A Commodity Point CommodityAlert
By Patrick Reames
At CommodityPoint, we will on occasion visit with the leaders of the largest suppliers of technology in the commodity trading and risk management (CTRM) space to get their take a broad range of topics, from the current state of the ETRM/CTRM market place to recent developments within their companies.
Today’s conversation is with Brad Anderson, founder, president & CEO of Solarc, Inc.
CommodityPoint: For many ETRM vendors, the last 18 months have been a bit of a mixed bag from the standpoint of new license sales. How has the market been for Solarc during that period?
Brad Anderson: SolArc has seen continued growth in revenue and new customer acquisition over the past 18 months. For that period, 70 percent of our license contracts have been with new customers. The past 18 months have been driven by significant new customer activity. We have been particularly pleased with our success in Europe, the Middle East and Asia (EMEA). Many of our new customers have chosen Solarc to replace products from current vendors. The common theme across geographies is that customers are setting aside systems that no longer served their needs.
SolArc’s experience with prospective customers would suggest that they have become more educated about the system selection process and are interested in identifying a CTRM vendor they can partner with for the next decade. Their approach matches Solarc’s primary business strategy—develop long-term partnerships with customers by providing market leading solutions, services and support. Therefore, an educated prospect typically finds SolArc a pleasant alternative to their existing vendor environment.
CommodityPoint: Solarc has long been associated with the crude, crude products, and NGL markets, particularly so for those companies looking for strong physical logistics capabilities. However, at CommodityPoint, we’ve recently noted that Solarc has signed a significant number of new clients that lay outside those traditional markets, including banks and natural gas players. What has been responsible for the shift in market for Solarc?
Mr. Anderson: SolArc believes commodity organizations must manage the underlying physical trades, movements and accounting accurately if they are to have any hope at managing their financial trading position. That is why SolArc is uniquely situated to help large and small organizations alike manage their financial risk position.
The banks are seeing significant opportunity to drive trade P&L leveraging more physical aspects of the commodity markets. And, SolArc provides banks and other financial players the ability to combine physical movements and manage some of the more complex issues around bulk products which help them produce a correct position to effectively trade around financially or physically thereby increasing trade P&L. Banks quickly put SolArc at the top of a short list of vendors with the right capability. We provide capabilities to the banking sector that others simply cannot. Our current banking customers are all in the top tier of financial institutions.
In the natural gas market, we have seen increased activity emanating from the shale plays. We believe there is a synergistic effect of increased activity in shale exploration and field development combined with private equity investing capital in midstream operations. Both of these events are driving organizations to improve the processes around their systems. SolArc is uniquely situated to support these customers with a combined solution that supports producer services, gathering, plant allocations and gas marketing which resides in one technology platform thereby providing better operational visibility, and the lowering of risk and total cost of ownership.
CommodityPoint: Airlines and other transportation centric businesses have also been a large part of Solarc’s success over the last several years, in large part due to the volatility in the fuels markets. With the collapse of energy prices in 2008, that market appears to have cooled significantly. Have you seen any indications that market might be coming back with the recent increase in crude prices?
Yes and no. It is difficult to determine how an absolute price affects the interest in systems across our prospects and customers. We like to think of ourselves as long on volatility. If prices go up or down, that effect causes some in either case to examine their solutions. Analysis would show that some of our Q2 business was a result of price drops in 2009 and some was a result in opportunities seen this year around price increases.
More broadly, our observation is that the commodity market and the economy in general are adapting to the “New Normal” and that the uncertainty and opportunity will continue to drive demand for CTRM solutions in any market segment that has material enterprise exposure to commodities. The broad-based commodity price shock and volatility we experienced in the last couple of years has been seared into the conscious of many boards from transportation to food beverage companies. As result, we are very bullish on these sectors over the long term.
CommodityPoint: Having been in attendance at several of your client meetings over the last couple of years, we’ve noted a particular emphasis by Solarc in the area of new technologies for CTRM, including the potential use of multi-touch technology pioneered by Microsoft. Do you anticipate this, or other, new technologies appearing in your products in the near future?
Mr. Anderson: SolArc’s technology investments are focused on three areas: mobility, collaboration and visualization. We are the only CTRM vendor investing in the next generation technologies. Example investments include, and are not limited to, Microsoft’s surface computing and mobile handhelds and the integration of these into the production suite.
SolArc believes the mobile handheld market is a vital extension of the enterprise environment. Our customer’s lives have been changed by the Blackberry™ and the iphone™. Mobile technologies are here to stay and we will serve our customers on their mobile device of choice.
We are set to release our first mobile application this quarter. Organizations have made significant efforts to facilitate a virtual work environment for employees. Un-tethering the trader or schedule from his office is the clear next step in the evolutionary process. And, the world of trading does not stop while someone is at lunch or at an outside meeting. SolArc will provide the tools and the access to information in the simplest manner possible for collaboration of what is a complex process.
CommodityPoint: We’ve seen a significant number of acquisitions over the last two years by your competition. Are you feeling pressure to make a similar move? Is Solarc contemplating growth through acquisition in near future?
Mr. Anderson: We have seen a number of deals in the market. There is a significant distinction that needs to be made between deals and good deals. We are only interested in doing good deals.
CommodityPoint: One of your competitors, Open Link Financials, filed their S-1 in 2008 anticipating a public stock offering sometime in 2009. However, they eventually withdrew the S-1 and subsequently did a private equity placement with The Carlyle Group. Do you see an opportunity for Solarc or any of your competitors to go public within the next year or two and you believe there is “room” in the public markets for more than one or two pure play ETRM/CTRM technology companies?
Mr. Anderson: We definitely believe that there is room for a couple of public companies in this market. Over the next few years, as companies in this market mature and obtain scale, public market financing should become an option.
CommodityPoint: At CommodityPoint, we believe that even though North America will continue to be a reliable market for CTRM solutions, the real growth in the future will be global, in particular Europe and Asia, but also including South America and Africa. What do you see as the most promising growth markets for Solarc’s products, either regionally or by market segment?
Mr. Anderson: SolArc has made, and will continue to make, significant investment in EMEA. We are beginning to see return on that investment, for example a large African bank recently selected the Solarc solution and in 2009, approximately half of our new customers were EMEA based. We anticipate that a significant percentage of our 2010 business will be outside the United States.
CommodityPoint: From the perspective of Solarc, what is the market looking for, or pointing to most often as their critical need, in a new CTRM system?
Mr. Anderson: The common message from prospective customers is business leaders are no longer willing to accept solutions that do not serve their needs. Out-dated software is becoming more expensive to maintain and provide increasingly less benefit to the business. The market demand has moved from an emphasis on specific feature/function to an emphasis on solutions that provide depth, breadth, and flexibility.
Customers no longer want to hear, “Yes, we do that” from vendors without proof. Customers want to ensure vendors can deliver what they promise. The buyers are more sophisticated and better understand the needs and requirements of their business. Moreover, they are looking for a trusted advisor and a partner who will be there for them post the sale. In other words, they want a vendor that has the expertise to understand their business challenge, clearly demonstrate a solution to their problem and, a commitment to long term project success. Simply seeing a graphical user interface (GUI) image is not enough.
CommodityPoint: What’s your company’s greatest challenge these days?
Mr. Anderson: We believe managing the growth is the largest challenge we face while maintaining our stellar customer delivery record. Satisfied customers matter to SolArc. We have been very successful in increasing the strength and depth of our Solarc team over the past 24 months and we continue to strategically invest in our customers, solutions, and people.
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About Brad Anderson
As chief executive officer and one of three original founders in 1991, Brad Anderson has overseen SolArc’s rapid growth from a startup company to its current position as a leading provider of software and services for global commodity trading and risk management. Under his leadership, SolArc has grown to provide mission-critical software and services to more than 70 industry-leading companies around the world.
In 2004, Mr. Anderson oversaw the strategic relocation of the corporate headquarters from Tulsa to Houston. Since then, the company has grown rapidly in Houston and continues to maintain a large development and support staff in Tulsa. SolArc opened its first international office in 2006 and now has offices in Houston, Dallas, Tulsa, London and Singapore. SolArc has twice been named to the Houston Fast 100 and FastTech 50 lists for the fastest growing companies and high-technology firms in Houston by the Houston Business Journal. Mr. Anderson has twice been named Top 50 People in Energy IT by New Energy Economy and Commodities Now.
A strong believer in community involvement, Mr. Anderson personally supports and encourages SolArc employees to participate in a range of charitable activities in the communities where the company works. These include the Carl McCain Foundation, Houston Livestock Show and Rodeo, Toys for Tots campaign, United Way and many other community-based activities around the world. Mr. Anderson has served as an advisory board member for The Street School, a non-profit alternative education program.
Mr. Anderson earned his bachelor’s in electrical engineering at Oklahoma State University. Prior to founding SolArc, Mr. Anderson designed systems at Andersen Consulting.
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