A UtiliPoint International IssueAlert
By Patrick Reames

Having tracked activity in the Energy Trading and Risk Management (ETRM) solutions market over the last several years, UtiliPoint has been able to see trends emerge and disappear and markets leaders rise and fall, only to rise again. It’s an impossible proposition to declare any particular solution vendor THE winner of the race, for not only is the race never complete - it’s difficult at times to even define WHICH race is being contested.

As we’ve written about many times in the past, the ETRM market is wide ranging space. It covers virtually anyone and everyone that buys or sells wholesale energy commodities, physical or financial. It includes exploration and production companies, producing and selling oil and gas; hedge funds that may not hold a particular energy commodity for more than a day or two; power utilities that produce, and sometimes buy or sell, wholesale quantities of power to service their native retail loads; refineries buying wholesale crude and selling finished products; airlines purchasing huge volumes of jet fuel...the list goes on and on.

Given the breadth of the space, it’s practically impossible for any one vendor of ETRM software to address the entirety of the greater market’s needs. The business processes are simply too wide ranging for any single product to be the best fit for everyone involved in whatever form of energy trading and risk management they have chosen to pursue. The reality is that for every stripe of business model, there will be one or two vendors that will be a best fit for that model, and over time, the “best fit” vendors will change as members of that group pursue new functionality or shift focus to address other needs that exist in the wider market. Nonetheless, we can look back over the last couple of years and see some consistent trends when it comes to identifying either particular market segment leaders or identifying companies that have had significant success in the broader market.

Following on from our IssueAlert of Jan. 28th, Energy Trading and Risk Management Systems Market
2007 Results, 2008 Outlook, and Customer Implications, and based on the granular information we’ve gleaned from the market and reported to us by many of the vendors, we wanted to break down the 2007 results and identify market leaders in a number of categories, some broad, and some more specific, but ones in which there was one or two clear leaders:

Total New Client Signings in 2007
For this category we took into account only net new business, not expansion license sales or new modules that were added to an existing customer. We also did not take into account reselling an existing customer - that is moving them off one product and onto a different product.

For 2007, Allegro and Triple Point came out on top in terms of global unit sales, or put another way, they signed the most new customers for their products around the world. Close on their heels last year were Solarc, OATI, and OpenLink.

ASP Delivered ETRM Solutions
In order to fully explore this category, we’ve broken it down into two segments: financial trading and physical trading. On the financial side, Kiodex, the pioneer in delivering solutions via the internet to energy centric trading shops, continues to sell significant numbers of new systems in the space, although their client base now encompasses many non-energy commodity and financial trading firms as well.

On the physical side, OATI continues to see great success for their ASP delivered webTrader product family. Their primary market, small to midsize utilities, continues to be one of the most progressive in terms of adopting the “software as a service” model in physical energy trading, allowing OATI to capture the most sales in the “ASP for physical trading” space.

Industrial and End User Market
Solarc has been the leader in this category for the last several years and was one of the first to recognize the value of, and pursue, large energy consuming end users. Airlines in particular have been selecting Solarc’s RightAngle more than any other product on the market, and as a result, the company has virtually locked up the airline segment. They’ve also been successful selling to package shipping companies and agricultural firms, amongst others.

One of the emerging challengers to Solarc in the end-user category is Allegro. 2007 saw several new end user clients for the company and they are well positioned to see additional success in 2008.

Financial Oriented Trading Market
In 2007, financially oriented trading companies, like hedge funds and bank founded and/or backed trading companies, continued buying ETRM systems to help them better manage their growing portfolios of physical energy commodities. Triple Point and Openlink have been the primary beneficiaries of this growing physical focus over the last several years and that trend continued in 2007.

Solarc also found success in the financial oriented markets in 2007 and may emerge to challenge the market leaders in 2008.

Utility Market
OATI has been able to leverage their huge customer base for their tagging and market communication products for power trading, yielding them solid success selling webTrader to small and mid-size utilities. On the upper end of this market (those utilities with large scale associated trading operations), the picture is less clear with several different vendors having each sold multiple systems to the market.

E&P Market
The oil and gas exploration and production (E&P) market has been a consistent, if not exceptionally large, market for ETRM vendors over the last 10 years. Every year, this segment comprises about 10-15% of all deals done. Over the last decade, Allegro has been a consistent market leader, a position they continued to enjoy in 2007. OpenLink has focused on development of additional producer functionality over the last couple of years, and as a result, has closed several significant new E&P deals in 2006 and 2007, positioning them near the top of this market with Allegro.

Solarc is positioned to mount a challenge to these current leaders, having acquired Trinity Apex in late 2006, a product with solid producer functionality and one which has already brought new E&P clients to the company.

Most Diverse New Client Base in 2007
Looking at the results of 2007, Triple Point added the most diverse group of new clients, ranging from traditional energy trading firms to financials, refiner/distributors, biodiesel producers, agricultural companies, generators and metal traders.

Several other vendors, including Allegro, Solarc, and OpenLink, also distinguished themselves from the pack in term of market segments serviced in 2007.

International Sales for a North America-based Vendor
Triple Point showed significant strength internationally last year, with their relationship with SAP and access to that company’s global client base proving to be a differentiator versus the competition. Triple Point closed the largest number of deals in Europe of any North American based vendor and added a new client in Africa. With their SAP relationship, Triple Point should be considered one of the favorites in capturing not only additional European business, but should also see growing success in other international markets.

Among the other vendors, Allegro, Sungard, Solarc, and OpenLink also showed solid international sales, with the group signing new deals across Europe, Asia, and Australia.

Other Markets
As mentioned above, there are numerous ways to slice and dice the ETRM market. However, for each of these slices, there is no one or two vendors that clearly stand out. Consider the refiner/ distributor market - while several vendors, including TradeCapture, Allegro, Triple Point and Sisu Group, sold products into that market, there simply were not enough transactions to definitively establish a market leader. Biofuels emerged as new market for ETRM vendors, and while several companies sold products to biofuel producers, again, the numbers don’t yet indicate a market leader.

We didn’t consider, for this analysis, markets or products that don’t encompass all or most of the core business processes of energy trading and/or risk management (defined as contract management, deal capture, position management, analytics, pre-scheduling, scheduling, actualization, accounting and invoicing), including those solutions that provide functionality peripheral to, but in support of, the buying and selling of energy commodities. These solutions include such things as power market communications, NERC tagging, asset management, logistical support tools, and analytics packages amongst others. We did find that many of the vendors providing these products (and who may also produce full scale ETRM solutions) experienced very good results and in some cases, record years. The roster of companies enjoying a good 2007 would include The Structure Group, OATI, Power Costs (PCI), RiskAdvisory, and Ventyx.

Conclusions
For a company considering the purchase of a new ETRM system, these results should be viewed as informative, but not a definitive indicator of what you should buy. If your business fits one or more of the categories described above, certainly you should take a close look at the leader(s) for your segment, but, you should not limit your search to those companies. Every energy commodity related business, including yours, is a unique mix of assets, geography, commodities, and business priorities. Given that UtiliPoint’s Directory of Energy Trading, Risk and Transaction Management Software Solutions and Providers now lists more than 70 firms producing solutions within the ETRM universe, the odds are good that you will find one, or possibly a mix of multiple solutions, that can meet your unique needs - and it may not be the current market leader.

RSS feed for comments on this post.
TrackBack URI