenues, more than 90 companies were reviewed and most had some or all of their revenues included in the final CTRM Vendor Market Size Estimate. The companies reviewed included (but are not necessarily limited to) the following:

Abacus

Agiboo

Agrosirius

Albedo Energy Consulting

Allegro

Amphora

Ascend Analytics

Aspect

ATOS Worldgrid

Brady

C Square International

Cadran Consultancy

Calvus

CDA - Australia

CMS

ComFin

Commodity Services and Solutions

Constellation Energy Solutions

Cultura

DMS

DISCUSSION OF REPORT METHODOLOGY

DycoTrade

Egar

EGAR

EKA

EMK3

Energeya

Energy One

Energy Solutions International

Ensite

Ensyte Energy Solutions

Entero

Enuit

Eximware

FEA

Gen10

GMSL

Hivedome

Ignite ETRM

IntStream Oy

InvenSoft Technologies

IPESoft Spol sro

IPSystems Ltd

iRely

JustCommodity

Kisters

Kyos energy Consulting

Lacima

Lloret Data Solutions

Logaviv

MCG

MicroStep HDO

Molecule Software

Murex

OATI

Open Link

P2 Solutions (fmrly WellPoint)

Panton (frmly Spectrum Prime)

PCR Ltd

Pioneer

PlanLogic

Powel Delta

For each known vendor of CTRM systems, research was con-ducted (including direct contact with many of the vendors) to obtain:

/ An estimate of vendor revenues and license revenues for 2014. Very few E/CTRM vendors are public companies and disclose some information as part of their regulatory report-ing requirements. Additionally, several large and a fewer num-ber of small E/CTRM vendors, though private, have provided this information to our company under terms of confidentially. Others, more rarely, do occasionally disclose the information publically via press release or other announcements. Utilizing these actual and estimated revenues, along with known and estimated headcount numbers, ComTech generated a num-ber of reliable reference points and ratios for analyzing other vendors for which we had less visibility.

/ One of the primary ratios utilized in estimating any particular vendors revenues was the "revenue per headcount" estimate. In our analysis of metrics provided by vendors or garnered through other sources, the actual revenue per headcount fig-

Progressive

Quorum

SAP

SASRiskAdvisory

Scalable

Sisu

Square Four

SunGard

Tegos

TradePaq

Transition Technologies

Trayport Contigo

Triple Point

UtiliDex

Utiligroup

Ventyx

Vesion

VuePoint

Waterfield Energy Software



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ure ranged from $50,000 to $320,000 per employee (with the $320k per head figure a significant increase over previ-ous years analyses). The large variances in this metric were correlated to a number of factors, though the primary influ-ences were geographic location of the employees and level of specialization of the vendor (i.e. specialized risk management resources would command a higher annual salary).

Based on an analysis of the entirety of this data, revenue estimates can be accurately established for all vendors known to provide qualified solutions in the market. Assumptions were then made for each vendor regarding the allocations of those revenues amongst 4 categories: 1) tra-ditional license revenues, 2) SaaS/Hosted license revenues, 3) services revenues, and 4) revenues associated with support and maintenance agreements. In addition to the identified and known vendors of CTRM products, we have made the assumption that there exists some number of vendors that are unknown to us. While Com-Tech Advisory analysts are highly experienced in this market, we cannot assume that every vendor, particularly those that operate in very localized markets (particularly in the Asia Pacif-ic, South America and Eastern European/Russian markets), will be known outside their local areas. Therefore, as with past years, we have included a relatively small amount of revenue (less than 5% of the global total) to account for these entities. In order to determine a total market spend for CTRM tech-nologies, it is also important to account for the dollars spent with consultants and system integrators outside those provid-ed by the vendors of the technologies. We have observed a clear trend by most market participants to engage such 3rd party services in almost all new product implementations, and in an increasing number of upgrade and other support-related

projects. Utilizing the results of a number of different research paths, we have established the value of these 3rd party ser-vices related to the initial implementation of CTRM solutions as $326 million in 2014.

Additionally, we have established a value of custom devel-oped or bespoke solutions (non-vendor) produced and deliv-ered by third party consultants at $273 million for 2014. This value represents the portion of the market that has chosen to deploy custom developed solutions despite there being com-mercially available software that could meet many or most of their requirements. While this portion of the market is size-able, representing about 17% of the total market, and there will certainly always be companies that feel they have unique requirements that cannot be adequately addressed by vendor solutions, the increasing penetration of commercial CTRM solutions has resulted in no appreciable growth in this market.

Figure 8 | Global CTRM Market Revenue Vendor OnlyFigure 9 | CTRM Vendor Revenue by Commodity



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Note: Differences in annual market size totals amongst the following data is related to rounding errors and/or model noise.

APPENDIX MARKET SIZE DETAIL 2014 THRU 2020

Total CTRM Market by Rev Source

2014$ Millions

2015$ Millions

2016$ Millions

2017$ Millions

2018$ Millions

2019$ Millions

2020$ Millions

Vendor License 210 216 224 232 241 250 259

Vendor Services 501 533 562 593 626 660 697

Vendor S&M 267 273 285 297 309 322 336

SaaS/Hosted 42 50 58 69 81 95 111

Third Party Implementation 326 325 330 380 356 373 395

Non-Vendor Solution 273 282 281 281 282 280 277

Total 1,619 1,679 1,740 1,812 1,895 1,980 2,072

2014$ Millions

2015$ Millions

2016$ Millions

2017$ Millions

2018$ Millions

2019$ Millions

2020$ Millions

Financial Cos. 83 83 83 84 84 85 85

Energy Merchants/Traders 213 226 234 244 225 266 279

O&G Producers 210 197 203 208 214 221 227

O&G Midstream 115 118 113 117 212 127 132

Power Utillities 215 220 222 225 229 233 237

Refiners, Distributors, Processors 104 109 115 121 127 134 139

Gas Utillities/LDC 43 45 46 48 49 51 52

Energy Retailers 25 26 27 27 28 29 30

C&I Energy Consumers 50 52 55 59 63 67 72

Ag Traders 157 171 181 193 206 219 234

Food and Bev (inc. Processors) 128 138 150 160 174 186 200

Ag Producers 77 86 90 96 100 108 117

Mining 47 49 51 53 55 57 59

Metals Traders 66 67 71 75 79 84 88

Multi-Class Traders 85 93 99 104 110 115 124

Total 1,619 1,681 1,741 1,813 1,895 1,982 2,074

Total Market does not include ancilary 3rd party services for non implementation support activities, including management consulting, technology road-mapping, etc.

Figure 10 | Total Market Value by Revenue Component

Figure 11 | Total Market Value by Segment - Vendor Revs, Third Party Implimentation, Unaddressed Market



16

2014$ Millions

2015$ Millions

2016$ Millions

2017$ Millions

2018$ Millions

2019$ Millions

2020$ Millions

Natural Gas 370 386 399 413 429 448 469

Power 398 404 415 426 439 449 451

Oil and Products 245 257 262 275 286 298 310

NGLs 108 114 118 121 125 127 129

Coal 23 23 23 24 24 24 24

Precious Metals 41 42 44 46 49 51 54

Other Metals and Ores 116 117 121 125 130 135 139

Ags/Softs 288 304 329 355 385 415 448

Other (Freight, Emissions, Etc. 30 32 33 35 38 40 43

Total 1,619 1,679 1,744 1,821 1,904 1,986 2,077

Figure 12 | Total Market Value by Commodity Vendor Revs, Third Party Implimentation, Unaddressed Market

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, whose 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:

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 CTRMCente at:

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Documents

2015 2020 CTRM Market Outlook