ETRM Implementations Small and Midsize companies Lanshore LLC. Mark Warne April 2015

Transcription

1 ETRM Implementations Small and Midsize companies Lanshore LLC. Mark Warne April 2015

2 Between late November and the first few weeks of January 2015, Lanshore conducted a survey related to Energy Trading and Risk Management System Implementations for small to midsize energy trading companies. Small firms were considered to be those firms with less than 10 traders, and midsize firms were considered to be those with less than 25 traders. Approximately 60% of the respondents communicated that they were either using a homegrown system or they were The request for responses to the survey was focused on organizations that hold US physical energy assets such as producing wells, gathering facilities, or midstream pipelines and that also engage in trading and logistics activities. Banks and financial institutions, although they could own assets as previously described, were not targeted as part of this survey, given the nature of their current participation in the US Energy market. Response rates were excellent and from the data collected, approximately 65% came from smaller firms that engaged in energy trading and 35% came from firms with mid-sized trading operations. relying of It should be noted that while the price of oil did decline Excel substantially during the time of the collection of survey results (it Spreadsheets. went from $75 per barrel in Late November down to $50 per barrel in early January), we did not see a significant divergence in the messaging across this time period. One of the first questions we asked respondents had to do with what their current type of system was. Approximately 60% of the respondents communicated that they were either using a homegrown system or they were relying of Excel Spreadsheets. The other 40% indicated that they were using an off the shelf ETRM software product or package. It should come as no surprise that the vast majority of the firms that were currently using spreadsheet were all small energy trading companies. Of the 60% of the respondents that were either using a homegrown system or relying on the use of Excel Spreadsheets currently, approximately 60% of those respondents (or 36% of the total respondents) had no intention of moving away from their spreadsheets or homegrown systems at this time. The other 40% of respondents currently using a homegrown system or relying on the use of Excel spreadsheets (24% of the total respondents) were either currently moving to a packaged solution or were planning to make a move towards a packaged solution.

3 Of the 40% utilizing package software currently, 35% of those respondents currently were expecting no immediate change with that software, 50% were planning to conduct an upgrade in the next 12 months, and 15% were expecting to make a change to their software within the following year. We also asked about expectations related to implementation time for an ETRM package to be up and running. 50% of all the respondents felt that the ETRM implementation should take between two to four months, 10% thought it should take between four to six months, and 40% thought it should take more than six months. These responses were considered consistent with the nature of the size of the majority of the respondents. 50% of the companies plan to upgrade in the next 12 months. 15% expect to make a change to their software within the next 12 months. The smaller trading shops are typically looking at simpler more narrowly defined scope of work related to the implementation. The midsize firms are looking for more complexity in terms of their expected ETRM project scope. The majority of the respondents that expected that it would take more than six months, either currently had a vendor package, or they were implementing an ETRM software package from a vendor. The respondents who thought that the implementation would take more than six months, either had experience implementing, or they clearly understood what it would take to implement an ETRM system for an organization of their size. We asked the respondents about the use of a third party integrator (with ETRM experience) and what stages should they be brought into the organization related to an ETRM system implementation. The options were the beginning, during the implementation, and after the implementation (for follow up work). The entirety of the respondents agreed that a third party integrator (with ETRM experience) should be best utilized during the implementation. Twenty percent said that the third party should also be used during the beginning stages prior to the implementation (vendor selection and project planning phases). Additionally, 15% said that the third party integrator could play a role post implementations. From their perspective that 15% suggested it would primarily be for Add-ons and upgrades after the implementation.

4 The 30% that replied that training should take less than one week tended to be the smaller trading shops. The respondents that stated that third party companies should be utilized after the implementation were mostly the larger firms that were surveyed. While it may come as no surprise that smaller firms would not likely want to continue to pay for higher priced 3rd party integrators post implementation, what was surprising was the concept that they (the trading firms) could and should manage everything post implementation. These responses may be due to the respondent's level of experience with ETRM systems or it may have more to do with their firm s willingness to invest money in an ETRM system post implementation. What it may also indicate is that third party Integrators need to have business models that better promotes the concept of lower total cost of ownership. We inquired about the appropriate amount of training time required for an ETRM implementation. 65% of the respondents thought that training users should take between one to two weeks, 30 % replied that it should take less than one week, and five percent though it should take two to four weeks (with ETRM experience). The 30% that replied that training should take less than one week tended to be the smaller trading shops. Here again, these responses may be due to the respondent's level of experience with ETRM systems or it may have more to do with their firm s willingness to invest money in an ETRM system. Given the importance of training as a function of change management and system acceptance, we see this as an area of concern when it comes to ETRM implementations involving smaller organizations. The survey discussed the importance of tools and techniques used to keep ETRM system implementation projects and related Energy Trading IT projects on track. We asked the respondents to rank a number or such tools and techniques. From the responses received, Face-to-Face meetings, Scheduled Phone Conferences, and Status Reports (sent via ) are the three most important tools and techniques for keeping ETRM implementations project on track. Unscheduled one-on-one phone calls and simply logging project hours were both seen as the least effective tools for keeping track of ETRM implementations. Overall, based on the tools and techniques identified, it is apparent that scheduled communications and the use of written status reports are viewed as important to all trading organizations regardless of their size.

5 About the author Mark Warne has over 20 years experience in business analysis and project management around transaction management systems implementations and development efforts. Mark has spent his entire career focused on the energy industry, and he combines experience in trading & risk management, exploration & production, pipeline operations, and accounting with experience in business consulting and software development. He has a solid understanding of commodities markets from both financial risk and physical logistics perspectives and he has worked with Natural Gas, Natural Gas Liquids, LNG, and Oil. Mark has played key roles on several high profile international projects for extended periods of time. Mark has experience in developing and managing Nearshore teams for clients in the United States and Canada. Finding and developing qualified energy IT professionals based in Latin America has been a focus area for Mark. Contact us info@lanshore.com P