Energy Risk Magazines ETRM Software Rankings 2013

Software Rankings 2013

risk.net/energy-risk March 2013

REPRINTED FROM

c o M M o d i t y r i s k M a n a g e M e n t & t r a d i n g

ETRM customers have spoken – Allegro ranks #1 brand in software

1 Reprinted from EnergyRisk March 2013

Energy trading and risk management (ETRM) software budgets are declining, just as new regulatory requirements are putting more demand on ETRM platforms than in previous years, according to the results of Energy Risk’s 2013 Software Survey and Rankings. Stella Farrington reports

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Energy firms are currently being bombarded with regulatory requirements, many of which will require changes to energy trading and risk management (ETRM) software systems,

according to market participants. But despite this, budgets for ETRM software are continuing to decline, according to Energy Risk’s 2013 Software Survey and Rankings, raising questions about the ability of firms to adequately adjust their systems.

The responses to this year’s survey give the impression firms are attempting to do more with less when it comes to ETRM technology. Above and beyond general maintenance, some 67% of respondents say their organisation is planning to invest in ETRM software systems this year – a figure that is up from 56% last year and 50% during 2011 (see figure 1). However, only 28% of respondents report having a larger budget this year compared with 2012. In fact, almost 27% of respondents say they have suffered a budget cut, while 45% of respondents say their budget will stay constant this year. This shows a steady downward trend in ETRM budgets over the past few years. During 2012, 35% of respondents said they would have a larger budget, while in 2011 the corresponding figure was 38% (see figure 2).

A trend of reduced spending on vendor systems is symptomatic of current economic conditions, combined with the maturity of the ETRM software space, says Mandeep Sidhu, London-based managing director at energy consultancy Opportune. “Increasingly, clients are focused on improving capabilities through integration and the streamlining of business processes. Unless vendors come up with software components that provide significant added value, new software purchases will decline as part of clients’ overall ETRM spending,” he says.

Chris Strickland, Sydney-based director at energy software firm Lacima Group, agrees. “People probably won’t look so much at replacing their full ETRM system now, but look at where they have weaknesses and see how they can best address them,” he says.

Yes67%

No33%

www.allegrodev.com 2

F1. Do you or your clients have plans to invest in software systems in 2013, over and above general maintenance costs?

0%

10 20 30 40 50

Increased

Decreased

The same

2013

2012

2011

F2. How has your budget for ETRM software changed compared with last year?

Focus on rulesCompliance with new regulations is one of the biggest focuses for energy trading firms in 2013 and will require significant additions to ETRM systems. The most significant reforms include the demands of the US Dodd-Frank Act and European Market Infrastructure Regulation (Emir), as well as the Regulation on Energy Market Integrity and Transparency (Remit). Both Dodd-Frank and Emir require clearing and reporting of over-the-counter derivatives trades, while Remit attempts to crack down on energy market manipulation by ushering in a mandatory trade reporting regime across the European Union. Despite this, only 20% of respondents to the survey feel their systems are ready for rules such as these. Some 40% report being almost ready, with 34% classing themselves as not quite ready and 5% saying they are not ready at all (see figure 3). Around 57% of respondents expect Dodd-Frank to be the regulation that will affect them most, with 12% focusing mainly on Emir and 10% on Remit.

Houston-based Baris Ertan, partner and vice-president for commercial trading at implementation specialist The Structure Group, says his firm has clients at various different stages of readiness for Dodd-Frank. “Some have been preparing for it for the last two years, while others are literally only just starting now. Delays in the timing and confusion over the scope of the regulation have held some companies back from focusing on any real solutions,” he says.

In addition, many software vendors are producing solutions that only address a small part of the challenge, making complying with the law much harder for energy firms. “Because not all vendors are addressing the full set of requirements, some companies will be left with a much greater effort to comply in the near term. A lot of risk managers are building component-led solutions for dealing with the regulation – for example, reporting packages and data repositories – and I think we’re going to see a lot more of that approach to come, along with demand for off-the-shelf components,” he adds.

Indeed, a significant number of respondents to the survey say they would like to see more ETRM components specifically focused on compliance with Dodd-Frank and other important regulations. Major vendors such as New York-based OpenLink, US-based Accenture and Connecticut-based Triple Point have developed specific regulatory modules for Dodd-Frank, but these are expected to remain a work in progress until the rules implementing the law are fully written by regulators. Software developers need a degree of certainty before they can finalise their offerings, while new products require extensive testing by both developers and their prospective users. This makes the timetable for producing software compliant with Dodd-Frank extremely challenging, say consultants.

“I really don’t think there’s enough time for everyone to implement systems around [Dodd-Frank],” says Ertan. “It’s definitely going to be challenging, as vendors still have to finish development and then test and then clients have to implement the systems and test. This leaves little time for a package-type solution, which will mean that some things will be done manually in non-optimal ways.”

Flexibility Phil Wang, senior vice-president for financial services product management at OpenLink, agrees the timeframe for developing ETRM software to accommodate Dodd-Frank is challenging. “As a software developer, we cannot wait for every rule to be fully defined before we start work – the timeframes for compliance really do not allow for that,” he says. According to Wang, OpenLink is developing its regulatory offerings as a plug-in that can be customised further by the client or OpenLink, without the need to change basic code. “This method offers a lot of flexibility and means that, as the scope of regulation expands and evolves, we can make changes quickly.”

The length of time it takes to implement new systems

or upgrades remains a bone of contention for many risk managers. While almost 52% of respondents say they implemented a new system last year, over 61% of those say the implementation took over six months. Only 3% say implementation took less than four weeks.

When asked about the outcome of a new implementation, some 82% of respondents say the final result was better, while 3% say it was worse. Fifteen per cent of respondents say the final result was neither better nor worse (see figure 4). A common criticism among respondents is that implementation took longer than originally estimated and was subject to delays, while many respondents were also irked that vendors did not sufficiently understand their needs.


This year’s survey shows many market participants to be less than pleased with their current ETRM software. Only 8% of respondents say their current system provides all the functionality they require, while 12% complain that it doesn’t provide the required functionality. A whopping 80% say the system does provide the required functionality, but that there is room for improvement (see figure 5).

Dissatisfaction with the speed and usability of an existing software system is still the biggest driver behind the decision to purchase a new system or upgrade, with 54% of the vote. Some 31% of respondents say regulation is the biggest factor in their decision to purchase a new system or upgrade, while 30% say changes in the market are the most important consideration.

Breakneck speedThe pace of change within commodity markets adds to the challenge of keeping an ETRM system aligned with business needs, consultants note. “New types of commodities products, markets and trading strategies are emerging all the time – and existing ones are constantly evolving. This requires ongoing investment in supporting and extending the core ETRM platform,” notes Sidhu at Opportune.

When asked what issues ETRM software systems should tackle next, the responses were diverse. Themes mentioned repeatedly by survey respondents include achieving complete straight-through processing (STP), better integration, real-time reporting and middle-office functionality around reporting, analytics and

quantitative modelling.Many consultants argue STP

will never be fully realised and that much money has been wasted trying to achieve the impossible. Because of the complexity of energy trading and reporting, there will always be a need for add-ons or workarounds, they assert. This will often mean using spreadsheets, data warehouses or other solutions to allow for accurate reporting and tracking. “The ETRM software world is still relatively new and the markets are highly complex and ever changing,” notes Houston-based Austin Morris, global managing partner at consultancy firm SunGard Global Services. “It will always be difficult to model highly complex deals and it’s unlikely there will ever be full standardisation.”

Properly integrating datasets and systems is also an area that requires greater improvement and one that companies should take better ownership of, according to implementation specialists.

“Integration is key to reducing operational risk, improving data processing times and ensuring that an organisation is using a single, common dataset for all metrics and reporting,” notes Ertan at The Structure Group. “The ability to see a complete portfolio across all commodities and instruments is also key to understanding risk – or at least, not overlooking risk that might not otherwise be reported as part of a consolidated package.”

Because most companies’ ETRM systems consist of several different software packages, including legacy systems and spreadsheets, it’s vital a company has plans in place to tackle its individual integration needs, say consultants. ■

20%

40%

35%

5%0

10

20

30

40

50

Ready Almost ready Not quite ready

Not at all ready

%

F3. How prepared are your firm’s systems for regulatory changes?

82%

3%

15%

0%

20 40 60 80 100

Better

Worse

Neither betternor worse

F4. What was the final result of your new implementation?

Yes, but thereis room for

improvement

Yes, all needsare met

80%

12%

8%

0 20 40 60 80 100

No

F5. Does your current system provide the functionality you require?



ETRM SOFTWARERegulatory compliance

2013 Vendor %

1 Allegro 25.1

2 SunGard 17.4

3 OpenLink 16.4

4 Triple Point 9.6

5 Pioneer Solutions 5.5

Front office & trade capture

2013 2012 Vendor %

1 2 Allegro 28.2

2 1 OpenLink 23.2

3 3 Triple Point 12.0

4 4 SunGard 8.7

5 5 Pioneer Solutions 8.3

Customer/support services

2013 2012 Vendor %

1 1 Allegro 22.5

2= 2 OpenLink 10.0

2= – Pioneer Solutions 10.0

3= – Lacima Group 8.7

3= – Triple Point 8.7

4 4 Murex 7.8

5 5 ZE PowerGroup 6.1

Overall ease of using the system

2013 2012 Vendor %

1 1 Allegro 31.3


3 2 OpenLink 12.4


5 4 SunGard 5.8

Degree of straight-through processing

2013 2012 Vendor %

1 2 Allegro 27.9

2 1 OpenLink 25.0

3 4 SunGard 10.5

4 – Murex 9.3


Integration of different data sets

2013 2012 Vendor %

1 2 Allegro 26.8

2 1 OpenLink 14.6



4= – Murex 6.1

4= – Pioneer Solutions 6.1

4= 4 SunGard 6.1


MOST PREFERRED SOFTWARE bRANDMost preferred software brand

2013 Vendor Name of software system/brand

1 Allegro Allegro 8

2= OpenLink Endur

2= Triple Point Commodity XL

4 Temenos Energy Credit

5 SunGard Aligne

6 ZE PowerGroup Zema

7 Murex MX.3

8 Pioneer Solutions TRMTracker

9 Lacima Group Lacima Analytics

10 GlobalView MarketView FrontOffice

Best overall ETRM platform

2013 2012 Vendor %

1 1 OpenLink 27.6

2 2 Allegro 26.9


4 – Lacima Group 7.1

5 – Pioneer Solutions 6.7

Best front-office system

2013 2012 Vendor %

1 2 Allegro 25.0

2 1 OpenLink 17.3


4 4 SunGard 8.2


Best for project delivery on time and within budget

2013 2012 Vendor %

1 1 Allegro 23.4


3 2 OpenLink 9.6

4= – SunGard 8.1

4= 3 Triple Point 8.1




ETRM SOFTWARE (CONT)

Order routing & connectivity

2013 Vendor %

1 Triple Point 26.9

2 OpenLink 19.4

3 Allegro 10.4

4 SunGard 9.0

5= Pioneer Solutions 4.5

5= Trading Technologies 4.5

5= Trayport 4.5

Market risk: Power

2013 2012 Vendor %


2 2 SunGard 20.8

3 3 Allegro 13.5

4 1 OpenLink 9.9


Market risk: Oil

2013 2012 Vendor %

1 1 OpenLink 21.5

2 3= Allegro 17.7


4 – SunGard 6.8

5 5 Amphora 6.3

Market risk: Gas

2013 2012 Vendor %


2 1 OpenLink 20.5

3 2 Allegro 20.2

4= 4 SunGard 6.4



Risk metrics

2013 2012 Vendor %


2 1 OpenLink 16.8

3 2 Allegro 12.2


5 4 SunGard 5.9

Physical and financial integration

2013 2012 Vendor %


2 2 OpenLink 27.4

3 1 Allegro 8.0

4= 5 Pioneer Solutions 7.0

4= 4 SunGard 7.0

5 – Murex 5.0

Widest product coverage

2013 2012 Vendor %

1 1 OpenLink 32.9

2 2 Allegro 26.2

3 – Triple Point 11.0


4= 3 SunGard 7.1

Modelling

2013 2012 Vendor %


2 3 OpenLink 18.7

3 4 Allegro 7.5

4 2 SAS RiskAdvisory 5.6

5 – FEA 4.4

Portfolio management

2013 2012 Vendor %

1 1 OpenLink 23.6


3 2 Allegro 15.9


5= 3 SunGard 6.8


Carbon emissions trading

2013 Vendor %

1 Pioneer Solutions 29.8

2 Allegro 25.0

3 SunGard 16.1

4 Triple Point 10.5

5 OpenLink 7.3

Coal trading

2013 Vendor %

1 Trayport 26.5

2 Triple Point 25.8

3 Allegro 19.4

4 SunGard 13.5

5 OpenLink 5.8

Operational risk

2013 2012 Vendor %

1 2 OpenLink 28.1

2 3= Allegro 23.7

3 3= Triple Point 10.1

4 1 SunGard 8.6

5 – Murex 6.5

Best middle-office system

2013 2012 Vendor %

1 1 OpenLink 25.1

2 2 Allegro 22.8



5= 4 SunGard 7.0


MethodologyThe Energy Risk Software Rankings 2013 survey received 238 valid votes from respondents.

Participants were asked to vote for their preferred software provider, data management firm and implementation specialist in a variety of categories. All votes were carefully checked and invalid votes stripped out. These include votes from people for their own firm, multiple votes from the same person or IP address, votes from people using personal email accounts and votes by people who chose the same firm indiscriminately throughout the poll. Votes were weighted, with three points for a first place, two points for a second and one point for a third.



DATA MANAgEMENT

ETRM SOFTWARE (CONT)

ADvISER/IMPlEMENTATIONSPECIAlISTS Preferred system

2013 2012 Vendor %


2 2 GlobalView 22.5

3 4= SunGard 14.4

4 1 Morningstar 11.1

5 – Interactive Data 7.7

Best adviser/implementation specialist

2013 Consultant %

1 The Structure Group 16.4

2 Baringa Partners 8.6

3 Deloitte 7.1

4 SunGard Global Solutions 6.4

5 Accenture 5.0

Best for project delivery within budget

2013 2012 Consultant %

1 – Baringa Partners 17.4

2 – Sapient 10.6

3 2 The Structure Group 9.4

4 1 Accenture 9.1

5 – Opportune 8.7

Best customer service

2013 2012 Vendor %

1 – Interactive Data 24.8


3 3 GlobalView 11.9

4 – SunGard 8.9

5 1 Morningstar 6.0

Ease of using the system

2013 Vendor %

1 ZE PowerGroup 21.8

2 GlobalView 13.4

3 Morningstar 12.2

4 Thomson Reuters 6.9

5 SunGard 6.5

Weather data management

2013 Vendor %

1 Speedwell Weather 24.9

2 Statweather 24.3

3= MDA Federal 11.2

3= Met Office 11.2

4 MeteoGroup 9.5

5 WSI 8.0

Ease of integrating with other systems, including ledgers, clearing/analytics systems and reporting systems

2013 2012 Vendor %

1 3 GlobalView 23.6


3 – SunGard 12.8

4 1 Interactive Data 12.5

5 – Morningstar 5.9

Post-trade services

2013 Vendor %

1 Trayport 24.1

2 OpenLink 19.0

3 Triple Point 11.6

4 SunGard 9.7

5 Allegro 8.3

Credit risk

2013 2012 Vendor %

1 2 Temenos 22.0


3 3 OpenLink 12.3

4 4 Allegro 11.2

5 5 SunGard 7.2

Freight trading

2013 Vendor %

1 Triple Point 27.6

2 OpenLink 18.9

3 Allegro 15.0

4 Amphora 12.6

5 SunGard 7.9



Best for project delivery on time

2013 2012 Consultant %

1 2 The Structure Group 18.9

2 – Baringa Partners 10.1

3 1 Accenture 8.1

4 5 Deloitte 7.4

5 – KPMG 5.7

Technology

Energy Risk Magazines ETRM Software Rankings 2013