Reports 2016 CTRM Market Update - Page 6

2016 CTRM Market Update spend in those segments was partially offset by higher than expected spend from refiners and petrochemicals (improved margins due to lower feedstock prices), as well as retail energy providers who saw increased activity from retail customers seeking to lock-in lower prices. /E  urope saw reasonable demand for energy-centric CTRM solutions in 2015, primarily due to energy market liberalization, shifting generation dynamics (continuing impact of renewables) and spending for regulatory compliance. This strength was partially offset by lower demand for ags and softs systems due to a combination of over-investment in those markets in the preceding years and the slowing global economy. Sales of CTRM products to commercial and industrial commodity consumers (a diverse group that would include food/bev manufacturers and supermarkets) in the European markets were in line with expectations, though very few, if any, top-tier deals were consummated. Revised Outlook For 2016 Through 2020 Overall, 2016 should be somewhat stronger than 2015 as the market continues to adjust to a lower commodity price regime. While buying cycles have lengthened, deal size for traditionally deployed solutions should increase somewhat. Additionally, we have increased our outlook for growth in the SaaS/ hosted solutions markets to reflect higher than anticipated adoption of such solutions. 2017 should be stronger as commodity prices are general- ly forecast to move higher. Overall, we anticipate growth in total CTRM vendor revenue in 2017 will be higher than ComTech has previously forecast, primarily driven by IT spending which was deferred in late 2014 thru 2016. This delayed spend is anticipated to occur in 2017 and beyond as prices improve and the commodity markets return to a more “normal” state driven by increasing growth in the Asia-Pac region. As such, we are projecting the CTRM markets in 2017 through 2020 to grow an average of 6-8% per year for the period. Additional Considerations To Note As previously mentioned, as estimates of annual market size has in the past been primarily a combination of recognized license, support & maintenance and implementation revenues, the increase in popularity of other approaches (such as SaaS/ hosted) will have an increasing impact on annual market size. Recurring revenues, often with support & maintenance and even enhancements and/or implementation fees rolled-in, may effect timing of revenue recognition in an increasing degree in the coming years. While the full impact of this shift is difficult to forecast, it is likely that shift in deal structuring will serve to reduce annual market size growth while increasing future growth by essentially deferring revenue recognition for new CTRM deals. © Commodity Technology Advisory LLC, 2016, All Rights Reserved. 6