The Era of ETRM in the Cloud
A ComTechAdvisory Whitepaper
AN APPETITE FOR THE CLOUD?
As commodity prices fell throughout FY2015, many energy companies cut their budgets and reduced, or delayed, their spending on IT solutions. The first half of FY2016 saw similar conditions, and with deadlines for regulatory reporting occurring during the same time period, the spending that did occur was with an emphasis on compliance in European energy markets specifically. Faced with reduced revenues, higher costs, and harder to find profitable trading opportunities more companies are turning to cloud-based solutions. This trend has continued in the latter half of 2016 and is forecast to continue 4. ComTech anticipates that spending on ETRM procurement will rise in 2017 primarily driven by previously deferred IT spending, as there is significant pentup demand for solutions that can assist industry participants address the near constant changes impacting their markets.
Experience has demonstrated that ETRM in the cloud does provide a number of business benefits. The initial cost of procurement is lower, as there are no upfront license fees and no hardware, third-party software, or infrastructure / installation services required( though implementation services are still required). Instead, the buyer will pay a recurring( usually monthly) fee that includes usage of software and hardware infrastructure, upgrades, and support. Additionally, all bug fixes, upgrades, and new functionality will be provided by the vendors and will be automatically applied to the software as part of the cloud agreement. This arrangement ensures users will stay current with industry changes, providing greater agility for the business in responding and adapting to change.
Back in 2010, research by CommodityPoint 5 showed considerable resistance to cloud-delivered ETRM software, with less than 10 % market penetration at that time. Yet by 2014, subsequent research 6 suggested that ETRM in the cloud penetration rates had increased by 150 %, accounting for about 16 % of the total market. The report also showed how buyer resistance to ETRM in the cloud had melted away with around 80 % of respondents being open to deployment in the cloud and just a hardcore of 20 % still resisting.
The results showed that industry participants had begun to realize the advantages, with survey respondents citing a number of perceived benefits, including,
/ Lower total cost of ownership( TCO),
/ Lower entry costs,
/ Lower demand on IT resources,
/ Faster deployment, and
/ Lower implementation costs.
4. 2016 CTRM Market Update, Commodity Technology Advisory Report, 2016 5. CTRM in the Cloud, CommodityPoint Report, 2010 6. CTRM in the Cloud, Commodity Technology Advisory Report, 2014
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