The Era of ETRM in the Cloud
Commodity Technology Advisory (ComTech) has been tracking the rise of ETRM solutions delivered in the cloud over many years. While the potential benefits and cost savings associated with ETRM in the cloud have always appeared to be robust, uptake across the industry has proven to be quite slow until relatively recently. Although many other industries migrated to the cost efficiencies of the cloud, the energy industry lagged behind. The key concern quoted by the industry was usually data security, despite companies often having back-up and recovery procedures in place that result in trade and position data being stored off-site. Then, commodity prices collapsed generally, led by energy, and costs began to rise inexorably as new regulations progressively came into force. Margins were squeezed and structural changes have occurred across the industry so that profitable trades are a good deal harder to find.
While ETRM and other IT initiatives were put on hold or scaled back to reduce costs, rapid market changes necessitated ETRM functional changes — compelling energy companies to seek more cost effective ways to procure the right ETRM platform. As their ETRM and related solutions have quickly become outdated, these systems are effectively deadweight — holding those businesses back from responding to change and streamlining business processes. In this environment, ETRM in the cloud3 has become a popular alternative to “traditional” on-premises software given its low cost of entry, potential lower total cost of ownership and promise of cheaper maintenance and upgrades. Confirming this trend, a recent survey conducted by ComTech looking at trends in a lower energy price environment3 found that around 30% of surveyed European energy traders had an increased urgency to upgrade or replace their current ETRM, and that almost 50% would consider ETRM in the cloud as a way forward.