Around half of systems integration or transformation projects fail because organizations aren’t looking at the holistic picture. But energy trading and risk management (ETRM) systems are critical enablers of the sophisticated activities within trading organizations, making it imperative that they invest wisely. In this episode of “The Trading Desk,” our team of experts discusses the importance of ETRM systems, the varying levels of maturity within different organizations, and what’s required to succeed and create value.

Joanne Salih

Hi, I'm Joanne Salih, a partner in Oliver Wyman's Energy and Natural Resources Practice and America's head of risk and trading.

Today, I'm joined by my colleagues, Matt Schuetz, a VP in our Veritas organization, a specialist risk and trading team, alongside Amber Storey, a director in the Veritas team, and also Adam Perkins, a partner in our Energy and Natural Resources Practice and a lead for risk in trading.

Today, we're going to be discussing whether trading systems give you bang for your buck. A part of our four-part series on risk and trading. Thank you so much for joining me, guys. Good to be here.

It’s interesting when you think about CTRM and Systems, it’s a topic that all of our clients, I think, endlessly seem to have as a top item on the agenda. Where do we invest, how do we invest, and when are we going to invest? But a really interesting statistic for me is that 50% of all systems implementations in the ETRM space, and maybe the wider environment, fail.

And it's like, if you know that that's the failure point, making the right decisions when it comes to system selection, how you choose to implement, on what basis you are implementing, is pretty fundamental to my investment case, right?

Matthew Schuetz

Yeah, I think you nailed it, right. It's around the right system selection. Don't choose the wrong system and then spend, you know, countless money trying to make it fit for your business.

Lay out the implementation like what is important for the implementation. And how are you going to work, right? Like some people want to work in an agile way. Some people, you know, want to take their time to get everything documented. If that's not agreed upon upfront and you're trying to figure that out as you go, it's going to be really, really inefficient.

And along those lines, have very clear success measures, right? Like what is critical, what is a must-have to go live? What are go lives going to look like? Are you going to have multiple, or are you just going to try to get everything in all at once, and everything has to be perfect? And I think, Amber, you have a pretty strong perspective on the everything has to be perfect approach.

Amber Storey 

Show me something as you go, right? Like in school, the kids don't show up with the term paper all written, right? They show up with the topic, and they show up with an outline. It's checkpoints, right? ETRM projects need the same checkpoints. And if you're trying to do it all perfectly at the end, it's never going to work.

But now I think you started with the system selection. And to me, that's the biggest point of failure. If people pick the wrong system.

Software vendors don't lie. They believe their software will do what you're asking when you're selecting the software. It's not dishonesty. It's a lack of understanding of what it takes to do it. My little nephew got a super grand cape for Halloween. Charlie, can you fly? Yes, I can fly. He's not lying. He jumps half a foot off the ground. In his head, he flew. He doesn't understand what flying entails.

It's the same thing with the ETRM system selection. Can you do a negative way CoG? Sure. I can do a negative number. There's so much stuff that goes into that. Things like that are where system selection goes sideways.

Joanne

Exactly, Amber. And I think it's interesting because you know, with a lot of our clients, guys that we work with, their view is: the solution to my system's requirements in a trading environment is a one-stop shop.

And if someone can come to me and say, this is the solution to absolutely everything, I can build whatever bells and whistles you want. Yeah, theoretically you can build it, but does it exist today? And is it the right way of doing things? I think it's a good question.

Adam Perkins

And there's a great Douglas Adams story where he saw a poster from a world fair after the invention of the electric lights, right in the house of the future. They thought they would be a single, enormous electric motor powering absolutely everything in the home. And obviously, that didn't happen.

The electric motor got smaller, and now we have thousands of them in all our tiny gadgets. The same thing happened with the computer with the analogy that Douglas Adams was making, that you don't have one big computer in your house. You have three on your person right now. The same thing happened with CTRM systems, right? You have this one-stop shop. You think it's an amazing thing, and you want it to do as much as possible. And it puts all this criticality on this selection of it.

But actually having a smaller, fragmented CTRM systems landscape that allows you to do more bespoke things is much more in line with how things actually work.

Matthew

I think that's really like the trend, not just of the day, but it's the right direction that everyone's moving to is, it used to be, I’m going to pick the right system and then I'm just going to spend forever trying to make it do exactly what I want it to do. And really, everyone's recognized between technology shifts, and just the right mentality of, like you said, break it up. Right? If you need complex inventory valuation, choose the right way to solve that.

Don't just try to jam it into something that doesn't fit. You know, pick the right systems, the right integrated solution for your commodities, for the functionality you're trying to achieve, put it together, which is really the technology that's evolved. It is much, much easier to integrate things, put them together now with advanced data and analytics. And then you can meet the business goals that much faster.

Joanne

It's like driving flexibility, basically.

Amber

Having said that, the collective approach means that you're not tied down to something. Those who are invested in one big system are stuck. The system's not built on the clouds, so cloud technology has come and passed them by. And there are a hundred different ways that they are stuck, and they have no place to go.  

Matthew

And then you're married to a certain vendor, and all the vendors are great, but do you really want to get married, you know, and your critical system that you need to run your business, right?

Do you really want to be married to a single vendor? Right?  

Amber  

And that's the regret to know for many, because the emerging technologies, cloud-based, are coming. They're real. And they have advantages that the legacy systems simply can never catch up with. If you're not built for the cloud, you don't optimize the cloud.

Joanne

I completely agree. And there’s definitely a systems maturation component to all of this. And I think when you're beginning to think about: “Ok, well, do I build something or do I buy something?” We know traders who have built their entire ecosystems. It's a big element of this. Or how do you scale out? Because your business ten years ago today is not going to look like it will in ten, 15, 20 years' time.

So, essentially, systems are to reflect the business environment. They're not there to kind of drive you in a certain direction. One thought that I think to a large extent, we're really beginning to see play out is, of course, how do we advance beyond the systems that we have today?

The ecosystem that we have today. But there are also a lot of new entrants into the trading space. And what I mean by new entrants, obviously, those who are entirely new, as well as those who are traders today, but probably want to significantly scale their capabilities.

So, for those who are looking to scale, so they have something, and it's not as easy to say: “Okay, well. Let's figure out how to just start again”. What are the things that come to you, you know, what are the top of mind items for you guys in building out an organization, you already have a system infrastructure landscape that you already have?

Matthew

Just to clarify, right? The question is, I have something and I scale, because like you said, there are three very distinct paths, right? We work with new organizations, they're working off of Excel, and they're like: “I need to go beyond Excel”, right?

And then there are the folks who have a solution in place, but they recognize that it doesn't meet the vision that they have for the business. And then there's a third one, right? The organizations that have been around for a while.

But like Amber said, technology changes, right? And even ETRM solution changes, as well as all the technology around it. How do you evolve that? Your question is really around, how does someone who has something in place take it to the next level? And I think the key with almost all of those, but it's especially important for that one, is what is the future vision that you're trying to enable.

Too many people will, because of high failure rates on implementations, too many people will just be like, I'm going to get the bare bones, I'm going to jam it in. Therefore, I can say I had a success, but then the very next day, all of a sudden, they have a new requirement that doesn't meet their needs.

So I think the first thing is to lay out where you are going and what you are trying to enable. And then I think it really is around, how are you going to enable that? Are you going to have an integrated solution architecture that picks the best of the different pieces to Adam's point?

What I'd argue for everyone, though, is: think about the vision, think about the processes that the solution allows you to operate more efficiently on. Because a lot of conversations we get into are: “I can throw someone at this”, right? And solve it, or I can put it into my ETRM. And that's a real conversation we had, right? Of course, do I want to throw more bodies at it, or do I want to enhance my technology? Right? I'm sure you've had some of those conversations.

Adam

I was going to say, I think there's a question for me that comes along with that, which is like, where does the value actually on?

It used to sit within the system. And containerizing your process into the code and saying, this is how it exists now, but it doesn't, right? Now, because you move to a more modular system, you say, I'm going to go for highly specialized smaller systems or microservices that do particular jobs. The actual value is in the interconnection of the data between them. And at that point, you can then have a little bit more lightness in terms of how you select the individual pieces of it to go together.

Because if your business evolves over the next two to three years, you can change that component out, right? Your credit system can be upgraded, and your liquidity management can then be upgraded. Your ETRM did too much, so you can scale it back. You can move it on-prem or you can move it to the cloud. You can change all these things if you have control of the data and the connections between.

Amber

There's a case when you have a clear vision, a clear roadmap, clear priorities and objectives, there's a strong case for tactical solutions that fit within that strategy, not chaotic. Yes, a lot of things could get funding. Not doing things on other people's desks, but one solution at a time. Fixing one thing at a time. Tactical as opposed to: “I blow it up and rebuild it.” There's a strong case for that. Our industry is evolving, right? You could go spend five years implementing a power system and then realize natural gas is where it’s at, and you want to flip back over to that.

If you're not tactical, you don't have agile solutions. You're not gonna be able to switch. The lack of vision, planning, and a roadmap leads to disaster. But if you have the vision, you have the strategy, tactical solutions, that decouple you from any one technology. One way to go.

Matthew

And you don't have to spend, you know, hours doing a business case, but make smart decisions. Oftentimes I'll get asked like: “Hey, can we make this improvement? Can we make this change?” Right? And it will, you know, ask why? And they'll tell me: “Oh, it'll save me five hours a year”.

Okay, but let's have a conversation. Right? Because what that's going to cost you is 100, 200 hours for us to make that change, just to save you five hours a year. What's the benefit? Is there something on top of it in terms of improved compliance and improved, you know, segregation of duties, single source of truth, or no, we're just trading off hours. In which case, hey, that may or may not make sense. Right?

And I think to just build upon that more. Like, again, having the vision, having the overall business case of: this is what I'm trying to achieve, this is what's going to enable my business, enable me to make smarter decisions around asset optimization, around trading, around my position, my exposure versus where am I going to get operational efficiencies. It is the right conversation to have.  

I think too many times, system implementers, too many times, you know, software vendors, when you say jump, I want to do this because it's going to save me five hours a year, and they'll jump.

And you have to have the right partner at the table who's going to take a step back and say what's right for you? What's the business case here? Without again, you don't have to overanalyze it, but at least ask the right questions without just, you know, putting your head down and keep going forward.

Joanne

To be honest, like any investment, this is an enabler of a commercial engine. So the question should be, well, how much value are we actually going to create through this, whether it's the fundamental system or whatever else it is that you're going to tag on, it's definitely very clear requirements for that.

And to not see it as some kind of like, functional back office thing that you're going to do. On the other side, Adam, this is like what you love. I mean, the reality is that trying to nickel and dime this exercise is not necessarily the best way to go about it.

Adam

No, it's such a fundamental piece of being able to reliably take risks and trading as a machine that turns risk into reward. So, to try and save yourself money is going to totally prevent you from making the money you want to make in the first place, right? It's just impossible to save yourself rich. You can save yourself marginally more profitable, but you can never actually make high revenue by saving.

Joanne

Yeah, absolutely. I think what you save today, you end up paying for it tomorrow anyway.  

Amber

There's an absolute drought during the COVID-19 negative oil prices, a drought during spending on ETRM. That drought resulted in entities trying to scale with human capital rather than systems. And that's proved to be very expensive, especially with the attrition that we're seeing, that we're continuing to see in the trading industry. We need five schedulers to do something that could have been automated for the cost of one.

Joanne

And I think, I mean, on this point, we know, especially for those where trading is not the core of the business, meaning they're not independent traders. They are not necessarily hedge funds that have gone out and built independent trading organizations.

But trading is part of a much larger asset business. And so there's, of course, always a corporate IT function that says: “Hang on, what are they doing? Why do traders think they're so special? Why do they need their own little tools and gadgets? And why is this a never-ending question?” For me, I mean, what I always kind of make very clear is that this is, I mean, I don't want to overlab it, but yeah, it is a special case. It's not like everything else.

Matthew

Yeah. I think the types of organizations that you just described are almost the most dangerous. To Adam's point. Right? Those are the organizations that are going out, whether you call it trading, whether you call it hedging, whether you call it supply marketing, those are the ones that are like, “Oh, we don't need to invest in this.”

And they don't have a clear understanding of their position, their exposure, or accuracy; they're relying on a proper, you know, really good risk manager, kind of putting it together after it comes out of the solution. Making manual updates. And it's really dangerous.

Amber

It's been on systems is also a spin on the proper controls to run your operations. You know, just spend more on human capital resources by not spending on systems, you spend on mistakes. You don't have the proper controls in place. Mistakes happen. Those mistakes are expensive. If you overpay a counterparty, they may or may not be able to tell you. They pretty much only call you when you underpaid them, right?

So those mistakes add up. And without proper systems investment, you're going to make those mistakes.

Adam 

I think the trading specificity is really high, right? They are not like average corporate systems.

They are highly specialized front office systems. And I think there are two successful IT development models, either within a corporate who recognize that specificity and are able to move in line with a trading organization and provide that specificity, or where they outsource it into the trading organization themselves, give it a delegation of authority, and allow them to move at their own pace with the relevant controls around it. But without it, as you say, that's the total lack of controls. And just because you are blind to a risk doesn't mean it doesn't exist.

Matthew

It is never a primary objective, but a secondary objective on almost every project I do is how do I get the IT folks more involved and understanding on the trading side?

And how do I get the front middle back office, right? More understanding of: “This is what the system is really doing behind the scenes. You don't just press the button and hope for the answer.” Right? Bringing those capabilities together, I think, is a really big objective on a lot of the transformations, a lot of the implementations that we do.  

Joanne

I think we should talk about ETRM. For me, this is like table stakes because, realistically, looking at your analytical environment, moving into AI, this is a fundamental differentiator.

The ones that are doing it right are not discussing like how much we save here and there, but how do we build future organizations that basically help us get even better at the trading activity we're doing?

Matthew

And how do we leverage, like you said, AI, ML? How do we leverage that? Right? Like, if you don't understand how your systems are fundamentally working and where the gaps are, you can't just throw an AI model on top of it and be like: “Oh, look, it told me an answer.” Right? You have to understand what's going on underneath it in order to leverage AI and ML, you know, and for efficiencies and for insights. Are you talking about data?

Amber

At the end of the day, it's all about the data. So, back in the day, in the beginning, I was just everything ETRM. ETRM was going to solve every problem. And it's fractional, right? It's a portrait of the trade lifecycle from capture to data settlement.

It's your control function, but it's not everything you need. And having ETRM be the center of your work landscape is a problem because the data is the value. And by decoupling the data from ETRM, you also decouple yourself from your commitment to your ETRM system. It makes it replaceable.

Matthew

Yeah. It's not just that the data is your property like that. It is the intellectual capital that allows for supply marketing, you know, hedging traders. Right. Like to do their job like that's what they need, right? And it's about how you enable that, right?

Adam

And probably the prevalence of the ETRM system and why it's so important is because ten, fifteen years ago, that was the only way you ever put that data together was to create a position report. But now we have so many better uses than just the control center. So you need it for much more than the ETRM, right? It makes sense to break it out.

Matthew

I can go back to something you mentioned earlier, the build versus buy. I think that was always like the analysis I would do early on. Should we build, should we buy? Right? And full disclosure, right? I'm a technologist. I'm like: “let's build,” right? And most of the time, the answer is okay. Most of the time, the answer is buy.  

Joanne

It only cost us a couple of billions. Usually, the right answer is buy.

Matthew

But I think we're just living in this great age where you don't have to choose between build versus buy. What you really need to do is buy to accelerate. Right? And then build the right data architecture around it to really give yourself what you need. I think it's a great time that we're living in right now.  

Joanne

So we've spoken about the kind of ETRM-centric architecture and moving towards a data-driven architecture. What does that mean?

Matthew

Yeah. So, to me, data-centric architecture is really around being independent of a single piece of software. Do you understand what data you need, where it should reside, and how to get to a single source of truth?

Capture the data in one place, and make sure that everything that needs that data gets the same pieces of data. And so where it used to be, we would all draw architecture diagrams, and ETRM would be, you know, sitting in the middle of it, and you have some interfaces in or out. What the architecture really needs to look at now is, what is the data? Then, what's the best place for that data to reside? Where is it going to be put? And then where is it going to go?

Joanne

It's interesting having this discussion, certainly for those who are on the journey. A lot of this will resonate, I think, for those who feel that they've basically like figured it out, like they've got the base.

The question does kind of tend to become, is this going to continue to be a strategic differentiator for us? Is this like another silver bullet we're all going to go running after, or not?

Amber

It continues to be the foundational component, a competitive edge. If the investment continues. The biggest fallacy that people make in systems is that I want to have this one big spend on systems. It's going to be the end-all, be-all system, and it's going to solve all my problems.

That's impracticality. And if that's the message you're giving to your management, you're setting yourself up for failure. And those routes and spending are catastrophic to the strategic support of the business.

You don’t have the systems to support you strategically. It's evolving. It's an ongoing spin, but it's got to be the right spend, carefully analyzed, the right vision, one piece at a time, as opposed to trying to put $30 million somewhere and build one giant system that builds it all.

Slow, incremental investments to get to where you want to be, and you're going to be able to reassess where you are along the journey. When you have a five-year ETRM plan, that plan is destined for failure because everything's going to change along the way. Everything you need changes along the way. It doesn't make sense. It'll be time to upgrade before you implement the system.

Matthew 

Just to be clear, you should have a plan. You should also be flexible and adaptable as the markets change, as your organization.

Amber

Five-year plan with incremental steps along the way. It’s when that five-year plan is one delivery at the end, you get into the problem. You're exactly right.

Adam

I think there's an element of the data-centric architecture, which is the separation from the data, from the processing of the data, and both your need for that data and your need to process it continuously evolve. And if you're not looking at both elements of that and continually investing, you are absolutely going to lose your edge.  

Amber

Where were you when I was working on the trade floor, and I would spend a whole month convincing people that I needed access to an ETRM system so I could do my job?

I was a data analytics data modeler, and we would spend all this time pulling information out of these. With your data-centric approach, the data is right there. All we do is analyze the data. And that's where our value is on the trading floor as analysts.  

Matthew

So, I think the examples that have just been around the energy industry forever are like the refining models, you know, natural gas storage. And now it's just expanding and expanding. But like in the refinery model. Right? To Adam’s point, who owns the data? How are we going to process it? Who needs to use it?

And again, the idea of a single source of truth, everybody has to be operating off of a single source of truth. You need one person, one group, one owner of the refinery model. What are the crudes coming in, what refined products are coming out, and everybody has to be operating off of that same page, where you have multiple people, you know, putting underlying assumptions into their work and processing it, but not starting at the same starting place.

There's no way to get to optimization. There's no way to truly capture all the value within your business. The same is true with, you know, natural gas storage, right?

I think a lot of organizations will have natural gas storage optimization models living outside the system, and that's fine. But if you're not feeding that back in, and if everyone's not looking off the same forward view, you start to get in real danger.

Joanne

Yeah, you do. And I think, to be honest, with kind of extrapolating the whole question of storage, and I think the wider midstream asset base, like in some ways, it's genuinely a strategic question.

Does everybody in this organization understand the absolute criticality of joining up our understanding of these assets with what we do in trading? On the other side, it's actually seen as a valued leverage point. And I think, you know, individual companies can have individual philosophies. But by the end of the day, you're not living in a bubble. You know, those systems are also accessible to your competitors.

And whatever value you leave on the table, they will be able to understand. And there are some very aggressive, highly mature competitors out there in this space. If you understand the value that's out there and how to get to it, that's a data point, right?

Matthew

It's just getting more and more competitive. Right? LNG, you know, true, just inventory and tank, like it's just getting to be more and more competitive. More people are getting into assets, whether it's truly owning the assets or long-term agreements. Sorry.  

Adam

Your point about ownership, right? Somebody has to own that data. And where I've seen the highest success is where that is owned by the traders and by the front office. And that is impossible to do while the data is hidden in an IT system, it's therefore owned by IT.

And it's only after you've liberated the data and it can actually be owned by the front office again, you change the systems and processes around the custodianship of that data, and then you can make the most of it commercially.

Joanne

Freedom for the data.  

Matthew

Yeah. Amber said it, right? The thing that's most infuriating is when, like you said, it's a commercial organization's data. Someone stops them from actually being able to get to it. Like, yeah, it drives me insane.  

Joanne

And I’ve got my favorites. I'm sure you have yours, but, you know, who's doing it really well? I think that's the question, right? Because that's what we get asked continuously.  

Matthew

Yeah. So I think, you know, the shining example is the people who are spending money on their solutions, and what it tends to be is it tends to be the sophisticated hedge funds and sophisticated banks.

They understand through, you know, equity trading or just because they started, you know, they were able to start a fund because they were really good commodity traders. They understand the need, the power, and the value within data-centric architecture. And being able to truly optimize.

And so I think those are the ones who are really doing it well. They've been talking about data-centric architecture, not what ETRM do I need, for a very long time.

And it's some of the players who are a bit more, more stagnant, you know, who rely on the margin being around the assets who are starting to fall behind because more and more true traders are starting to invest more in assets, knowing that they can squeeze some more value out of it.

Amber

So it's not lost on me. The fact that a lot of the best examples, the banks, took a best of breed approach. They took the system that best provides power, and they went with that for power.

They took the system that was best among metals, and they were the best among metals. They never went after the let's build an all-in-all system. They invested as they needed, as their business evolved, and as their strategy changed, the IT investment came along. And that's where the success story and accessibility, the data being that I think it's part of that success story.

Joanne

So I do think that maybe from my side as well, I mean, there’s obviously the best, you know, top quartile players, and a lot of our clients don’t see themselves as peers to those organizations. And I think they accept the value tradeoff that they’re going to get because they don’t have that same control.  

I think, and then they look across to the oil and gas peers or other, you know, I agree, whatever else, right, that the producers, what I’ve seen, really differentiates trading, in terms of the value created is actually is trading truly seen as an independent business unit, which is there to optimize the margin of the whole business, or is it not the better understood that is, I find the more value that is generally created.

If there are just continuous questions about whether we should be letting these guys do all of this, and it all seems a bit risky? So on and so forth. Yeah. Questions like what systems do you select? How much do you invest? Just continue to percolate.

Matthew

You know your vision, like, yeah, one of my, one of my favorite organizations that I work with, they knew, hey, we are not a trading organization. We make our money off of optimizing logistics. Great. Let’s choose the right system. Let’s set up the right architecture so that you can know what’s going on, logistics, and what’s going on with the inventory. So you know your exposure, and you can minimize risk. Yeah.

Another favorite organization I work with, they knew their value was in truly trading. Understanding the fundamentals and taking the right positions on those. They have a fundamental understanding and are a great organization to work with. We put in a very, very sophisticated solution for them because that’s what they needed.

Joanne

So honestly I always look at this and I think, you know, it’s it’s so clear in some ways and very complex in others. And the importance of trading as an organization, having their arms around all of this and being really able to control the ecosystem they’re dealing with, to me, is fundamental.

Matthew

Yeah. I think you’re right. It’s the commercial teams, the traders, and the decision makers who have to own the data, and they have to be responsible for it. And they’re the ones who ultimately need to be getting the value out of it.

Joanne

And who has the control points? Is it in-house? Is it external?

Matthew

So, you know, I think in a lot of organizations, you know, at the end of the day, you have an IT, you have a support organization that is responsible for that data. And they oftentimes make the mistake of or we own the data. That’s not true. Right. Like you enable the data owners, you enable the people who are using that data. And it has to be a smart, intelligent, informed dialogue between what do you need data owners, right? Commercial teams front, all of it, back office. And how do we enable and provide that data together? And the most yeah. And the most efficient, effective way.  

Amber

So what you’re saying is IT provides us the governance, makes sure the data is accurate, it’s coming in, and the accessibility, making sure that we can answer any problems. Right. And those problems are evolving. And that’s why the ecosystems need to adapt.  

For example, when I worked on Power Desk, we spent all our time working on demand forecasting, etc., now that renewables introduce the questions around productivity, what are we going to have in the way of our turbines that are solar, and so forth. It’s a whole new model of what’s coming onto the grid, not just what’s coming off. And so, data accessibility and being able to model and analyze are of great importance.  

A great example is that we collected all the data from our turbines, and consistently, one turbine wasn’t producing as much as every other turbine. And it wasn’t that the wind was hitting it differently, it wasn’t that the weather needed more analysis, it was that it was a functional problem. Right? Without the accessibility of the data, we’ll never figure that out.

It’s way faster to figure that out in the air-conditioned office, with all your data in front of you, than going to each turbine and inspecting it for its productivity. Right. And there are countless examples of that in the renewables space.  

Adam

Yeah, the production, the PNL, the invoicing. Right. It’s like Stafford Beer being the grandfather of strategy consultancy and cybernetics, said it was like having a computer to do your invoicing is like having Albert Einstein memorize the phone book so you can get to it a little bit quicker. Right?  

You should use that tool, to try and generate as much value and use it the best way they possible can.

Matthew

It also just gets back to often times IT organizations get frustrated because t they're like, oh, the front office has their own their own models, their own spreadsheets. Why are they not using this? You know the solution I built them.  

You’re not enabling them right. Like and so you know let the commercial teams let the front office or the middle office have what they need. Right. And don’t don’t make them you know, reinvent the wheel. Don’t make them have a side system. Right. Like you give them what they need to understand the business value.  

Amber

Yeah. So the IT department that has no idea there’s a business going on around it.  

Joanne

Yeah. And yeah, there’s a place for corporate IT, as we always say. But it’s the relationship with the business that we’re really talking about.  

Well, thank you so much for joining me. You know, we spoke about many things today, but I think we all agree the systems and the ecosystem of systems is not just, you know, ETRMs are going to continue to be a strategic differentiator for any trader in the market.  

And it’s not really a question of if I need to do this or how cheaply do I do this, but how much value do I want to create and how do I want to get underway?

This transcript was edited for clarity.

Around half of systems integration or transformation projects fail because organizations aren’t looking at the holistic picture. But energy trading and risk management (ETRM) systems are critical enablers of the sophisticated activities within trading organizations, making it imperative that they invest wisely. In this episode of “The Trading Desk,” our team of experts discusses the importance of ETRM systems, the varying levels of maturity within different organizations, and what’s required to succeed and create value.

Joanne Salih

Hi, I'm Joanne Salih, a partner in Oliver Wyman's Energy and Natural Resources Practice and America's head of risk and trading.

Today, I'm joined by my colleagues, Matt Schuetz, a VP in our Veritas organization, a specialist risk and trading team, alongside Amber Storey, a director in the Veritas team, and also Adam Perkins, a partner in our Energy and Natural Resources Practice and a lead for risk in trading.

Today, we're going to be discussing whether trading systems give you bang for your buck. A part of our four-part series on risk and trading. Thank you so much for joining me, guys. Good to be here.

It’s interesting when you think about CTRM and Systems, it’s a topic that all of our clients, I think, endlessly seem to have as a top item on the agenda. Where do we invest, how do we invest, and when are we going to invest? But a really interesting statistic for me is that 50% of all systems implementations in the ETRM space, and maybe the wider environment, fail.

And it's like, if you know that that's the failure point, making the right decisions when it comes to system selection, how you choose to implement, on what basis you are implementing, is pretty fundamental to my investment case, right?

Matthew Schuetz

Yeah, I think you nailed it, right. It's around the right system selection. Don't choose the wrong system and then spend, you know, countless money trying to make it fit for your business.

Lay out the implementation like what is important for the implementation. And how are you going to work, right? Like some people want to work in an agile way. Some people, you know, want to take their time to get everything documented. If that's not agreed upon upfront and you're trying to figure that out as you go, it's going to be really, really inefficient.

And along those lines, have very clear success measures, right? Like what is critical, what is a must-have to go live? What are go lives going to look like? Are you going to have multiple, or are you just going to try to get everything in all at once, and everything has to be perfect? And I think, Amber, you have a pretty strong perspective on the everything has to be perfect approach.

Amber Storey 

Show me something as you go, right? Like in school, the kids don't show up with the term paper all written, right? They show up with the topic, and they show up with an outline. It's checkpoints, right? ETRM projects need the same checkpoints. And if you're trying to do it all perfectly at the end, it's never going to work.

But now I think you started with the system selection. And to me, that's the biggest point of failure. If people pick the wrong system.

Software vendors don't lie. They believe their software will do what you're asking when you're selecting the software. It's not dishonesty. It's a lack of understanding of what it takes to do it. My little nephew got a super grand cape for Halloween. Charlie, can you fly? Yes, I can fly. He's not lying. He jumps half a foot off the ground. In his head, he flew. He doesn't understand what flying entails.

It's the same thing with the ETRM system selection. Can you do a negative way CoG? Sure. I can do a negative number. There's so much stuff that goes into that. Things like that are where system selection goes sideways.

Joanne

Exactly, Amber. And I think it's interesting because you know, with a lot of our clients, guys that we work with, their view is: the solution to my system's requirements in a trading environment is a one-stop shop.

And if someone can come to me and say, this is the solution to absolutely everything, I can build whatever bells and whistles you want. Yeah, theoretically you can build it, but does it exist today? And is it the right way of doing things? I think it's a good question.

Adam Perkins

And there's a great Douglas Adams story where he saw a poster from a world fair after the invention of the electric lights, right in the house of the future. They thought they would be a single, enormous electric motor powering absolutely everything in the home. And obviously, that didn't happen.

The electric motor got smaller, and now we have thousands of them in all our tiny gadgets. The same thing happened with the computer with the analogy that Douglas Adams was making, that you don't have one big computer in your house. You have three on your person right now. The same thing happened with CTRM systems, right? You have this one-stop shop. You think it's an amazing thing, and you want it to do as much as possible. And it puts all this criticality on this selection of it.

But actually having a smaller, fragmented CTRM systems landscape that allows you to do more bespoke things is much more in line with how things actually work.

Matthew

I think that's really like the trend, not just of the day, but it's the right direction that everyone's moving to is, it used to be, I’m going to pick the right system and then I'm just going to spend forever trying to make it do exactly what I want it to do. And really, everyone's recognized between technology shifts, and just the right mentality of, like you said, break it up. Right? If you need complex inventory valuation, choose the right way to solve that.

Don't just try to jam it into something that doesn't fit. You know, pick the right systems, the right integrated solution for your commodities, for the functionality you're trying to achieve, put it together, which is really the technology that's evolved. It is much, much easier to integrate things, put them together now with advanced data and analytics. And then you can meet the business goals that much faster.

Joanne

It's like driving flexibility, basically.

Amber

Having said that, the collective approach means that you're not tied down to something. Those who are invested in one big system are stuck. The system's not built on the clouds, so cloud technology has come and passed them by. And there are a hundred different ways that they are stuck, and they have no place to go.  

Matthew

And then you're married to a certain vendor, and all the vendors are great, but do you really want to get married, you know, and your critical system that you need to run your business, right?

Do you really want to be married to a single vendor? Right?  

Amber  

And that's the regret to know for many, because the emerging technologies, cloud-based, are coming. They're real. And they have advantages that the legacy systems simply can never catch up with. If you're not built for the cloud, you don't optimize the cloud.

Joanne

I completely agree. And there’s definitely a systems maturation component to all of this. And I think when you're beginning to think about: “Ok, well, do I build something or do I buy something?” We know traders who have built their entire ecosystems. It's a big element of this. Or how do you scale out? Because your business ten years ago today is not going to look like it will in ten, 15, 20 years' time.

So, essentially, systems are to reflect the business environment. They're not there to kind of drive you in a certain direction. One thought that I think to a large extent, we're really beginning to see play out is, of course, how do we advance beyond the systems that we have today?

The ecosystem that we have today. But there are also a lot of new entrants into the trading space. And what I mean by new entrants, obviously, those who are entirely new, as well as those who are traders today, but probably want to significantly scale their capabilities.

So, for those who are looking to scale, so they have something, and it's not as easy to say: “Okay, well. Let's figure out how to just start again”. What are the things that come to you, you know, what are the top of mind items for you guys in building out an organization, you already have a system infrastructure landscape that you already have?

Matthew

Just to clarify, right? The question is, I have something and I scale, because like you said, there are three very distinct paths, right? We work with new organizations, they're working off of Excel, and they're like: “I need to go beyond Excel”, right?

And then there are the folks who have a solution in place, but they recognize that it doesn't meet the vision that they have for the business. And then there's a third one, right? The organizations that have been around for a while.

But like Amber said, technology changes, right? And even ETRM solution changes, as well as all the technology around it. How do you evolve that? Your question is really around, how does someone who has something in place take it to the next level? And I think the key with almost all of those, but it's especially important for that one, is what is the future vision that you're trying to enable.

Too many people will, because of high failure rates on implementations, too many people will just be like, I'm going to get the bare bones, I'm going to jam it in. Therefore, I can say I had a success, but then the very next day, all of a sudden, they have a new requirement that doesn't meet their needs.

So I think the first thing is to lay out where you are going and what you are trying to enable. And then I think it really is around, how are you going to enable that? Are you going to have an integrated solution architecture that picks the best of the different pieces to Adam's point?

What I'd argue for everyone, though, is: think about the vision, think about the processes that the solution allows you to operate more efficiently on. Because a lot of conversations we get into are: “I can throw someone at this”, right? And solve it, or I can put it into my ETRM. And that's a real conversation we had, right? Of course, do I want to throw more bodies at it, or do I want to enhance my technology? Right? I'm sure you've had some of those conversations.

Adam

I was going to say, I think there's a question for me that comes along with that, which is like, where does the value actually on?

It used to sit within the system. And containerizing your process into the code and saying, this is how it exists now, but it doesn't, right? Now, because you move to a more modular system, you say, I'm going to go for highly specialized smaller systems or microservices that do particular jobs. The actual value is in the interconnection of the data between them. And at that point, you can then have a little bit more lightness in terms of how you select the individual pieces of it to go together.

Because if your business evolves over the next two to three years, you can change that component out, right? Your credit system can be upgraded, and your liquidity management can then be upgraded. Your ETRM did too much, so you can scale it back. You can move it on-prem or you can move it to the cloud. You can change all these things if you have control of the data and the connections between.

Amber

There's a case when you have a clear vision, a clear roadmap, clear priorities and objectives, there's a strong case for tactical solutions that fit within that strategy, not chaotic. Yes, a lot of things could get funding. Not doing things on other people's desks, but one solution at a time. Fixing one thing at a time. Tactical as opposed to: “I blow it up and rebuild it.” There's a strong case for that. Our industry is evolving, right? You could go spend five years implementing a power system and then realize natural gas is where it’s at, and you want to flip back over to that.

If you're not tactical, you don't have agile solutions. You're not gonna be able to switch. The lack of vision, planning, and a roadmap leads to disaster. But if you have the vision, you have the strategy, tactical solutions, that decouple you from any one technology. One way to go.

Matthew

And you don't have to spend, you know, hours doing a business case, but make smart decisions. Oftentimes I'll get asked like: “Hey, can we make this improvement? Can we make this change?” Right? And it will, you know, ask why? And they'll tell me: “Oh, it'll save me five hours a year”.

Okay, but let's have a conversation. Right? Because what that's going to cost you is 100, 200 hours for us to make that change, just to save you five hours a year. What's the benefit? Is there something on top of it in terms of improved compliance and improved, you know, segregation of duties, single source of truth, or no, we're just trading off hours. In which case, hey, that may or may not make sense. Right?

And I think to just build upon that more. Like, again, having the vision, having the overall business case of: this is what I'm trying to achieve, this is what's going to enable my business, enable me to make smarter decisions around asset optimization, around trading, around my position, my exposure versus where am I going to get operational efficiencies. It is the right conversation to have.  

I think too many times, system implementers, too many times, you know, software vendors, when you say jump, I want to do this because it's going to save me five hours a year, and they'll jump.

And you have to have the right partner at the table who's going to take a step back and say what's right for you? What's the business case here? Without again, you don't have to overanalyze it, but at least ask the right questions without just, you know, putting your head down and keep going forward.

Joanne

To be honest, like any investment, this is an enabler of a commercial engine. So the question should be, well, how much value are we actually going to create through this, whether it's the fundamental system or whatever else it is that you're going to tag on, it's definitely very clear requirements for that.

And to not see it as some kind of like, functional back office thing that you're going to do. On the other side, Adam, this is like what you love. I mean, the reality is that trying to nickel and dime this exercise is not necessarily the best way to go about it.

Adam

No, it's such a fundamental piece of being able to reliably take risks and trading as a machine that turns risk into reward. So, to try and save yourself money is going to totally prevent you from making the money you want to make in the first place, right? It's just impossible to save yourself rich. You can save yourself marginally more profitable, but you can never actually make high revenue by saving.

Joanne

Yeah, absolutely. I think what you save today, you end up paying for it tomorrow anyway.  

Amber

There's an absolute drought during the COVID-19 negative oil prices, a drought during spending on ETRM. That drought resulted in entities trying to scale with human capital rather than systems. And that's proved to be very expensive, especially with the attrition that we're seeing, that we're continuing to see in the trading industry. We need five schedulers to do something that could have been automated for the cost of one.

Joanne

And I think, I mean, on this point, we know, especially for those where trading is not the core of the business, meaning they're not independent traders. They are not necessarily hedge funds that have gone out and built independent trading organizations.

But trading is part of a much larger asset business. And so there's, of course, always a corporate IT function that says: “Hang on, what are they doing? Why do traders think they're so special? Why do they need their own little tools and gadgets? And why is this a never-ending question?” For me, I mean, what I always kind of make very clear is that this is, I mean, I don't want to overlab it, but yeah, it is a special case. It's not like everything else.

Matthew

Yeah. I think the types of organizations that you just described are almost the most dangerous. To Adam's point. Right? Those are the organizations that are going out, whether you call it trading, whether you call it hedging, whether you call it supply marketing, those are the ones that are like, “Oh, we don't need to invest in this.”

And they don't have a clear understanding of their position, their exposure, or accuracy; they're relying on a proper, you know, really good risk manager, kind of putting it together after it comes out of the solution. Making manual updates. And it's really dangerous.

Amber

It's been on systems is also a spin on the proper controls to run your operations. You know, just spend more on human capital resources by not spending on systems, you spend on mistakes. You don't have the proper controls in place. Mistakes happen. Those mistakes are expensive. If you overpay a counterparty, they may or may not be able to tell you. They pretty much only call you when you underpaid them, right?

So those mistakes add up. And without proper systems investment, you're going to make those mistakes.

Adam 

I think the trading specificity is really high, right? They are not like average corporate systems.

They are highly specialized front office systems. And I think there are two successful IT development models, either within a corporate who recognize that specificity and are able to move in line with a trading organization and provide that specificity, or where they outsource it into the trading organization themselves, give it a delegation of authority, and allow them to move at their own pace with the relevant controls around it. But without it, as you say, that's the total lack of controls. And just because you are blind to a risk doesn't mean it doesn't exist.

Matthew

It is never a primary objective, but a secondary objective on almost every project I do is how do I get the IT folks more involved and understanding on the trading side?

And how do I get the front middle back office, right? More understanding of: “This is what the system is really doing behind the scenes. You don't just press the button and hope for the answer.” Right? Bringing those capabilities together, I think, is a really big objective on a lot of the transformations, a lot of the implementations that we do.  

Joanne

I think we should talk about ETRM. For me, this is like table stakes because, realistically, looking at your analytical environment, moving into AI, this is a fundamental differentiator.

The ones that are doing it right are not discussing like how much we save here and there, but how do we build future organizations that basically help us get even better at the trading activity we're doing?

Matthew

And how do we leverage, like you said, AI, ML? How do we leverage that? Right? Like, if you don't understand how your systems are fundamentally working and where the gaps are, you can't just throw an AI model on top of it and be like: “Oh, look, it told me an answer.” Right? You have to understand what's going on underneath it in order to leverage AI and ML, you know, and for efficiencies and for insights. Are you talking about data?

Amber

At the end of the day, it's all about the data. So, back in the day, in the beginning, I was just everything ETRM. ETRM was going to solve every problem. And it's fractional, right? It's a portrait of the trade lifecycle from capture to data settlement.

It's your control function, but it's not everything you need. And having ETRM be the center of your work landscape is a problem because the data is the value. And by decoupling the data from ETRM, you also decouple yourself from your commitment to your ETRM system. It makes it replaceable.

Matthew

Yeah. It's not just that the data is your property like that. It is the intellectual capital that allows for supply marketing, you know, hedging traders. Right. Like to do their job like that's what they need, right? And it's about how you enable that, right?

Adam

And probably the prevalence of the ETRM system and why it's so important is because ten, fifteen years ago, that was the only way you ever put that data together was to create a position report. But now we have so many better uses than just the control center. So you need it for much more than the ETRM, right? It makes sense to break it out.

Matthew

I can go back to something you mentioned earlier, the build versus buy. I think that was always like the analysis I would do early on. Should we build, should we buy? Right? And full disclosure, right? I'm a technologist. I'm like: “let's build,” right? And most of the time, the answer is okay. Most of the time, the answer is buy.  

Joanne

It only cost us a couple of billions. Usually, the right answer is buy.

Matthew

But I think we're just living in this great age where you don't have to choose between build versus buy. What you really need to do is buy to accelerate. Right? And then build the right data architecture around it to really give yourself what you need. I think it's a great time that we're living in right now.  

Joanne

So we've spoken about the kind of ETRM-centric architecture and moving towards a data-driven architecture. What does that mean?

Matthew

Yeah. So, to me, data-centric architecture is really around being independent of a single piece of software. Do you understand what data you need, where it should reside, and how to get to a single source of truth?

Capture the data in one place, and make sure that everything that needs that data gets the same pieces of data. And so where it used to be, we would all draw architecture diagrams, and ETRM would be, you know, sitting in the middle of it, and you have some interfaces in or out. What the architecture really needs to look at now is, what is the data? Then, what's the best place for that data to reside? Where is it going to be put? And then where is it going to go?

Joanne

It's interesting having this discussion, certainly for those who are on the journey. A lot of this will resonate, I think, for those who feel that they've basically like figured it out, like they've got the base.

The question does kind of tend to become, is this going to continue to be a strategic differentiator for us? Is this like another silver bullet we're all going to go running after, or not?

Amber

It continues to be the foundational component, a competitive edge. If the investment continues. The biggest fallacy that people make in systems is that I want to have this one big spend on systems. It's going to be the end-all, be-all system, and it's going to solve all my problems.

That's impracticality. And if that's the message you're giving to your management, you're setting yourself up for failure. And those routes and spending are catastrophic to the strategic support of the business.

You don’t have the systems to support you strategically. It's evolving. It's an ongoing spin, but it's got to be the right spend, carefully analyzed, the right vision, one piece at a time, as opposed to trying to put $30 million somewhere and build one giant system that builds it all.

Slow, incremental investments to get to where you want to be, and you're going to be able to reassess where you are along the journey. When you have a five-year ETRM plan, that plan is destined for failure because everything's going to change along the way. Everything you need changes along the way. It doesn't make sense. It'll be time to upgrade before you implement the system.

Matthew 

Just to be clear, you should have a plan. You should also be flexible and adaptable as the markets change, as your organization.

Amber

Five-year plan with incremental steps along the way. It’s when that five-year plan is one delivery at the end, you get into the problem. You're exactly right.

Adam

I think there's an element of the data-centric architecture, which is the separation from the data, from the processing of the data, and both your need for that data and your need to process it continuously evolve. And if you're not looking at both elements of that and continually investing, you are absolutely going to lose your edge.  

Amber

Where were you when I was working on the trade floor, and I would spend a whole month convincing people that I needed access to an ETRM system so I could do my job?

I was a data analytics data modeler, and we would spend all this time pulling information out of these. With your data-centric approach, the data is right there. All we do is analyze the data. And that's where our value is on the trading floor as analysts.  

Matthew

So, I think the examples that have just been around the energy industry forever are like the refining models, you know, natural gas storage. And now it's just expanding and expanding. But like in the refinery model. Right? To Adam’s point, who owns the data? How are we going to process it? Who needs to use it?

And again, the idea of a single source of truth, everybody has to be operating off of a single source of truth. You need one person, one group, one owner of the refinery model. What are the crudes coming in, what refined products are coming out, and everybody has to be operating off of that same page, where you have multiple people, you know, putting underlying assumptions into their work and processing it, but not starting at the same starting place.

There's no way to get to optimization. There's no way to truly capture all the value within your business. The same is true with, you know, natural gas storage, right?

I think a lot of organizations will have natural gas storage optimization models living outside the system, and that's fine. But if you're not feeding that back in, and if everyone's not looking off the same forward view, you start to get in real danger.

Joanne

Yeah, you do. And I think, to be honest, with kind of extrapolating the whole question of storage, and I think the wider midstream asset base, like in some ways, it's genuinely a strategic question.

Does everybody in this organization understand the absolute criticality of joining up our understanding of these assets with what we do in trading? On the other side, it's actually seen as a valued leverage point. And I think, you know, individual companies can have individual philosophies. But by the end of the day, you're not living in a bubble. You know, those systems are also accessible to your competitors.

And whatever value you leave on the table, they will be able to understand. And there are some very aggressive, highly mature competitors out there in this space. If you understand the value that's out there and how to get to it, that's a data point, right?

Matthew

It's just getting more and more competitive. Right? LNG, you know, true, just inventory and tank, like it's just getting to be more and more competitive. More people are getting into assets, whether it's truly owning the assets or long-term agreements. Sorry.  

Adam

Your point about ownership, right? Somebody has to own that data. And where I've seen the highest success is where that is owned by the traders and by the front office. And that is impossible to do while the data is hidden in an IT system, it's therefore owned by IT.

And it's only after you've liberated the data and it can actually be owned by the front office again, you change the systems and processes around the custodianship of that data, and then you can make the most of it commercially.

Joanne

Freedom for the data.  

Matthew

Yeah. Amber said it, right? The thing that's most infuriating is when, like you said, it's a commercial organization's data. Someone stops them from actually being able to get to it. Like, yeah, it drives me insane.  

Joanne

And I’ve got my favorites. I'm sure you have yours, but, you know, who's doing it really well? I think that's the question, right? Because that's what we get asked continuously.  

Matthew

Yeah. So I think, you know, the shining example is the people who are spending money on their solutions, and what it tends to be is it tends to be the sophisticated hedge funds and sophisticated banks.

They understand through, you know, equity trading or just because they started, you know, they were able to start a fund because they were really good commodity traders. They understand the need, the power, and the value within data-centric architecture. And being able to truly optimize.

And so I think those are the ones who are really doing it well. They've been talking about data-centric architecture, not what ETRM do I need, for a very long time.

And it's some of the players who are a bit more, more stagnant, you know, who rely on the margin being around the assets who are starting to fall behind because more and more true traders are starting to invest more in assets, knowing that they can squeeze some more value out of it.

Amber

So it's not lost on me. The fact that a lot of the best examples, the banks, took a best of breed approach. They took the system that best provides power, and they went with that for power.

They took the system that was best among metals, and they were the best among metals. They never went after the let's build an all-in-all system. They invested as they needed, as their business evolved, and as their strategy changed, the IT investment came along. And that's where the success story and accessibility, the data being that I think it's part of that success story.

Joanne

So I do think that maybe from my side as well, I mean, there’s obviously the best, you know, top quartile players, and a lot of our clients don’t see themselves as peers to those organizations. And I think they accept the value tradeoff that they’re going to get because they don’t have that same control.  

I think, and then they look across to the oil and gas peers or other, you know, I agree, whatever else, right, that the producers, what I’ve seen, really differentiates trading, in terms of the value created is actually is trading truly seen as an independent business unit, which is there to optimize the margin of the whole business, or is it not the better understood that is, I find the more value that is generally created.

If there are just continuous questions about whether we should be letting these guys do all of this, and it all seems a bit risky? So on and so forth. Yeah. Questions like what systems do you select? How much do you invest? Just continue to percolate.

Matthew

You know your vision, like, yeah, one of my, one of my favorite organizations that I work with, they knew, hey, we are not a trading organization. We make our money off of optimizing logistics. Great. Let’s choose the right system. Let’s set up the right architecture so that you can know what’s going on, logistics, and what’s going on with the inventory. So you know your exposure, and you can minimize risk. Yeah.

Another favorite organization I work with, they knew their value was in truly trading. Understanding the fundamentals and taking the right positions on those. They have a fundamental understanding and are a great organization to work with. We put in a very, very sophisticated solution for them because that’s what they needed.

Joanne

So honestly I always look at this and I think, you know, it’s it’s so clear in some ways and very complex in others. And the importance of trading as an organization, having their arms around all of this and being really able to control the ecosystem they’re dealing with, to me, is fundamental.

Matthew

Yeah. I think you’re right. It’s the commercial teams, the traders, and the decision makers who have to own the data, and they have to be responsible for it. And they’re the ones who ultimately need to be getting the value out of it.

Joanne

And who has the control points? Is it in-house? Is it external?

Matthew

So, you know, I think in a lot of organizations, you know, at the end of the day, you have an IT, you have a support organization that is responsible for that data. And they oftentimes make the mistake of or we own the data. That’s not true. Right. Like you enable the data owners, you enable the people who are using that data. And it has to be a smart, intelligent, informed dialogue between what do you need data owners, right? Commercial teams front, all of it, back office. And how do we enable and provide that data together? And the most yeah. And the most efficient, effective way.  

Amber

So what you’re saying is IT provides us the governance, makes sure the data is accurate, it’s coming in, and the accessibility, making sure that we can answer any problems. Right. And those problems are evolving. And that’s why the ecosystems need to adapt.  

For example, when I worked on Power Desk, we spent all our time working on demand forecasting, etc., now that renewables introduce the questions around productivity, what are we going to have in the way of our turbines that are solar, and so forth. It’s a whole new model of what’s coming onto the grid, not just what’s coming off. And so, data accessibility and being able to model and analyze are of great importance.  

A great example is that we collected all the data from our turbines, and consistently, one turbine wasn’t producing as much as every other turbine. And it wasn’t that the wind was hitting it differently, it wasn’t that the weather needed more analysis, it was that it was a functional problem. Right? Without the accessibility of the data, we’ll never figure that out.

It’s way faster to figure that out in the air-conditioned office, with all your data in front of you, than going to each turbine and inspecting it for its productivity. Right. And there are countless examples of that in the renewables space.  

Adam

Yeah, the production, the PNL, the invoicing. Right. It’s like Stafford Beer being the grandfather of strategy consultancy and cybernetics, said it was like having a computer to do your invoicing is like having Albert Einstein memorize the phone book so you can get to it a little bit quicker. Right?  

You should use that tool, to try and generate as much value and use it the best way they possible can.

Matthew

It also just gets back to often times IT organizations get frustrated because t they're like, oh, the front office has their own their own models, their own spreadsheets. Why are they not using this? You know the solution I built them.  

You’re not enabling them right. Like and so you know let the commercial teams let the front office or the middle office have what they need. Right. And don’t don’t make them you know, reinvent the wheel. Don’t make them have a side system. Right. Like you give them what they need to understand the business value.  

Amber

Yeah. So the IT department that has no idea there’s a business going on around it.  

Joanne

Yeah. And yeah, there’s a place for corporate IT, as we always say. But it’s the relationship with the business that we’re really talking about.  

Well, thank you so much for joining me. You know, we spoke about many things today, but I think we all agree the systems and the ecosystem of systems is not just, you know, ETRMs are going to continue to be a strategic differentiator for any trader in the market.  

And it’s not really a question of if I need to do this or how cheaply do I do this, but how much value do I want to create and how do I want to get underway?

This transcript was edited for clarity.