Energy Trading and Risk Management (ETRM) Software Market Shows Strong Demand
By Louis Caron
The collapse of the merchant energy sector of 2001 is still driving the ETRM market's demand and will continue to do so for the next 18 months. The void left by the departure of the super energy marketers is being filled by the E&P super majors, financial institutions, and hedge funds. These players require robust credit functionality, collateral management, margining functionality, and trade clearing process automation.
The biggest challenge faced by a buyer of ETRM software today is vendor stability—the ETRM market has been evolving for over 10 years now during which time we have seen numerous startups and exits, mergers and acquisitions, and resulting business strategy changes for these ETRM market participants. This situation has resulted in much instability and frustration for the user community with respect to ETRM vendor support. Buyers should look at the level of experience of the principals behind the ETRM's energy group, the longevity operating in the ETRM market, historical and current profitability, R&D investment levels, and the vendor's suite of current client references.
An ETRM software package buyer should have complete, up-to-date, and documented requirements before making the procurement decision. We have heard the story too many times that a package was chosen in part due to the flashy graphical user interface demonstrated during the a slick sales presentation. Ease-of-use is important for a solution, but we would recommend running a small set (5-10) of transactions that would broadly represent a sample of the software buyer's portfolio through a package under evaluation and then examining the outputs to reveal adequacy of the package's functionality against the user's requirements.
If you have any questions concerning ETRM software, or the information contained in this article, contact Louis Caron.