2015 2020 ctrm market outlook by CTRM Center

RESEARCH AND REPORT

2015–2020

CTRM MARKET OUTLOOK

2015–2020 CTRM Market Outlook

Introduction and Scope Commodity Technology Advisory LLC (ComTech), the leading analyst firm covering commodity trading and risk management (CTRM) technology markets, has recently completed its biannual in-depth review of the CTRM software market space in order to compile an estimate of the size of the global CTRM technology market and prepare an outlook for growth across the various component submarkets that comprise it.

Products, functionality, and application modules excluded from this market sizing analysis include:

Readers of this report should be aware that in the development of this data, as in past years, we must delineate boundaries for the companies and applications reflected in the scope of the analysis. ‘CTRM’ is a term that has been widely adopted by many technology companies. “Traditional” CTRM vendors have been expanding their reach outside of what has been widely and traditionally accepted as core CTRM through acquisition of applications that would commonly be viewed as tools for managing and optimizing supply chains and as such, without adjusting vendor reported results to eliminate these non-CTRM capabilities, we would be overstating the size of the market directly related to commodity trading and risk management capabilities. As such, for this report, ComTech has utilized a fairly rigid view of what capabilities are encompassed within the bounds of CTRM. The included capabilities (and associated services where applicable) for this report are:

// The modules or functional components of ERP applications (such as JDE, SAP and Oracle Financials) that are not directly related to trading or commodity marketing activities

// Physical and financial commodity deal capture, contract management and origination // Position management and valuation // Tracking/managing of commodities logistics as they apply to functionality commonly deployed as a functional component of large scale CTRM solutions servicing gas, power, crude and bulk product movements // Confirmation, settlement and accounting of deals/transactions // Trader analytics and trading optimization tools // Commodity risk management and analytics including but not limited to, VaR, EaR, limits management, credit risk management and PnL.

// Logistical management capabilities not associated with core trading requirements, such as truck, rail or ship tracking software // Treasury and treasury-oriented credit functionality // Production modeling or optimization software for industries such as oil and gas production, mining or agriculture // Applications for managing physical facilities, such as power generation, mines, gas plants, pipelines, refineries, mills or other processing plants

// Applications intended only to manage financial products (which may or may not include financial commodities) and provide no capabilities for capturing, valuing or tracking physical commodities // Supply chain management and optimization applications that cannot capture, manage or value traded commodities based upon their unique physical characteristics // Software products related to the metals recycling and waste management segments.

In developing this market outlook, we have included the following commodity classes: natural gas, power, oil and oil products, coal, industrial metals, precious metals, agricultural commodities, softs, and others (including freight, RECs, and other minor commodities). Establishing a definitive size for any market, particularly one as complex as commodity trading and risk management, is a difficult exercise and is impossible to complete with absolute certainty. Market sizing, being a forward-looking exercise, must be based upon numerous factors and assumptions. These assumptions include overall economic conditions, forces encouraging new market entrants, historical buying patterns of existing market participants, technology drivers encouraging new purchases, and the number and capabilities of product vendors servicing the needs of the market. Despite these difficulties, we believe that our organization’s unique position in the market, that of highly experienced analysts focused exclusively on the intersection of the commodity trading markets and their requisite technologies, provides us the market vision and insight necessary to compile a reliable and accurate estimate of this unique and dynamic technology market.

2015â&#x20AC;&#x201C;2020 CTRM Market Outlook

SUMMARY OF RESULTS â&#x20AC;&#x201C; 2014/2015 ComTech estimates the value of the global market for vendor-supplied CTRM applications in 2014 was approximately $1.01 billion, comprised of $210 million in license sales, $501 million in services, $267 million in support and maintenance, and $42 million in revenues associated with cloud deployed or hosted software. Utilizing these 2014 results, and based on current market conditions and estimated vendor results to date, we believe that the market in 2015 will show only a modest increase over 2014, with total estimated vendor revenues of $1,072 million. While license revenues will increase slightly over 2014, the largest absolute increase in value will be associated with vendor-supplied services. Figure 1 | Total Market Value by Revenue Component

Total CTRM Market by Rev Source Vendor License

2014 $ Millions

2015 $ Millions 210

216

Vendor Services

501

533

Vendor S&M

267

273

SaaS/Hosted

Third Party Implementation

326

325

Non-Vendor Solution

273

282

1,619

1,679

Total

While vendor supplied software makes up the majority (in terms of available technology revenues) of the market for CTRM applications, there still exists a number of companies that continue utilizing third party consultants or internal IT staff to develop and support their own custom solutions. ComTech estimates that these bespoke solutions accounted for approximately $273 million spent on the services of third party consultants in 2014, with a majority of those dollars being spent on continuing support and maintenance; and the remaining amounts being expended on development of new applications. These estimates do not include costs associated with customer resources assigned to the development or support of these bespoke applications (internal costs). Though adoption rates for vendor supported solutions will vary by industry segment and geography, ComTech does forecast

that vendor-supplied solutions will continue to see additional adoption (particularly in the metals, ags and softs commodity categories, and in the Asia Pacific region) and we believe the market for custom developed or bespoke solutions will not show any significant growth from year-to-year for the foreseeable future. In addition to 3rd party consulting revenues associated with the development and support of bespoke functionality, consultants and integrators also maintain a significant role in the implementation and support of vendor-deployed solutions. For the purposes of this market sizing analysis, ComTech includes these dollars as part of the global CTRM market size. For 2014, we estimate some $326 million was spent by customers of vendor-supplied CTRM solutions for the services of these 3rd party consultants to provide assistance during the selection, implementation and integration of the newly acquired technologies. This estimate is somewhat flat to previous years as a number of very large projects that were initiated in 2011 and 2012 have now completed and there have been no new projects of similar size initated in the last two years. We have also observed a tendency to try to prolong the life of existing IT investments as a result of cost pressures in certain markets, such as Europe, and believe that this may have resulted in a slight switch from license to third-party service revenues. Additionally, we continue to see that more customers of vendor supplied CTRM solutions are engaging with third parties to assist in their acquisition and implementation projects and we expect to see increased spend in this category over the next several years. Based on historical activity and an increasing reliance on 3rd party implementation resources, we believe the expenditures for these consultants to be, on average, at least 3 times the amount spent on vendor supplied consulting resources. Including these associated services revenues, ComTech believes the total annual global market for CTRM products to be $1.62 billion in 2014, and we are forecasting the results in 2015 to be $1.68 billion.

2015â&#x20AC;&#x201C;2020 CTRM Market Outlook

MARKET BY GEOGRAPHY Geographically, North America continues to be the largest market region for CTRM software solutions, with a mature commodity trading market, particularly in power, natural gas, oil, coal, agricultural commodities and metals. While there continues to be a number of companies that maintain non-vendor systems, a large majority of the market for CTRM technology in North America is serviced by vendor-supplied and supported solutions. Europe also has a mature market in commodity trading, though less so than North America in terms of natural gas and

ternally developed CTRM systems are more common in the region. Elsewhere in Europe, established global commodity trading centers, particularly in the UK, Switzerland, and the Netherlands have a long history in trading agricultural products, softs, and oil; and penetration by commercially supported CTRM systems is relatively high. The Asia-Pacific region, driven by high demand for commodities to meet rapidly expanding economies, has become an increasingly active market for CTRM vendors, particularly those for managing oil and oil products, agriculturals, softs and industrial metals and ores. Within the last several years, CTRM

Figure 2 | Total Market by Commodity by Geography 2014 North America $ Millions

South America $ Millions

Europe $ Millions

Middle East & Africa $ Millions

Asia/Pacific $ Millions

Total by Commodity $ Millions

Natural Gas

179

155

369

Power

181

175

399

245

100

107

Oil and Products NGLs Coal Precious Metals Other Metals and Ores

117

Ags/Softs

288

695

568

239

1,618

Other (Freight, Emissions, Etc. Total

power. Western Europe, particularly the UK, Scandinavia and Germany have established liquid markets for gas and power trading and are relatively penetrated by commercial CTRM solutions. Central and Eastern Europe continue to be rapidly emerging energy trading markets, though often without full and consistent liberalization across the continent, the markets in individual countries are relatively isolated in terms of trading activities and business practices. Given the relatively small size of these national markets, this localization has limited the adoption of vendor-supported CTRM applications as few vendors have been willing or able to make the necessary investments in developing capabilities to address the unique local requirements in each country. Therefore, bespoke or in-

Figure 3 | CTRM Market Share by Geography 2014

2015â&#x20AC;&#x201C;2020 CTRM Market Outlook

6 vendors have found success selling products into the Singapore and Hong Kong markets, with national oil companies and large metals and agricultural trading companies being particularly active buyers of vendor systems. However, given cultural and language differences outside of the major trading centers in the region, western-oriented CTRM vendors have continued to have difficulties selling their products within the borders of the largest economies in the region, particularly China and Japan, and these markets are still dominated by custom developed solutions. Overall, while the outlook for additional sales in the

region remain strong, sales of new product licenses is not consistent from year-to-year and we expect this trend to continue for the foreseeable future. Despite this, liberalization of national power and gas markets is proceeding in various countries in the region, with Japan seen as a particular area of interest at the moment. In addition, more complex regulatory environments in the West have driven some trading operations to the area. As a result, the market is growing and we assume this market will continue to grow faster than in other geographic region.

MARKET OUTLOOK AND STUDY ASSUMPTIONS Within the last year, a number of significant changes have occurred in the commodities markets that will impact market growth in CTRM. In particular, the collapse of oil prices in late 2014 has had an impact on several market segments, though particularly oil producers, and especially those in North America, stalling projects and reducing the outlook for new license sales in 2015. However, with the fall in oil prices, there has been knock-on impacts across several other commodity classes as oil derived products (as such fuel for production and transportation) are a significant cost contributor to every other commodity. New market regulations, with implementation begun in 2012, have created much uncertainty in the market and appear to have reduced the number of entities trading commodities, particularly energies. The following assumptions were utilized in the development of the forward-looking market analysis: // Growth estimates reflects current consensus outlook for global economic growth of 3 to 3.5% per year for the foreseeable future. Though this rate has been revised upward when compared with recent years, much of the forecast growth is expected to occur in developing countries, regions in which there is little or no market for CTRM products. With a continuing, though slower than expected recovery in the larger

economies, overall growth in the market for CTRM products is anticipated to be in line with earlier ComTech estimates. // All data is expressed in 2014 dollars â&#x20AC;&#x201C; there have been no adjustments for inflation or currency exchange rate changes over the period 2015 to 2020. // In line with previous estimates, ComTech currently believes the global market for CTRM licenses (including ASP/SaaS) will grow, on average, approximately 5% per year from 2015 to 2020 || Traditionally installed software license sales will grow by approximately 3.5-4.5% per year during that period. || Growth in ASP/SaaS/Cloud will be approximately 15-17% per year reflecting a high rate of market adoption for cloud related technologies. // That being said, as the trend toward cloud continues, it is difficult at this time to accurately forecast the full implications of this changing mix of perpetual license vs. annual license revenues with complete certainty. // A lower rate of growth from 2014 to 2015 primarily reflects reduced spending associated with the completion in 2014 of several exceptionally large deals done in late 2012. Based on early 2015 results compiled at the time of this analysis, we anticipate 2014 to 2015 license sales to show lower growth as compared to the later years in our analysis. // In general, we see future growth rates reflecting an increasing number of smaller deals as E/CTRM software is adopted in the cloud by smaller firms and a decreasing number of larger traditionally licensed deals as the top tier becomes saturated. We believe that an increasing number of deals will be made

2015–2020 CTRM Market Outlook

7 but at a lower average license value, slowing license growth rates. Additionally to this is a trend towards recurring revenue licensing models (lease, rental, monthly or quarterly payments etc.) on the part of many vendors in the space meaning that some of the revenues associated with a particular deal are pushed out into the future.

In addition to our current forecast assumptions, there exist a number of potential market developments that could impact the outlook for the CTRM market in the coming years. Should the global economy (and demand for commodities) grow in excess of current forecast assumptions, the following market segments could show higher than forecast growth. // Agricultural markets and Consumer Package Goods (CPG) – Increasing price volatility and growing awareness of the value of trading-centric solutions (driven in part by CTRM vendors) for direct, indirect and cross-commodity hedging could accelerate adoption of CTRM capabilities/solutions. // Trading companies and fuels intensive industries, including transportation and logistics companies, processing companies – Increased demand for oil and products could lead to higher prices/volatilities and could increase demand for CTRM technology solutions as new entrants come to the markets and existing participants seek to improve risk visibility and/or grow via increasing trading volumes or by entering new markets. // Mining – Mining has been in decline since mid-year 2012. However a strong increase in demand for metals, ores and coal could lead to increased mine development and a subsequent increase in demand for CTRM solutions in this segment, particularly in Australia, South America and Africa.

// Base metals and concentrates – economic upturn will increase demand and increase price volatilities in non-precious metals trading/processing, attracting new market participants particularly in the traditional market trading centers in Europe and in the import centric markets in the Asia Pacific region. // Should full market liberalization in the European Union energy markets occur prior to 2017, growth in demand for CTRM products in that market could exceed 10%/year post liberalization; however the current outlook does not support full opening of the EUR energy markets prior to 2018.

Additionally, we do observe a number of additional trends that may also impact our forward outlook as follows, // Increased interest in CTRM solutions for non-listed commodities such as diary and diary products, wool, and other raw materials. Historically, exchanges have introduced financial instruments for commodities in which there was trading and hedging interest and it may be that one or more of these commodities becomes established over the next five years creating additional prospective market for vendors, // The blurring boundary between CTRM and ERP is driven by a real need for better functionality around the buying and selling and hedging against price volatility of physical commodities and raw materials. Several ERP vendors now offer commodity management extensions and some CTRM vendors have targeted the same market space. This trend could also result in a broadening of the market for CTRM software as more manufacturing and production companies adopt solutions globally helping to increase the size of the market faster than we have projected.

2015–2020 CTRM Market Outlook

5-YEAR MARKET OUTLOOK In developing our outlook for the global CTRM markets, we reviewed the current and perspective market by commodities, geographies and industrial market segments; developing our topside outlook of the market based upon this granular review. In line with previous years estimates, we anticipate the total global CTRM market will grow by 4-6%, with our estimates Figure 4 | Total CTRM Market value

reflecting a midrange value of 5%. Within the revenue components that comprise this market, we anticipate that traditional installed software license sales will grow at modest rate of 3.5-4.5%, while increasing adoption of SaaS or “cloud” based solutions will see growth rates from 15-17%, a slight increase over our previous estimates for the market. Nonetheless, while cloud solutions will continue to increase in number of systems deployed, particularly in the low and mid tiers of the market, traditionally installed solutions will continue to dominate in terms of revenues generated for the foreseeable future. However, with a continuing push by vendors to migrate existing clients and/or sell new clients on either cloud implementations or a lease/rental type licensing agreement (in part to ensure a predictable revenue stream for those vendors), the lines between license revenues vs. SaaS/Hosted/ Cloud revenues will blur in the future.

REGIONAL REVIEW High levels of natural gas production in North America have had a significant impact on prices and volatilities for both natural gas and power, reducing trading activities across virtually all industry segments and limiting the entrance of new market participants. Given that the future outlook for natural gas prices is flat to today’s market, it is very unlikely that this market will see much in the way of increased demand for CTRM solutions for natural gas or power during the study period. Most sales of new licenses for the energy centric market (including oil, products and coal) in North America will be for replacement of existing vendor supported systems that have been in production for five or more years, and for expansion licenses due to organic business growth. Non-energy CTRM

license sales do show more promise for growth as we are seeing increasing adoption of CTRM for managing price and operational risks in the supply chains of agricultural, CPG and metals intensive industries. We expect growth in these markets will continue, contributing to an overall growth rate in the North American market on par with the global average of approximately 5%. Europe is continuing to face difficulties in its banking markets and much of the continent has been battling economic recession since the global financial crisis of 2008. While there are indications that there may be an economic recovery in the offing, a number of factors (including continuing debt issues in several countries, insufficient capital for trade finance, delayed opening of the liberalized energy markets, and a regulatory environment that is still unsettled) are creating headwinds that

2015â&#x20AC;&#x201C;2020 CTRM Market Outlook

9 Figure 5 | Total CTRM Market by Commodity by Geography 2014

we believe will limit the growth of the European CTRM markets to less than 5% through 2018. Despite indications that Chinese economic growth may be slowing, economic growth in the Asia-Pacific region is expected to remain high in comparison to the rest of the world, and the region will continue to see increasing demand for all commodities. This demand growth, coupled with increasing adoption of solutions for managing market and operational risks, will result in increasing demand for CTRM technologies, particularly those for managing exposures along the global supply chains in ags, metals and oil products. However, we do note that the Asia-Pacific region continues to be a more price

sensitive region when it comes to license fees generally. We believe the growth rate for CTRM in the region will average 7-10% during the next 5 years, exceeding that in other areas. While CTRM deals will continue to occur in South America, it has not yet matured into a predictable and reliable market for CTRM technologies. As much of the regionâ&#x20AC;&#x2122;s commodities markets are export oriented, and limited and very uneven economic growth (relative to other global economic regions) does not indicate an expansion of trading activities within the continent, we do not see significant prospects for growth in the CTRM markets in this region for the next several years.

MARKET BY SEGMENT In terms of market segments, we anticipate the prospects for growth in any individual segment will be dependent upon their location and commodity requirements. Banks and financial institutions, particularly in North America and Europe, have been departing from commodity trading and overall, those segments will show little or no

growth in CTRM demand over the period. And though hedge funds have returned to the markets in limited numbers after the financial crash of 2008, the decline in global commodities prices will limit growth for the foreseeable future. Energy merchants and traders, despite the decline in oil prices and the lackluster gas and power markets in North America, are continuing to make investments in new CTRM

2015â&#x20AC;&#x201C;2020 CTRM Market Outlook

10 Figure 6 | Total CTRM Market value by Industry Segment by Year

technology solutions, including replacement systems and expansion of existing solutions. With declining prices and increased volatility in oil and oil products, we expect that market will continue to attract investment, including new traders, and this market will continue to drive additional growth for CTRM products, particularly in the Asia-Pacific region. Smaller oil trading companies have also been active buyers of CTRM solutions over the last couple of years, particularly cloud deployed solutions, and we do expect this trend to continue. As previously mentioned, with low oil and gas prices in North America, regional scale oil and gas producers have mothballed CTRM acquisition/replacement projects and we expect lower activity in this market for the near term. Though global producers have also been impacted by lower oil prices, we do anticipate their scale will allow them to continue to invest in systems, though potentially at a reduced pace as compared to previous years. While the sudden decline in oil and liquids prices have affected many midstream operators, we do see continued spend in that market in North America as many new system purchases are intended to support facility development. Given the long lead time necessary for design and construction, these projects will continue for some time despite the near term impact of lower liquids prices. However,

should drilling continue to slump for an extended period, we would expect a lower spend in this segment until some recovery in oil or gas prices begins to stimulate new drilling activity. Utilities, including both power and natural gas, will continue to invest in upgrading and maintaining their trading/marketing capabilities, though the rate of growth for those expenditures is expected to be lower than the overall market. Several large agricultural and CPG companies committed to very large CTRM deals (with licenses value of more than $10 million) in the period from 2008 to 2012; however, ComTech has previously noted that we believe these size of deals are an exception and we do not believe deals of this scale will become the norm in this market. In fact, since 2012, we are unaware of any single deal resulting in a license sale of greater than $5 million. Without the impact of these mega-deals, the total value of new licenses actually declined from $235 million in 2012 to $210 million in 2014. We do believe the 2014 results provide a more reliable baseline for forecasting and do not expect to see any additional exceptionally large deals to be signed in the foreseeable future. The global metals markets began slowing in 2012 as demand declined due to lower global economic growth. Despite earlier predictions of a near term recovery, the market for met-

2015–2020 CTRM Market Outlook

11 als has continued to be soft. Without a broad recovery in the global economic outlook, particularly in the Chinese market, ComTech believes the metals trading markets will perform at or slightly below average compared to the wider global CTRM markets, at about 5% per year. Within the last decade, the market has increasing seen the rise of trading companies that have expanded their focus from a single commodity or single class of commodities (such

as energy, ags, softs, metals) and are now trading a broader portfolios of commodities. While these global-scale companies may be commonly identified with a particular class of commodity (such as Cargill in agricultural commodities), they are, in fact, trading a broad array of commodities. For this “multi-class” market segment, we anticipate the growth rate will be slightly higher than the market average, approximately 8% per year through 2020.

MARKET BY COMMODITY Both natural gas and power-centric CTRM markets are primarily focused in North America and Europe, where active trading of the commodities is fairly widespread. Within the last several years, there have been sales of power and gas capable systems in the Asia-Pacific region, primarily to utilities and producers; however these sales have previously been the exception. Nonetheless, with market liberalization in several Asian markets, we do expect growth for gas and power capable systems to increase in that geography.

The North American natural gas market has continued to experience low prices for the last several years, and those prices are anticipated to remain low for the foreseeable future. Nonetheless, we do anticipate that increased demand in other geographies should keep total demand for gas centric systems at about 4-5% growth over the period. Power prices are also expected to remain low and our outlook for growth in CTRM for power is somewhat lower at around 3% over the next 5 years. With the sudden collapse of oil prices in the fourth quarter of 2014, demand for oil centric systems has rapidly declined as traders, producers and refiners assess the impacts of the fall. How-

Figure 7 | Total CTRM Market by Commodity / Inc. Vendor Revs, 3rd Party Implementation and Unadressed Market

2015–2020 CTRM Market Outlook

12 ever, we believe this pause will be temporary as the market finds equilibrium and demand for oil and oil products systems will again show solid growth of 5–6% per year. CTRM for NGL trading, which is almost entirely centric to the North American market, has seen a strong increase in the last five years as massive increases in natural gas and oil production led to a boom in infrastructure development and strong growth in the midstream of the market. However, with falling oil and gas prices, we do anticipate a slowing of the market for NGL capable systems as current infrastructure development projects complete and the industry slows to match the slowdown in drilling. As such, the outlook for continued growth in NGLs is limited and we believe beyond 2015, the market will see year over year increase of about 3–4%. Coal producers and traders are continuing to suffer the effects of a declining market for coal for power generation, particularly in the US and Europe, where environmental regulations are accelerating the closing of coal fired facilities and are effectively killing new construction. Though large coal fired projects continue to be developed in China and other areas of Asia-Pacific, the global demand for steam coal is declining. Given these conditions we continue to anticipate that there will be no increase in demand for coal centric CTRM products for some time. CTRM for precious metals is a highly variable market from year to year, driven primarily by both the price and volatility of the gold markets. Precious metals prices have continued to fall over the

last two years and demand for new trading systems has been low. Further, as gold prices are driven by a number of influences outside of physical supply and demand, it is difficult to forecast future performance of this market. In all, and based on past performance, ComTech believes that this commodity segment will produce a slight increase in demand (less than 5%) through 2020. As previously noted, demand for industrial metals has softened over the last 3 years. We are, however, forecasting growth in CTRM for metals and ores to increase by about 5% per year as that market continues to adopt vendor supplied solutions in a maturing market. Despite recent low commodity prices, continuing demand for agricultural products and high levels of price volatility will keep demand for ag and soft centric systems relatively strong. Additionally, increasing adoption of CTRM products by agricultural and CPG market players will drive additional growth for technology in those markets. We anticipate that sales of CTRM capable systems will remain high as agricultural centric market participants continue to adopt to these systems to better manage price, currency, credit and operational risk associated with their long, global supply chains. However, it is important to note that the ags and softs market is more sensitive to price and that average license values in certain geographies and segments of this market can be as much as 2535% lower than for other commodities. In all, we anticipate growth in this commodity segment will average as high as 9% per year over the next 5 years.

2015–2020 CTRM Market Outlook

DISCUSSION OF REPORT METHODOLOGY To arrive at this market sizing estimate, ComTech utilized “a bottom-up” review of all known vendors of production solutions and tools that meet the previously discussed criteria of CTRM technologies. While there are numerous vendors around the globe that do provide qualified (as it relates to this analysis) CTRM solutions, many of those companies also provide products and associated services that fall outside the established criteria, and those revenues have be excluded from this analysis. In developing the bottom up estimate related to CTRM vendor revenues, more than 90 companies were reviewed and most had some or all of their revenues included in the final CTRM Vendor Market Size Estimate. The companies reviewed included (but are not necessarily limited to) the following:

IPSystems Ltd

Progressive

iRely

Quorum

JustCommodity

SAP

Kisters

SASRiskAdvisory

Kyos energy Consulting

Scalable

Lacima

Sisu

Lloret Data Solutions

Square Four

Logaviv

SunGard

MCG

Tegos

MicroStep HDO

TradePaq

Molecule Software

Transition Technologies

Murex

Trayport Contigo

OATI

Triple Point

Open Link

UtiliDex

P2 Solutions (fmrly WellPoint)

Utiligroup

Panton (frmly Spectrum Prime)

Vesion

Abacus

DycoTrade

PCR Ltd

Agiboo

Egar

Pioneer

Agrosirius

EGAR

PlanLogic

Albedo Energy Consulting

EKA

Powel Delta

Allegro

Energeya

Amphora

Energy One

Ascend Analytics Aspect

Energy Solutions International

ATOS Worldgrid

Ensite

Brady

Ensyte Energy Solutions

C Square International

Entero

Cadran Consultancy

Enuit

Calvus

Eximware

CDA - Australia

FEA

CMS

Gen10

ComFin

GMSL

Commodity Services and Solutions

Hivedome

Constellation Energy Solutions

IntStream Oy

Cultura DMS

Ventyx VuePoint Waterfield Energy Software

EMK3

Ignite ETRM InvenSoft Technologies IPESoft Spol sro

For each known vendor of CTRM systems, research was conducted (including direct contact with many of the vendors) to obtain: // An estimate of vendor revenues and license revenues for 2014. Very few E/CTRM vendors are public companies and disclose some information as part of their regulatory reporting requirements. Additionally, several large and a fewer number of small E/CTRM vendors, though private, have provided this information to our company under terms of confidentially. Others, more rarely, do occasionally disclose the information publically via press release or other announcements. Utilizing these actual and estimated revenues, along with known and estimated headcount numbers, ComTech generated a number of reliable reference points and ratios for analyzing other vendors for which we had less visibility. // One of the primary ratios utilized in estimating any particular vendor’s revenues was the "revenue per headcount" estimate. In our analysis of metrics provided by vendors or garnered through other sources, the actual revenue per headcount fig-

2015–2020 CTRM Market Outlook

14 ure ranged from $50,000 to $320,000 per employee (with the $320k per head figure a significant increase over previous years’ analyses). The large variances in this metric were correlated to a number of factors, though the primary influences were geographic location of the employees and level of specialization of the vendor (i.e. specialized risk management resources would command a higher annual salary).

projects. Utilizing the results of a number of different research paths, we have established the value of these 3rd party services related to the initial implementation of CTRM solutions as $326 million in 2014. Figure 9 | CTRM Vendor Revenue by Commodity

Figure 8 | Global CTRM Market Revenue – Vendor Only

Based on an analysis of the entirety of this data, revenue estimates can be accurately established for all vendors known to provide qualified solutions in the market. Assumptions were then made for each vendor regarding the allocations of those revenues amongst 4 categories: 1) traditional license revenues, 2) SaaS/Hosted license revenues, 3) services revenues, and 4) revenues associated with support and maintenance agreements. In addition to the identified and known vendors of CTRM products, we have made the assumption that there exists some number of vendors that are unknown to us. While ComTech Advisory analysts are highly experienced in this market, we cannot assume that every vendor, particularly those that operate in very localized markets (particularly in the Asia Pacific, South America and Eastern European/Russian markets), will be known outside their local areas. Therefore, as with past years, we have included a relatively small amount of revenue (less than 5% of the global total) to account for these entities. In order to determine a total market spend for CTRM technologies, it is also important to account for the dollars spent with consultants and system integrators outside those provided by the vendors of the technologies. We have observed a clear trend by most market participants to engage such 3rd party services in almost all new product implementations, and in an increasing number of upgrade and other support-related

Additionally, we have established a value of custom developed or bespoke solutions (non-vendor) produced and delivered by third party consultants at $273 million for 2014. This value represents the portion of the market that has chosen to deploy custom developed solutions despite there being commercially available software that could meet many or most of their requirements. While this portion of the market is sizeable, representing about 17% of the total market, and there will certainly always be companies that feel they have unique requirements that cannot be adequately addressed by vendor solutions, the increasing penetration of commercial CTRM solutions has resulted in no appreciable growth in this market.

2015–2020 CTRM Market Outlook

APPENDIX MARKET SIZE DETAIL – 2014 THRU 2020 Note: Differences in annual market size totals amongst the following data is related to rounding errors and/or “model noise”. Figure 10 | Total Market Value by Revenue Component

Total CTRM Market by Rev Source

2014 $ Millions

2015 $ Millions

2016 $ Millions

2017 $ Millions

2018 $ Millions

2019 $ Millions

2020 $ Millions

Vendor License

210

216

224

232

241

250

Vendor Services

501

533

562

593

626

660

697

Vendor S&M

267

273

285

297

309

322

336

SaaS/Hosted

259

111

Third Party Implementation

326

325

330

380

356

373

395

Non-Vendor Solution

273

282

281

282

280

277

1,619

1,679

1,740

1,812

1,895

1,980

2,072

Total

Total Market does not include ancilary 3rd party services for non implementation support activities, including management consulting, technology road-mapping, etc.

Figure 11 | Total Market Value by Segment - Vendor Revs, Third Party Implimentation, Unaddressed Market

2014 $ Millions Financial Cos.

2015 $ Millions

2016 $ Millions

2017 $ Millions

2018 $ Millions

2019 $ Millions

2020 $ Millions

Energy Merchants/Traders

213

226

234

244

225

266

279

O&G Producers

210

197

203

208

214

221

227

O&G Midstream

115

118

113

117

212

127

132

Power Utillities

215

220

222

225

229

233

237

Refiners, Distributors, Processors

104

109

115

121

127

134

139

Gas Utillities/LDC

Energy Retailers

C&I Energy Consumers

Ag Traders

157

171

181

193

206

219

234

Food and Bev (inc. Processors)

128

138

150

160

174

186

200

100

108

117

Mining

Metals Traders

Multi-Class Traders

104

110

115

124

1,619

1,681

1,741

1,813

1,895

1,982

2,074

Ag Producers

Total

2015–2020 CTRM Market Outlook

16 Figure 12 | Total Market Value by Commodity – Vendor Revs, Third Party Implimentation, Unaddressed Market

2014 $ Millions

2015 $ Millions

2016 $ Millions

2017 $ Millions

2018 $ Millions

2019 $ Millions

2020 $ Millions

Natural Gas

370

386

399

413

429

448

469

Power

398

404

415

426

439

449

451

Oil and Products

245

257

262

275

286

298

310

NGLs

108

114

118

121

125

127

129

Coal

Precious Metals

Other Metals and Ores

116

117

121

125

130

135

139

Ags/Softs

288

304

329

355

385

415

448

1,619

1,679

1,744

1,821

1,904

1,986

2,077

Other (Freight, Emissions, Etc. Total

ABOUT Commodity Technology Advisory LLC Commodity Technology Advisory is the leading analyst organization covering the ETRM and CTRM markets. We provide the invaluable insights into the issues and trends affecting the users and providers of the technologies that are crucial for success in the constantly evolving global commodities markets. Patrick Reames and Gary Vasey head our team, whoseÂ combined 60-plus years in the energy and commodities markets, provides depth of understanding of the market and its issues that is unmatched and unrivaled by any analyst group. For more information, please visit:

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