What Does Tomorrows CTRM Look Like?

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Commodity Technology Advisory LLC Houston TX and Prague CZ www.comtechadvisory.com

What Does Tomorrow’s CTRM Solution Look Like?

White Paper

Commodity Management A ComTech Advisory Whitepaper

© Commodity Technology Advisory LLC, 2014 2

Table of Contents Introduction ................................................................................................................................................................. 3

Delivering Flexibility and Agility in CTRM ..................................................................................................................... 4

Generation 10 – Building Solutions .............................................................................................................................. 5

Agility, Flexibility and User Engagement ...................................................................................................................... 6

About Commodity Technology Advisory LLC ............................................................................................................... 7



Introduction The $1.6 billion Commodity Trading and Risk Management (CTRM) software category continues to change and evolve rapidly, driven by the many and varied issues that those in commodity industries face. Today, the CTRM software category is being forced to move from one that is mostly about managing trading transactions after the fact (capturing volume and price, managing the delivery and then producing an invoice), to something dramatically different.

Multiple issues now face those operating in the commodity industries, including:

o The need to process, store and manage vast quantities of structured and unstructured data, o Ensuring compliance with numerous new and onerous regulatory requirements, o Responding to structural change in the industry such as the exit of the banks, for example, o The emergence of an array of new trading instruments and markets, o The move to exchange-‐based and exchange-‐cleared transactions, and o The need to reduce costs, increase efficiency and maximize profits.

The confluence of these issues is driving many of the changes in CTRM software. For those who need to manage physical commodities and their supply chains, the issues are magnified further due to the complexity of tracking and managing those physical commodities with stock, quality characteristics, paperwork, movement and much more. There is more data, more regulation and more risk. CTRM software must incorporate much more functionality to support the modern supply chain.

In the future, CTRM solutions will necessarily need to offer users real-‐time analytics and provide them with the tools they need not only to manage and report transactions, but also to help identify trading opportunities,

“If you can’t get a user to engage, you’re not providing them with the collaborative tools they need to be the best at their job. If they aren’t collaborating on a unified platform, it’s going to be difficult to measure performance, monitor activity and provide the real-‐time business analytics they need to get an edge on the competition. That edge comes in the form of intelligence, efficiency and risk control.”

Richard Williamson, CEO, Generation 10 Ltd.



address operational risks, effectively manage and optimize supply chains, ensure compliance with regulations and provide trading intelligence.

The tremendous drivers for change that we see impacting commodity markets mean that all companies must take immediate action to improve their:

• Market transparency – a need to develop market awareness driven by data and maintain a vigilant eye on macro trends. Strategies must be formulated around those macro trends and managed on market data and real-‐time (or near real-‐time) analysis of that data in multiple formats and from many sources, including quite possibly even various forms of social media.

• Internal transparency – profit is made or lost on daily decisions. Accurate and timely position management, risk management and business intelligence support are key to ensure opportunities are exploited, costs kept under control and risks addressed.

• Regulatory transparency – regulators will be quick to move and once on their radar, businesses will be the target of scrutiny for a very long time. Developing a culture of compliance and improving transparency for regulators is crucial to avoiding punitive and damaging enforcement actions.

The chances of succeeding in the broader commodity industries in the future are increasingly dependent on the trading, trade management and supply chain management technologies deployed and utilized to address these big challenges, including CTRM, data aggregation and analysis, trading surveillance, business intelligence and reporting.

Much like the traders who earn their living in these unsettled markets, the technologists that produce CTRM software are also being challenged like never before.

Delivering Flexibility and Agility in CTRM The common factor to being successful in meeting these challenges is to deliver CTRM software that not only has the required functionality but that is also both flexible and agile. However, when it comes to software of any kind, these terms are overused and therefore somewhat meaningless. Providing agility and flexibility is, in part, about the technology and architecture chosen to deliver the functionality. Today, those applications best able to deliver these attributes are generally highly modular, web-‐enabled applications that make use of service oriented architectures. Consideration must also be given to the user interface to ensure that it is not merely configurable, but that it can truly be personalized by each end user without the need for programmer involvement. It must also be graphical, intuitive and engaging to the user. Finally, the application must be able to deal with data in multiple formats and to help the user extract the maximum value from that information. However, even when all of the above is true, it might all be for naught if the software vendor takes the traditional approach to delivering software.

In the traditional software delivery mechanism, a vendor releases upgrades to the software periodically. In the fast-‐moving world of CTRM, there might be 4 to 6 incremental releases per year. Each incremental release needs to be tested and then implemented by the user and, after a while, the users inevitably fall behind on the release cycle. In extreme cases, the end users fall so far behind that they lose their support (most vendors will only support a fixed number of previous versions of their software). Given that fact and the unavoidable conflict between the vendor’s prioritizing of certain new functionality to drive sales rather than meet the specific needs of individual customers, the inevitable happens: Users are forced to create spreadsheet workarounds to give themselves much-‐needed new functionality. Suddenly, the use of spreadsheets outside of the system – the very problem that the new CTRM solution was designed to fix in the first place – begins to flourish once again.

Surprisingly perhaps, another issue is the commercial structure of the software licensing deal. Most software has historically been licensed on a one-‐off basis and the users then pay a percentage of that initial license fee for annual support and maintenance. Add more users and perhaps you will pay an incremental license fee. Ask for



enhancements and you will likely pay an incremental fee for the delivery of custom software. You might also need to pay additional fees for implementation, data conversion, testing and training. This model doesn’t support flexibility and agility. Rather, it simply perpetuates the status quo that is described above. New subscription-‐based models, however, offer both the means and the incentive for vendors to be more flexible and more agile – and perhaps even more customer-‐focused as well.

The delivery of true flexibility and agility in a CTRM solution requires:

o CTRM software that is built with the right tools and technologies on the right architecture, o a user interface that is graphical, intuitive and truly capable of being configured by end users without the

need for programming assistance, o The ability to store and manage multiple types of data and to be able to easily analyze the data to identify

and extract trends and useful intelligence, o The capability to be deployed rapidly and in a manner that allows for continuous customer feedback on

which the vendor is able to act rapidly, delivering enhancements efficiently and without the need for long testing and implementation cycles, and

o That the commercial terms of the deal be designed to encourage and support such flexibility.

Generation 10 – Building Solutions Generation 10 has been around for more than a decade, quietly building and marketing solutions for a broad range of clients, initially in the world of cotton. The interesting thing about cotton is its complexity. If you can handle cotton properly, other commodities hold no real surprises, regardless of whether they’re bulk or containerized. In 2009, although still a relatively small and niche company, Generation 10 decided to completely re-‐engineer its software and invest in building an all-‐new product set from the ground up. Along the way, Generation 10 used its track record and experience in delivering solutions in the cotton world to decide on architectures, tools, structure as well as functionality. What it was looking for was the ability to be agile and flexible.

The company chose a web-‐based architecture and built its own technology platform – the G10 Framework – to serve as the foundation for all of its products, including its new CTRM solution, G10 Commodity Manager. Generation 10 also developed a new highly visual, graphical user interface and analytics tool called d3 Analytics. The G10 Commodity Manager is a multi-‐commodity and highly configurable CTRM solution known for the strength and depth of its logistics functionality, which provides users with a host of supply chain optimization business benefits. Users can streamline planning and scheduling, utilize capacity more efficiently, identify the best vendors to work with, and manage suppliers more effectively, all while achieving high standards of care and customer service. Users are simply in a better position to gain competitive advantage, optimize workflows, establish metrics, set benchmarks and identify trends by analyzing performance over the long term. It also provides comprehensive trade capture, risk management and accounting functionality for a variety of products.

The d3 Analytics solution provides interactive, visual tools to help users identify trends, increase operational transparency, set benchmarks and achieve goals. Users can locate, understand and act on information much more quickly and efficiently. When combined with its library of web-‐enabled components and bespoke applications, the G10 Framework allows Generation 10 to provide customers with the exact capabilities they need, rapidly and seamlessly.

All of its products have been designed to be highly configurable and personalizable by the users without programmer intervention. “People in the ‘Facebook generation’ demand intuitive, flexible tools to help them perform their jobs with a minimum of fuss and a maximum of cool,” says Richard Williamson, CEO of Generation 10. Its software makes it easy to add new fields, grids, data collectors, dashboards, work flows and so on without any programmer involvement at all.



In addition to its innovative products, Generation 10’s unique business model is also a differentiator. The company provides flexible software solutions and services via agile delivery methods, using commercial structures that include the use of the software with continuous upgrades – including customized upgrades. G10 positions itself as the customers’ technology and analytics partner largely due to its team of data analysts, all of whom have hands-‐on experience with commodities. The team regularly meets with customers at their own facilities to better understand their strategies and ensure they’re able to extract the maximum value from their data. Functionality is delivered rapidly and seamlessly via the G10 Framework, eliminating any temptation to resort to Excel spreadsheets, and upgrades are delivered continuously via the cloud.

Generation 10 essentially delivers on each of the criteria for delivering agility and flexibility as follows:

o Products are built with the right tools and technologies on the right architecture, o It has a user interface that is graphical, intuitive and capable of being truly configured by end users

without the need for programming assistance, o It is able to store and manage multiple types of data and can easily analyze the data to identify trends and

extract useful intelligence, o It has the capability to be deployed rapidly and in a manner that allows for continuous customer feedback

on which the vendor is able to act rapidly, delivering enhancements efficiently and without the need for long testing and implementation cycles,

o It designs and structures the commercial terms of each deal to encourage and support such flexibility.

Today, Generation 10’s clients are trading cotton, coffee, cocoa and sugar using the G10 Commodity Manager, which is helping them to optimize their supply chains and better control all types of risk (market, credit, operational and liquidity) in real time. Notable clients using the G10 Framework and d3 Analytics include the US Department of Agriculture (USDA) and marine insurance specialists Rekerdres & Sons Insurance Agency. Generation 10 has given USDA the analytical tools it needs to identify long-‐term trends in performance and also to be proactive in addressing potential problems before they escalate – often before they even occur. Meanwhile, Rekerdres & Sons uses Generation 10’s solutions to coordinate highly complex processes and documentation from a variety of stakeholders, operating on different systems from all over the world. “Generation 10 has helped usher our company into the age when data works for us, rather than us having to work for the data. The more the system can anticipate what I need and give it to me without my having to spend time looking for it and modifying it, the greater my efficiency is going to be,” says Mr. Brett Anderhub, VP at Rekerdres & Sons.

Agility, Flexibility and User Engagement For Generation 10, it’s not just about delivering software that does what it’s supposed to do, but making sure that it keeps on delivering as it is supposed to, as well. By building agility and flexibility into both the software and the business model, the company aims to ensure user engagement with the software as well. Its focus is strongly on user job satisfaction and ensuring continued long-‐term usefulness of the software. “If you can’t get a user to engage, you’re not providing them with the collaborative tools they need to be the best at their job,” Williamson says. “If they aren’t collaborating on a unified platform, it’s going to be difficult to measure performance, monitor activity and provide the real-‐time business analytics they need to get an edge on the competition. That edge comes in the form of intelligence, efficiency and risk control.”

In retooling its product portfolio, Generation 10 used its extensive experience in the complex world of cotton to develop a truly multi-‐commodity platform designed for optimization and transparency. It focuses on business logic, user engagement and “exceptions to the rule,” thus delivering the agility required by businesses today, in an environment where data is becoming one of the most valuable assets a company can possess. They have created a suite of software for a broader commodities world that appears to deliver on the premise that CTRM software needs to be about real-‐time analytics and providing users with the tools that they need, not just to manage and report end-‐to-‐end transactions, but also to help identify favorable trading opportunities, address operational risks, effectively manage and optimize supply chains, ensure compliance with regulations and provide trading intelligence.



About Commodity Technology Advisory LLC

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 with a combined 60-‐plus years in the energy and commodities markets, providing a depth of understanding of the market and its issues that is unmatched and unrivaled by any analyst group. For more information, please visit http://www.comtechadvisory.com.

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 CTRMCenter at http://www.ctrmcenter.com.

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What Does Tomorrows CTRM Look Like?

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