Webinar: Why Commodity Analytics is the Next Big Thing for Trading, Risk, & Supply Chain

Webinar: Why Commodity Analytics is the Next Big Thing for Trading, Risk, & Supply Chain

Patrick Reames Founder and Managing Partner,

Commodity Technology Advisory

Michael SchwartzEVP & Chief Marketing Officer,

Eka Software

USA | India | United Kingdom | Australia | Canada | Singapore

Agenda

• Commodity market tech spending trends• Technology solution trends• Why commodity analytics now• How Commodity Analytics Cloud enables fact-based decision

making

Join the conversation: @EkaSoftware

CRITICAL TRENDS IN CTRM TECHEKA WEBINAR – JUNE 29 2016

© 2016, COMMODITY TECHNOLOGY ADVISORY, LLC

ETRM/CTRM TECHNOLOGY TRENDS

Commodity Market and Tech Spending Regulations are Impacting Systems Cloud, Cloud and more Cloud A Return to “Grow Your Own”? Changing Landscapes of Tech Providers and Buyers Analytics a “Must Have”?

© 2016, COMMODITY TECHNOLOGY ADVISORY, LLC 05/03/2023 4

Seeing significant belt tightening in many sectors of the industry as commodity prices drag bottom, regulatory and other costs increase and profits are squeezed

IT is always among the first cost cutting casualties and this time is no different

The market for “full” CTRM solutions has not grown as projected and recovery will be dependent upon commodity market improvements

New systems are still being purchased, but there is pressure in all areas of costs from license to support

Buyers that are in the market are often seeking alternatives to the traditional approach of “soup-to-nuts” vendor supplied CTRM solutions

COMMODITY MARKETS IMPACTING TECH SPEND

05/03/2023© 2016, COMMODITY TECHNOLOGY ADVISORY, LLC 5

Source: Bloomberg.com

Bloomberg Commodity Index 06/28/16

Increasingly invasive regulatory regime in the west: D-F, REMIT, EMIR, MiFiD2 and equivalents

Regulations are impacting systems and processes Trade Reporting Data Retention Risk Management Portfolio Management Capital Adequacy Market Abuse Market centralization

More connections, more data, greater reporting…

REGULATION INCREASING COMPLEXITY


Increased costs and risks - direct and indirect (staff, systems, business processes, fines and penalties, reputation)

Growing pool of regulatory solutions, tools and add-ons have emerged to address specific market requirements

Not just regulatory though - outside and internal auditors, stakeholders etc. will also expect more rigor, including KPI’s

Treasury management becoming more critical - protecting balance sheet and meeting lender/debt holder requirements

Greater amounts of data are being held longer - data management, analysis and visualization are becoming more critical capabilities in addressing regulatory and stakeholder inquiries

REGULATORY AND MORE


General economic environment has resulted in cost cutting and deferred projects; however, this is NOT the entire story: The near demise of Triple Point and some notorious project failures have also resulted in increased

due diligence and are slowing the buying cycle

Buyers are focusing more on track records – successful implementations, completeness of the solution and reliability of vendors

This trend is only likely to deepen given current environment, including geopolitical concerns impacting commodities markets - Brexit, unreliability of growth in Asia, etc.

More and more buyers are looking at “non-traditional” solutions, including cloud and hybrid homegrown/vendor

BUYERS ARE BEING MORE CAUTIOUS


“CLOUDY” DAYS

Adoption of cloud solutions increasing – estimated 15% annual growth v. 3% for “traditional” software

Fits with current economic environment Reduced up-front

expenditures Lower internal IT Different accounting

treatment More options - Growing

number of true “in the cloud” solutions from multi-tenanted to hosted in the cloud

© 2016, COMMODITY TECHNOLOGY ADVISORY, LLC 05/03/2023 9

Lower Total Cost of Ownership Lower entry cost – server and system costs

Lower demand on internal IT resources Lower implementation costs

Faster deployment Ease of version upgrade

More secure backup, recovery and cyber security Relatively easy to replace if or when necessary

3.4 3.5 3.6 3.7 3.8 3.9 4 4.1 4.2 4.3

Perceived Benefits of SaaS and the Cloud

Difficulties in integrating with other sys-tems

Lack of control

Loss of agility for competitive advantage

3.5 3.6 3.7 3.8 3.9 4 4.1 4.2 4.3 4.4 4.5

Perceived Negatives of SaaS and the Cloud

BUILD IS MAKING A COMEBACK


Why would you build? Why would you buy?

Top tier – multi-commodity, global merchants/traders looking at build – no solution on the market to cover all requirements.

Many adopt hybrid approach – combining components of vendor solutions with homebuilt – willingness to consider smaller vendors if vendor risk can be addressed.

Is there a growing disillusionment with commercial systems?

38%

32%

30%Yes definitely consider custom

Yes, but probably buy

No, we would not consider custom

IT prefers this approach

We are too different

Avoid generic functionality

We know our business requirements best

To have total control over functionality

1 2 3 4By the time delivered, requirements changed

There are adequate commercial solutions

Impossible to free up business resources

Keeping it current to requirements

Too costly to build

We are not an IT organization

1 2 3 4

Despite ongoing M&A activity and market size growth, ComTech market sizing studies indicate that the top 6 vendors market share has eroded (from 71% in 2014 to 65% in 2015).

Some of this is attributable to the near demise of Triple Point but not all…. Top Tier is shrinking – banks, utilities and others left commodity trading or scaled down operations

considerably Reduced budgets and general cost cutting Many large established vendors have been late to the cloud and are essentially providing hosting

services Emergence of ERP vendors with Commodity Management capabilities taking market share Still more than 90 vendors in the space – some of the smaller, more modern technology players are

gaining ground The CTRM vendor market is undergoing a shift, with many of the large vendors moving

down-market to preserve market share and find growth…and in the process, reducing functionality and capabilities to better compete on price.

CTRM VENDOR TRENDS


Despite cost pressures, regulatory mandates, increasing market risks and need to improve bottom-line performance are driving the need for improved analytics – predictive analytics, sentiment analysis, beefed-up risk metrics, optimization etc.

In the recent ComTech 2016 CTRM Vendor Perceptions report, 50% of the respondents ranked “Comprehensive Analytics” as a critical or important capability for their company.

Data management and analysis tools are becoming a “must have” capability for a growing number of trading and marketing companies.

How much of this will ultimately be met by ETRM/CTRM vendors remains to be seen, but the trend is increasingly to extract these functions as an enterprise-wide layer that can provide improved processing performance, improved analytics capabilities, and improved visualizations not reliant on the underlying CTRM architecture.

ANALYTICS ARE BECOMING A “MUST HAVE”


The fall in commodity prices (driven by over-supply/lower demand) is driving the big picture, squeezing profit from many commodity trading entities; the regulatory environment is not helping either, adding costs, complexity and uncertainty.

These two factors are driving many of the current tech trends – cost cutting, buying cycle lengthening, increasing popularity of cloud, hybridized solutions and increased interest in analytics.

Despite the ‘gloom’ and uncertainty generated by the media, the overall tech market (so far) remains active with bright spots in certain segments. However, the larger CTRM vendors are facing increasing pressure to pivot to lower cost solutions that address a wider market, and with over 90 vendors, competition is fierce.

For tech users/buyers, there is no singular approach or vendor - just more requirements and options that need to be addressed with lower budgets – will require innovation and an openness to new tech approaches.

SUMMARY


CONTACT


19901 Southwest Freeway, Suite 140Sugar Land, TX 77479

Phone: 281.207.5412Cell: 832.687.4736

[email protected]

Patrick ReamesManaging Partner


Eka Software Solutions: Company ProfilePosition: Global leader in on premise & cloud served Smart Commodity Management solutions

Founded: 2004

Employees: 315

Global Offices: 7 offices. 3 development & support centers• North America, APAC, Europe

Investors: Silver Lake Partners - GP Group - Nexus Venture Partners

Customer Base: >50 leading global enterprises on 4 continents• Cargill, EDF Trading, Twin Eagle, Rio Tinto, Mitsui, Bunge, BMA, Graincorp, Viterra, Louis

Dreyfus, COFCO, CBH, Boliden, Tata Steel, Pinnacle Foods, Just Energy, REG

Solutions: InSight Commodity Management (CM) Platform (ETRM & CTRM)• End to end financial and physical transaction management – Energy, Ags, Metals, Bulk• Cross asset trading and position management • State of the art enterprise risk management

Commodity Analytics Cloud• Analytics specific to commodities – Commodity Intelligence Engine• Multiple data sources internal and external to Eka (including competitive E/CTRM) • Prebuilt apps

15


Accenture and Microsoft Study – Digital Trends in O&G

16

• Short term focus is to lower costs and longer term is to create value

• Investment continues and is expected to increase

• Digital is enabling companies to reduce costs and better manage operations through new capabilities such as advanced analytics

• Companies need to quickly improve their capabilities, including maturity in analytics

• Increased use of cloud to unlock the value of digital


Why is Analytics and Fact-Based Decision Making a Challenge

1. Many commodity market problems are unique and require complex logic to get to the answer. Which software can do this for me?

2. Existing options are expensive and time consuming to implement. We’ve already spent so much, do we have to spend significant sums again?

3. To make meaningful and timely decisions, large volume data needs to be integrated from multiple sources and processed. What technology choices do I have?

Most companies have already invested in ERP, CTRM, Treasury, CRM, Accounting, Business Intelligence, etc. – but still rely on spreadsheets to get to answers.

Traditional options are to customize ERP or CTRM or write custom applications. But these are transaction systems, not analytics systems, so customizing them ends up being more expensive & less effective.

Integration projects are expensive and risky. And to process large volumes of data quickly, existing options will require large computation capability driving costs even higher.

17


18

How Commodity Analytics Cloud Solves These Problems

CONNECT• Data from multiple sources• Internal applications, external sources,

spreadsheets


Key Product Features

Commodity Intelligence Engine• Algorithms, models, analysis engine

Apps• Examples: Position Consolidation, Procurement,

Plan Performance

Monitors• Brings focus on key areas instead of combing

through all data

Self Service• Intuitive visualizations and app design

Sharing• Share insights and ideas with team members

Data Ecosystem• All data required for analysis in one place

Connectors• Bring in data from 3rd party apps & data sources

Data Preparation• Mapping and transformation that relates raw

data to what the engine needs

Speed• Process millions of data entities in seconds

Mobile• Available on mobile devices including tablets

and phones


Apps For Your Industry - Examples

Commodity Analytics Cloud Apps are a powerful component of our commodity management platform.

• Make faster, data-driven, fact-based decisions• Answer critical business questions• Arm users with confidence to make the right decisions at the right time

Commodity Trading

Energy Agriculture Manufacturing/CP

Metals &Mining

Bulk Commodity Sites

• Position Consolidation

• P&L Explained• Accounts

Recon• Trader

analytics

• Flash P&L• P&L Explained• Accounts

Recon• Position

Consolidation• Trader

analytics

• P&L Explained• Accounts

Recon• Position

Consolidation• Trader

analytics• Production

simulation

• Procurement• P&L Explained

• Raw Material Margin

• Inventory optimization

• P&L Explained

• Plan performance

• Plan diagnostics

• Stockyard optimization

20

USA | India | United Kingdom | Australia | Canada | Singapore 21

Use Case: P&L Attribution

• Why is it hard:• Data is spread out among different systems and requires many excel sheets,

macros, and man hours to consolidate and gain a holistic view• Interdependencies between factors complex to parse• Difficult to gather and analyze data on a daily/timely basis so a large portion of

change put in an unexplained bucket• Although many E/CTRM systems have P&L attribution modules, in the real-

world attribution is done in spreadsheets


P&L Explained - Easy Upload of Data from Multiple Sources

22


P&L Explained - Flexible, User-Defined, 5-Tier Hierarchy

23


P&L Explained - Intuitive, Graphical Interface

24


P&L Explained - Sort, Filter, Group, and Drill to Trade Level

25


Commodity Analytics Cloud – Next Generation Analytics

• Blend data from internal and external sources

• Use commodity specific algorithms and models

• Gain insights with business specific apps

• Empower users without reliance on IT or team of BI specialists

• Make timely, data-driven, and fact-based decisions

26

USA | India | United Kingdom | Australia | Canada | Singapore 27

Questions?

Michael SchwartzEVP & CMO

[email protected]

Webinar Recording:https://www.ekaplus.com/resources.aspx

mailto:[email protected]

https://www.ekaplus.com/resources.aspx

https://www.ekaplus.com/resources.aspx

Webinar: Why Commodity Analytics is the Next Big Thing for Trading, Risk, & Supply Chain

Software

Transcript of Webinar: Why Commodity Analytics is the Next Big Thing for Trading, Risk, & Supply Chain