Professional Documents
Culture Documents
20152020
// Physical and financial commodity deal capture, contract management and origination
// Position management and valuation
// Tracking/managing of commodities logistics as they apply to
functionality commonly deployed as a functional component of
large scale CTRM solutions servicing gas, power, crude and bulk
product movements
// Confirmation, settlement and accounting of deals/transactions
// Trader analytics and trading optimization tools
// Commodity risk management and analytics including but not limited to, VaR, EaR, limits management, credit risk management
and PnL.
// Logistical management capabilities not associated with core trading requirements, such as truck, rail or ship tracking software
// Treasury and treasury-oriented credit functionality
// Production modeling or optimization software for industries such
as oil and gas production, mining or agriculture
// Applications for managing physical facilities, such as power generation, mines, gas plants, pipelines, refineries, mills or other processing plants
In developing this market outlook, we have included the following commodity classes: natural gas, power, oil and oil products,
coal, industrial metals, precious metals, agricultural commodities, softs, and others (including freight, RECs, and other minor commodities).
Establishing a definitive size for any market, particularly
one as complex as commodity trading and risk management,
is a difficult exercise and is impossible to complete with absolute certainty. Market sizing, being a forward-looking exercise,
must be based upon numerous factors and assumptions. These
assumptions include overall economic conditions, forces encouraging new market entrants, historical buying patterns of
existing market participants, technology drivers encouraging
new purchases, and the number and capabilities of product
vendors servicing the needs of the market.
Despite these difficulties, we believe that our organizations unique position in the market, that of highly experienced
analysts focused exclusively on the intersection of the commodity trading markets and their requisite technologies, provides
us the market vision and insight necessary to compile a reliable
and accurate estimate of this unique and dynamic technology
market.
2014
$ Millions
2015
$ Millions
210
216
Vendor Services
501
533
Vendor S&M
267
273
SaaS/Hosted
42
50
326
325
Non-Vendor Solution
273
282
1,619
1,679
Total
While vendor supplied software makes up the majority
(in terms of available technology revenues) of the market for
CTRM applications, there still exists a number of companies
that continue utilizing third party consultants or internal IT staff
to develop and support their own custom solutions. ComTech
estimates that these bespoke solutions accounted for approximately $273 million spent on the services of third party consultants in 2014, with a majority of those dollars being spent
on continuing support and maintenance; and the remaining
amounts being expended on development of new applications.
These estimates do not include costs associated with customer resources assigned to the development or support of these
bespoke applications (internal costs).
Though adoption rates for vendor supported solutions will vary
by industry segment and geography, ComTech does forecast
MARKET BY GEOGRAPHY
Geographically, North America continues to be the
largest market region for CTRM software solutions,
with a mature commodity trading market, particularly
in power, natural gas, oil, coal, agricultural commodities and metals. While there continues to be a number of companies that maintain non-vendor systems,
a large majority of the market for CTRM technology
in North America is serviced by vendor-supplied and
supported solutions.
Europe also has a mature market in commodity trading,
though less so than North America in terms of natural gas and
South America
$ Millions
Europe
$ Millions
Asia/Pacific
$ Millions
Total by Commodity
$ Millions
Natural Gas
179
155
31
369
Power
181
175
37
399
86
20
84
12
42
245
100
107
10
24
12
16
40
34
10
26
37
117
Ags/Softs
85
20
84
24
76
288
14
30
695
59
568
58
239
1,618
6
vendors have found success selling products into the Singapore
and Hong Kong markets, with national oil companies and large
metals and agricultural trading companies being particularly
active buyers of vendor systems. However, given cultural and
language differences outside of the major trading centers in
the region, western-oriented CTRM vendors have continued to
have difficulties selling their products within the borders of the
largest economies in the region, particularly China and Japan,
and these markets are still dominated by custom developed
solutions. Overall, while the outlook for additional sales in the
region remain strong, sales of new product licenses is not consistent from year-to-year and we expect this trend to continue
for the foreseeable future. Despite this, liberalization of national
power and gas markets is proceeding in various countries in the
region, with Japan seen as a particular area of interest at the
moment. In addition, more complex regulatory environments
in the West have driven some trading operations to the area.
As a result, the market is growing and we assume this market
will continue to grow faster than in other geographic region.
7
but at a lower average license value, slowing license growth
rates. Additionally to this is a trend towards recurring revenue
licensing models (lease, rental, monthly or quarterly payments
etc.) on the part of many vendors in the space meaning that
some of the revenues associated with a particular deal are
pushed out into the future.
Additionally, we do observe a number of additional trends
that may also impact our forward outlook as follows,
// Increased interest in CTRM solutions for non-listed commodities such as diary and diary products, wool, and other raw
materials. Historically, exchanges have introduced financial
instruments for commodities in which there was trading and
hedging interest and it may be that one or more of these commodities becomes established over the next five years creating additional prospective market for vendors,
// The blurring boundary between CTRM and ERP is driven by a
real need for better functionality around the buying and selling
and hedging against price volatility of physical commodities
and raw materials. Several ERP vendors now offer commodity
management extensions and some CTRM vendors have targeted the same market space. This trend could also result in
a broadening of the market for CTRM software as more manufacturing and production companies adopt solutions globally
helping to increase the size of the market faster than we have
projected.
reflecting a midrange value of 5%. Within the revenue components that comprise this market, we anticipate that traditional
installed software license sales will grow at modest rate of
3.5-4.5%, while increasing adoption of SaaS or cloud based
solutions will see growth rates from 15-17%, a slight increase
over our previous estimates for the market. Nonetheless, while
cloud solutions will continue to increase in number of systems
deployed, particularly in the low and mid tiers of the market, traditionally installed solutions will continue to dominate in terms
of revenues generated for the foreseeable future. However, with a continuing
push by vendors to migrate existing clients and/or sell new clients on either
cloud implementations or a lease/rental type licensing agreement (in part to
ensure a predictable revenue stream
for those vendors), the lines between
license revenues vs. SaaS/Hosted/
Cloud revenues will blur in the future.
REGIONAL REVIEW
High levels of natural gas production in North America
have had a significant impact on prices and volatilities for both natural gas and power, reducing trading
activities across virtually all industry segments and
limiting the entrance of new market participants.
Given that the future outlook for natural gas prices
is flat to todays market, it is very unlikely that this
market will see much in the way of increased demand
for CTRM solutions for natural gas or power during
the study period.
Most sales of new licenses for the energy centric market
(including oil, products and coal) in North America will be for
replacement of existing vendor supported systems that have
been in production for five or more years, and for expansion
licenses due to organic business growth. Non-energy CTRM
9
Figure 5 | Total CTRM Market by Commodity by Geography 2014
MARKET BY SEGMENT
In terms of market segments, we anticipate the prospects for growth in any individual segment will be
dependent upon their location and commodity requirements.
Banks and financial institutions, particularly in North
America and Europe, have been departing from commodity trading and overall, those segments will show little or no
10
Figure 6 | Total CTRM Market value by Industry Segment by Year
11
als has continued to be soft. Without a broad recovery in the
global economic outlook, particularly in the Chinese market,
ComTech believes the metals trading markets will perform at
or slightly below average compared to the wider global CTRM
markets, at about 5% per year.
Within the last decade, the market has increasing seen
the rise of trading companies that have expanded their focus
from a single commodity or single class of commodities (such
MARKET BY COMMODITY
Both natural gas and power-centric CTRM markets are
primarily focused in North America and Europe, where
active trading of the commodities is fairly widespread.
Within the last several years, there have been sales
of power and gas capable systems in the Asia-Pacific
region, primarily to utilities and producers; however
these sales have previously been the exception. Nonetheless, with market liberalization in several Asian
markets, we do expect growth for gas and power capable systems to increase in that geography.
Figure 7 | Total CTRM Market by Commodity / Inc. Vendor Revs, 3rd Party Implementation and Unadressed Market
12
ever, we believe this pause will be temporary as the market finds
equilibrium and demand for oil and oil products systems will again
show solid growth of 56% per year.
CTRM for NGL trading, which is almost entirely centric to
the North American market, has seen a strong increase in the last
five years as massive increases in natural gas and oil production
led to a boom in infrastructure development and strong growth
in the midstream of the market. However, with falling oil and gas
prices, we do anticipate a slowing of the market for NGL capable
systems as current infrastructure development projects complete
and the industry slows to match the slowdown in drilling. As such,
the outlook for continued growth in NGLs is limited and we believe
beyond 2015, the market will see year over year increase of about
34%.
Coal producers and traders are continuing to suffer the effects of a declining market for coal for power generation, particularly in the US and Europe, where environmental regulations are
accelerating the closing of coal fired facilities and are effectively
killing new construction. Though large coal fired projects continue
to be developed in China and other areas of Asia-Pacific, the global demand for steam coal is declining. Given these conditions we
continue to anticipate that there will be no increase in demand for
coal centric CTRM products for some time.
CTRM for precious metals is a highly variable market from
year to year, driven primarily by both the price and volatility of the
gold markets. Precious metals prices have continued to fall over the
last two years and demand for new trading systems has been low.
Further, as gold prices are driven by a number of influences outside of physical supply and demand, it is difficult to forecast future
performance of this market. In all, and based on past performance,
ComTech believes that this commodity segment will produce a
slight increase in demand (less than 5%) through 2020.
As previously noted, demand for industrial metals has softened over the last 3 years. We are, however, forecasting growth in
CTRM for metals and ores to increase by about 5% per year as that
market continues to adopt vendor supplied solutions in a maturing
market.
Despite recent low commodity prices, continuing demand
for agricultural products and high levels of price volatility will keep
demand for ag and soft centric systems relatively strong. Additionally, increasing adoption of CTRM products by agricultural and CPG
market players will drive additional growth for technology in those
markets. We anticipate that sales of CTRM capable systems will
remain high as agricultural centric market participants continue to
adopt to these systems to better manage price, currency, credit and
operational risk associated with their long, global supply chains.
However, it is important to note that the ags and softs market is
more sensitive to price and that average license values in certain
geographies and segments of this market can be as much as 2535% lower than for other commodities. In all, we anticipate growth
in this commodity segment will average as high as 9% per year over
the next 5 years.
13
DISCUSSION OF REPORT
METHODOLOGY
To arrive at this market sizing estimate, ComTech utilized a bottom-up review of all known vendors of
production solutions and tools that meet the previously discussed criteria of CTRM technologies. While
there are numerous vendors around the globe that do
provide qualified (as it relates to this analysis) CTRM
solutions, many of those companies also provide
products and associated services that fall outside
the established criteria, and those revenues have be
excluded from this analysis.
In developing the bottom up estimate related to CTRM
vendor revenues, more than 90 companies were reviewed and
most had some or all of their revenues included in the final
CTRM Vendor Market Size Estimate. The companies reviewed
included (but are not necessarily limited to) the following:
IPSystems Ltd
Progressive
iRely
Quorum
JustCommodity
SAP
Kisters
SASRiskAdvisory
Scalable
Lacima
Sisu
Square Four
Logaviv
SunGard
MCG
Tegos
MicroStep HDO
TradePaq
Molecule Software
Transition Technologies
Murex
Trayport Contigo
OATI
Triple Point
Open Link
UtiliDex
P2 Solutions
(fmrly WellPoint)
Utiligroup
Panton
(frmly Spectrum Prime)
Vesion
Abacus
DycoTrade
PCR Ltd
Agiboo
Egar
Pioneer
Agrosirius
EGAR
PlanLogic
Albedo Energy
Consulting
EKA
Powel Delta
Allegro
Energeya
Amphora
Energy One
Ascend Analytics
Aspect
Energy Solutions
International
ATOS Worldgrid
Ensite
Brady
C Square International
Entero
Cadran Consultancy
Enuit
Calvus
Eximware
CDA - Australia
FEA
CMS
Gen10
ComFin
GMSL
Commodity Services
and Solutions
Hivedome
Constellation
Energy Solutions
IntStream Oy
Cultura
DMS
Ventyx
VuePoint
Waterfield Energy
Software
EMK3
Ignite ETRM
InvenSoft Technologies
IPESoft Spol sro
For each known vendor of CTRM systems, research was conducted (including direct contact with many of the vendors) to
obtain:
// An estimate of vendor revenues and license revenues for
2014. Very few E/CTRM vendors are public companies and
disclose some information as part of their regulatory reporting requirements. Additionally, several large and a fewer number of small E/CTRM vendors, though private, have provided
this information to our company under terms of confidentially.
Others, more rarely, do occasionally disclose the information
publically via press release or other announcements. Utilizing
these actual and estimated revenues, along with known and
estimated headcount numbers, ComTech generated a number of reliable reference points and ratios for analyzing other
vendors for which we had less visibility.
// One of the primary ratios utilized in estimating any particular
vendors revenues was the "revenue per headcount" estimate.
In our analysis of metrics provided by vendors or garnered
through other sources, the actual revenue per headcount fig-
14
ure ranged from $50,000 to $320,000 per employee (with
the $320k per head figure a significant increase over previous years analyses). The large variances in this metric were
correlated to a number of factors, though the primary influences were geographic location of the employees and level of
specialization of the vendor (i.e. specialized risk management
resources would command a higher annual salary).
Based on an analysis of the entirety of this data, revenue
estimates can be accurately established for all vendors known
to provide qualified solutions in the market.
Assumptions were then made for each vendor regarding
the allocations of those revenues amongst 4 categories: 1) traditional license revenues, 2) SaaS/Hosted license revenues,
3) services revenues, and 4) revenues associated with support
and maintenance agreements.
In addition to the identified and known vendors of
CTRM products, we have made the assumption that there exists
some number of vendors that are unknown to us. While ComTech Advisory analysts are highly experienced in this market,
we cannot assume that every vendor, particularly those that
operate in very localized markets (particularly in the Asia Pacific, South America and Eastern European/Russian markets),
will be known outside their local areas. Therefore, as with past
years, we have included a relatively small amount of revenue
(less than 5% of the global total) to account for these entities.
In order to determine a total market spend for CTRM technologies, it is also important to account for the dollars spent
with consultants and system integrators outside those provided by the vendors of the technologies. We have observed a
clear trend by most market participants to engage such 3rd
party services in almost all new product implementations, and
in an increasing number of upgrade and other support-related
Additionally, we have established a value of custom developed or bespoke solutions (non-vendor) produced and delivered by third party consultants at $273 million for 2014. This
value represents the portion of the market that has chosen to
deploy custom developed solutions despite there being commercially available software that could meet many or most of
their requirements. While this portion of the market is sizeable, representing about 17% of the total market, and there
will certainly always be companies that feel they have unique
requirements that cannot be adequately addressed by vendor
solutions, the increasing penetration of commercial CTRM
solutions has resulted in no appreciable growth in this market.
15
APPENDIX
MARKET SIZE DETAIL 2014 THRU 2020
Note: Differences in annual market size totals amongst
the following data is related to rounding errors
and/or model noise.
Figure 10 | Total Market Value by Revenue Component
2014
$ Millions
2015
$ Millions
2016
$ Millions
2017
$ Millions
2018
$ Millions
2019
$ Millions
2020
$ Millions
Vendor License
210
216
224
232
241
250
Vendor Services
501
533
562
593
626
660
697
Vendor S&M
267
273
285
297
309
322
336
SaaS/Hosted
259
42
50
58
69
81
95
111
326
325
330
380
356
373
395
Non-Vendor Solution
273
282
281
281
282
280
277
1,619
1,679
1,740
1,812
1,895
1,980
2,072
Total
Total Market does not include ancilary 3rd party services for non implementation support activities,
including management consulting, technology road-mapping, etc.
Figure 11 | Total Market Value by Segment - Vendor Revs, Third Party Implimentation, Unaddressed Market
2014
$ Millions
Financial Cos.
2015
$ Millions
2016
$ Millions
2017
$ Millions
2018
$ Millions
2019
$ Millions
2020
$ Millions
83
83
83
84
84
85
85
Energy Merchants/Traders
213
226
234
244
225
266
279
O&G Producers
210
197
203
208
214
221
227
O&G Midstream
115
118
113
117
212
127
132
Power Utillities
215
220
222
225
229
233
237
104
109
115
121
127
134
139
Gas Utillities/LDC
43
45
46
48
49
51
52
Energy Retailers
25
26
27
27
28
29
30
50
52
55
59
63
67
72
Ag Traders
157
171
181
193
206
219
234
128
138
150
160
174
186
200
77
86
90
96
100
108
117
Mining
47
49
51
53
55
57
59
Metals Traders
66
67
71
75
79
84
88
Multi-Class Traders
85
93
99
104
110
115
124
1,619
1,681
1,741
1,813
1,895
1,982
2,074
Ag Producers
Total
16
Figure 12 | Total Market Value by Commodity Vendor Revs, Third Party Implimentation, Unaddressed Market
2014
$ Millions
2015
$ Millions
2016
$ Millions
2017
$ Millions
2018
$ Millions
2019
$ Millions
2020
$ Millions
Natural Gas
370
386
399
413
429
448
469
Power
398
404
415
426
439
449
451
245
257
262
275
286
298
310
NGLs
108
114
118
121
125
127
129
Coal
23
23
23
24
24
24
24
Precious Metals
41
42
44
46
49
51
54
116
117
121
125
130
135
139
Ags/Softs
288
304
329
355
385
415
448
30
32
33
35
38
40
43
1,619
1,679
1,744
1,821
1,904
1,986
2,077
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, whosecombined 60-plus years in the
energy and commodities markets, provides depth of understanding of the market and
its issues that is unmatched and unrivaled by any analyst group.
For more information, please visit:
www.comtechadvisory.com
ComTech Advisory also hosts the CTRMCenter, your online portal with news and
views about commodity markets and technology as well as acomprehensive online
directory of software and services providers.
Please visit the CTRMCente at:
www.ctrmcenter.com