A CommodityPoint Technical Briefing Note CTRM Founded In and Around Business Intelligence
Patrick Reames, Managing Director - CommodityPoint January, 2012
CommodityPoint A division of UtiliPoint International Inc. 19901 Southwest Freeway Suite 121 Sugar Land, Texas 77479 www.commodity-point.com
2012
Woodlands Solutions' Phoenix Core
I NTRODUCTION To remain competitive in today’s commodity trading environment, organizations are increasingly looking for new ways to help them better manage their portfolios through improved visibility into their positions and market risks. As a result, CTRM software is increasingly expected to serve not only as the system of record for transactional data, but also as the system from which to monitor and manage the business’s performance and risks. Leading commodity trading organizations know that managing risk effectively demands not just the ability to capture transactions and run risk metrics but also the tools to enable a thorough understanding of the portfolio, implying the need to have visibility into the numbers and being able to quickly drill down into those numbers to find hidden risks and opportunities. In this environment, trading, risk management, and financial controls personnel increasingly require tools to allow them to quickly identify and investigate risks and opportunities. Unfortunately, it has been demonstrated that traditional CTRM systems that rely on standardized reports are generally incapable of providing this type of capability as reporting, particularly near real-time transactional reporting, has always proven to be one of the greatest weakness in the traditionally architected systems. Users have long complained that while it is relatively easy to get data into CTRM software, it is often very difficult to get useful information back out. Indeed, CommodityPoint’s own extensive research has consistently highlighted the area of “reporting”
as
a
specific
weakness
in
CTRM
software.
In
CommodityPoint’s2009 CTRM Vendor Perception Study 1 , respondents
1
Reames and Vasey, "2009 CTRM Vendor Perception Study", CommodityPoint, April 2009
2
©UtiliPoint International, Inc. 2012
Woodlands Solutions' Phoenix Core
2012
ranked ‘reporting’ as extremely important and their third most important criteria overall in procuring CTRM software. Another CommodityPoint study, Changes in Commodities Markets – Impacts and Traders and Software 2 , found that reporting issues, such as the ‘availability of adequate Business Intelligence tools’ and the ‘speed of reporting’, ranked highly in the top 10 critical business issues faced by commodity trading firms. Not surprisingly, the ability to mine transactional and position data for Business Intelligence is increasingly becoming a sought after feature in CTRM software. And the increased scrutiny and oversight commodity trading operations are receiving will continue to drive the transition of CTRM software from ‘after the fact’ transaction recording software to ‘real-time’ Business Intelligence tools.
T HE B USINESS I NTELLIGENCE C HALLENGE Given the complex nature of CTRM solutions and how they have evolved over the years – that is the near continual adding of functionality and the resultant increasing complexity of the underlying relational databases, providing Business Intelligence tools within an existing CTRM solution has proven very challenging for CTRM vendors. This inability to address evolving and ad hoc reporting requirements forced many customers of these vendors to develop their own Business Intelligence tools, and in particular, such approaches as data warehouses and data marts. While these custom data warehouses (and many various “out of the box” solutions offered by consulting shops and Business Intelligence vendors) were useful, they suffered from a variety of weaknesses. Some were batch driven tools that were only updated nightly, making the data stale 2
Reames and Vasey, "Changes in Commodities Markets – Impacts on Traders and Software", CommodityPoint, January 2009
3
©UtiliPoint International, Inc. 2012
Woodlands Solutions' Phoenix Core
2012
and the tool less valuable. Others were limited by the types of positions they could capture or the type of reporting they could support. Additionally, given the very nature of these outboard or add-on solutions, significant integration efforts are required, bringing with that integration the attendant ongoing maintenance and potential for cascading failure as affiliated systems are upgraded or changed. Beyond the technical complexity involved in bringing Business Intelligence into the realm of CTRM, in CommodityPoint’s view, any business intelligence tool must meet four overall requirements: 1.
It must be visually intuitive, meaning that the information presented must be in an easily consumable form that facilitates quick analysis and reaction.
2.
It must include drill-down capabilities, allowing users to quickly investigate issues in order to identify their source or cause.
3.
It must present current, near real-time information, providing relevant “up to date” data.
4.
It must encapsulate all key areas of trading and risk, meaning it should include all transactions and positions – including all relevant commodities, assets, and instrument types; and, ideally, be capable of providing that information/intelligence in a form that is of value to the broader business, including front, mid, and back office functions.
Woodlands Solutions (Woodlands) Phoenix ETRM is arguably one of the very few E/CTRM solution we’ve seen which meets all of the above criteria and does so all within the footprint of the core CTRM solution, not as an outboard or ancillary capability.
4
©UtiliPoint International, Inc. 2012
Woodlands Solutions' Phoenix Core
2012
T HE P HOENIX C ORE Woodlands’ Phoenix ETRM is a relatively young product (with development having begun in the fall of 2008). What makes Phoenix unique is that it was literally built around a “Data Mart”, a data warehouse populated with data from a single application. Woodlands’ management states that addressing the market’s reporting complaints was one of the drivers of their “Data Mart” approach.
Illustration 1: Phoenix ETRM Position Cube Screen
To be sure, many of the screens available to users would more typically be found in Business Intelligence tools. Each functional area within Phoenix, from position whiteboard to settlement, includes “Cube” and “Pivot” screens that allow users to quickly visualize their data and to “slice and dice” that data to easily investigate issues. Moreover, both the “Cube” and “Pivot” screens allow the user to view positions at an incredibly detailed level as the data within the Phoenix Core goes well
5
©UtiliPoint International, Inc. 2012
Woodlands Solutions' Phoenix Core
2012
beyond the typical “risk legs” approach. As such, Phoenix fully meets the first two criteria. Phoenix ETRM also includes an integrated distributed processing engine with customizable workflow definition. This allows organizations to see updated position information as deals are entered (or imported from trading exchanges), as market prices are updated, or as the result of some other triggering event. As a result, the data within Phoenix ETRM is continually “up to date”, fully meeting the third requirement. Finally, Phoenix ETRM is a commodity neutral system boasting a highly flexible position capture module. More to the point, Phoenix’s Deal Capture sub-system is separate from the Phoenix Core, greatly simplifying the complexity of adding new positions or deal types. The ability to capture multiple commodities and a wide array of positions as well as the previously mentioned Business Intelligence functionality across functional areas means that Phoenix ETRM also meets our fourth requirement. Woodland's approach to the Phoenix ETRM architecture enables functionality that can provide users and executives with the Business Intelligence they require to better manage their positions. It allows users to create and share pre-defined or ad hoc views of their positions from the perspective of front, mid, and back office. Moreover, the integrated approach and real time nature of the solution allows for improved team communication as well as the elimination of cross-group reconciliations. Surely, these are key goals for any Business Intelligence project.
6
©UtiliPoint International, Inc. 2012
Woodlands Solutions' Phoenix Core
2012
S UMMARY &C ONCLUSIONS In CommodityPoint’s view, the approach Woodlands Solutions has taken with their Phoenix ETRM solution, and more specifically the Phoenix Core, is a unique approach to solving a long standing issue in this technology market and represents a potentially significant innovation in the CTRM space. With its ability to provide continually up to date Business Intelligence in a visually intuitive manner, CommodityPoint sees in the Phoenix ETRM system a relatively new product, founded in an architecture and functional approach that is capable of providing competitive advantage to both the company and its users.
Note: CommodityPoint Technical Briefing Notes are designed to inform about what CommodityPoint believes to be technical innovations and advancements in CTRM software. While the TBN may cover a specific vendor and or product it is not an endorsement of that particular vendor or its product on the part of CommodityPoint, but an informative analysis of that innovation.
7
ŠUtiliPoint International, Inc. 2012