Reimagining Energy Trading and Risk Management (ETRM) With Advanced Delivery and Support

WHITE PAPER

REIMAGINING ENERGY TRADING AND RISK MANAGEMENT (ETRM) WITH ADVANCED DELIVERY AND SUPPORT

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A ComTechAdvisory Whitepaper

INTRODUCTION ETRM systems are, by their nature, complex software products as the software must mirror the full complexity of the commodities industries, markets, and assets that they serve. Spanning from contract administration through invoicing and settlement, the business processes involved in commodity trading varies greatly. This variation is created by the unique combinations and nature of the physical or financial commodity or commodities traded, as well as by the industry segment (power generation/trading, gas production/trading, agricultural production/trading, etc.), the assets employed in the supply chain(s) and geographic differences (North American power vs. European vs. Japan, for example). Unfortunately, this creates a wide variance, not only in functionality and capabilities required to model unique market processes, but it can also create conflicts in terms of the trading tenor (24-hour markets vs. five-minute markets) and the types of transactions commonly conducted in any individual marketplace or set of markets. While these variances obviously create complexity in the design and coding of the software, they also create significant issues in supporting that software after it goes into production. This is only magnified by rapid change in the industry as new market processes or other requirements are introduced into the market that must be reflected, via updates, in the ETRM software. The complex upgrade process is further

complicated by the user’s own particular application environment or ecosystem. Companies using ETRM software solutions will often create any number of interfaces, and even custom functionality, to fit their unique mix of assets or trading strategies, each of which adds additional burdens to the installation and testing process for each software update or version upgrade. Deploying and testing new code can require days, weeks, or even multiple months of effort prior to an update or upgrade being put into production. Power trading and marketing firms have been particularly impacted by frequent ETRM software updates. With the recent influx of renewable resources in almost all regions and markets, and the subsequent roll-out of new

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Reimagining Energy Trading and Risk Management (ETRM) With Advanced Delivery and Support

trading products, the pace of change in the industry is rapid and seemingly never ending – requiring more frequent updates to critical software capabilities to maintain synchronicity with market requirements. For companies of all sizes, these ETRM software updates can become very burdensome as each requires acceptance testing prior to being put into production. Often, the company must either deploy a team of dedicated professionals, or increase the workload on what is already a fully resourced staff of commercial resources, including contract administration, trading, scheduling and settlements. The effort required for even minor upgrades can be a time-consuming drain on company resources, and larger scale version upgrades can be much more difficult to manage and potentially even disruptive to commercial operations. Particularly for smaller companies with relatively localized and/or less complex operations, a software vendor’s requirements for them to take a large upgrade to maintain support, can be particularly

A ComTechAdvisory Whitepaper

disruptive. They may not even truly benefit from the upgrade as their functional requirements may be already addressed in their current version, or they may only require a small update to address the needs of the specific markets or commodities in which they operate. Given the need to stay current with their ETRM software in order to comply with the support and maintenance agreements, and more importantly, ensure the solution stays current with industry requirements, including critical cyber security mandates, any ability to speed up the process and ease the burdens of safely deploying vendor’s updates is generally welcomed by users. However, as noted, this is a complex issue. Recognizing the value of improving that process for their customers, FIS is one vendor that has developed a streamlined approach and advanced technologies to provide tangible improvements and ensure that their clients’ needs are being met effectively and efficiently.

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Reimagining Energy Trading and Risk Management (ETRM) With Advanced Delivery and Support

A ComTechAdvisory Whitepaper

ADDRESSING THE SUPPORT CHALLENGE To ensure that their FIS Energy Trading, Risk and Logistics Platform (formerly Aligne) clients’ specific needs are being met, both in terms of rapidly developing required functionality enhancements, and in helping to facilitate testing and integration of those new capabilities prior to going into production, FIS designed a new approach that reduces the huge burden placed on users by constant upgrades, even minor ones. FIS’ Continuous Delivery Model, or CDM, has been rigorously designed to provide closer cooperation between FIS and their clients to better ensure that those clients can stay current with new releases and with annual upgrades of the FIS platform. Maintaining this currency ensures that each update/upgrade is a single-step event avoiding the necessity to move through multiple upgrades prior to delivering critical capabilities available to users. This means that smaller and less complex updates are required, and users are assured of the lowest cost and least effort-intensive upgrades possible. Additionally, with the close cooperation and continuous communication inherent in the CDM program, participating customers receive the latest capabilities and upgraded functionality as soon as they are released, with each release tested (via automated testing routines) against that customer’s relevant business processes. Further, with close and open communication with FIS’ product team, those customers can better ensure their needs and interests are well represented in FIS’ development roadmap.

Though many vendors may offer some type of upgraded support model, FIS’ CDM extends beyond offering just improved communication, cooperation, and support responsiveness. The key differentiators of CDM versus an “upgraded support service” is actually FIS’ containerized code delivery model. With containerized delivery, all code deployments are automated and can be quickly implemented with little or no customer intervention. Additionally, as new code is developed to address a critical issue, updates can arrive and be put into production in less than a day. In fact, FIS has demonstrated its ability to quickly address critical issues with new code put into production at a client site in less than an hour. And, perhaps most importantly, by using containerized delivery, users can remain online throughout the processes, experiencing no interruptions or lost time on the system. The ability to provide these very rapid updates via the CDM program is facilitated by regular (e.g. monthly) upgrades of the test environment and available testing of the system under customer specific configuration and customizations using utilizing automated test cases.

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Reimagining Energy Trading and Risk Management (ETRM) With Advanced Delivery and Support

A ComTechAdvisory Whitepaper

HOW DOES THIS WORK? From a technical perspective, containerization enables virtualization at the level of the operating system (OS). It enables you to deploy and run applications without launching an entire virtual machine (VM) for each application server. It allows multiple isolated applications or services to run on a single host and access the same OS kernel. The use of application containers consumes fewer hardware resources than a comparable VM deployment. They share resources without requiring a full OS to underpin each application service. The approach uses memory, CPU and storage resources more efficiently, allowing user companies to deploy more application containers on the same hardware infrastructure. The containerized model also centralizes and simplifies application administration. The container engine deploys the application images on one or more hosts and a simple-to-use dashboard enables robust application monitoring. There is no requirement to go through servers to secure virtual machines. FIS estimates a 90% cost savings on human resource effort can be achieved for maintaining containerized applications in comparison with VM’s. In cloud services environments that offer elastic pricing models, dynamic use of resources through

containerization offers even more cost reductions. A containerized application can scale resource use on demand based on preconfigured limits. There is no requirement to go through servers to secure virtual machines. FIS estimates 30% cost optimization by utilizing elastic computing power, as clients pay for what the application uses and not resources reserved for VM. Rolling patch updates don’t just automate deployment - they reduce 90% of human resource time for several environments including installation and patches compared with VM. They also eliminate downtime and, as previously indicated, avoid user and process disruption. The container engine deploys container images on hosts and supports live updates of images while users are still active within the system. Just as important, the containerized model provides simpler and cheaper availability and disaster recovery.

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Reimagining Energy Trading and Risk Management (ETRM) With Advanced Delivery and Support

A ComTechAdvisory Whitepaper

CUSTOMER BENEFITS OF CDM ENABLED BY CONTAINERIZATION With CDM, clients receive numerous benefits versus a traditional or conventional support model. By working in close cooperation with clients and their users, FIS can better ensure those clients stay current with continuing code developments and annual upgrades; helping to minimize the client’s efforts, and risks, associated with putting each new release or version upgrade into full production. Further, with containerization, these clients will have less painful upgrades and be able to utilize lower overhead environments to accept development upgrades in isolation and test without upsetting their production environment. This ensures high levels of confidence and lower risks and costs when taking a GA release into production. Containerization also allows patches to be rolled into the production environment without any downtime. As the container engine deploys images on hosts and supports the live update of those images, users active on the system experience no disruptions while updates are occurring.

This highly automated support process provides FIS’ Energy Trading, Risk and Logistics Platform (formerly Aligne) clients with the very latest capabilities and upgraded functionality available. In addition, by working closely with FIS’ product team, these clients are better able to convey and represent their interests and needs to FIS, helping to ensure that their most critical system continues to meet their needs as their trading and marketing strategies, and the markets in which they operate, continue to evolve.

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Reimagining Energy Trading and Risk Management (ETRM) With Advanced Delivery and Support

A ComTechAdvisory Whitepaper

SUMMARY With a considerable track record of issues around delivering timely and cost-effective upgrades to users, the ETRM and broader CTRM software category has gained a reputation in which users often fall behind on gaining access to important functionality or critical bug fixes. This often results in significant issues with the system, user dissatisfaction, increased risk to business operations and an increasing need to build additional custom capabilities around the commercial solution. In fact, ComTech has observed many instances in which having fallen considerably behind, companies end up having to procure a new solution to start with a fresh slate or engage in a complex and expensive re-implementation of their current solution. Any

improvement in ability to stay current on a software solution, particularly one as critical as E/CTRM, is a differentiator for the vendor. FIS is a global technically advanced vendor with significant resources and expertise across the company in delivering and supporting software and services. It has been able to leverage this expertise for its energy and commodities customers that use its FIS Energy Trading, Risk and Logistics Platform (formerly Aligne) solution to build a support delivery model that appears to provide significant advantages for its users; and adds what may well be an important differentiator to its brand.

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SPONSORED BY FIS FIS is a leading provider of technology solutions for merchants, banks and capital markets firms globally. Our employees are dedicated to advancing the way the world pays, banks and invests by applying our scale, deep expertise and data-driven insights. We help our clients use technology in innovative ways to solve business-critical challenges and deliver superior experiences for their customers. Headquartered in Jacksonville, Florida, FIS is a Fortune 500® company and is a member of Standard & Poor’s 500® Index.

To learn more, visit www.fisglobal.com. Follow FIS on Facebook, LinkedIn and Twitter (@FISGlobal)

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, whose 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:

www.comtechadvisory.com ComTech Advisory also hosts the CTRMCenter, your online portal with news and views about commodity markets and technology as well as a comprehensive online directory of software and services providers. Please visit the CTRMCenter at:

www.ctrmcenter.com

19901 Southwest Freeway Sugar Land TX 77479 +1 281 207 5412 Prague, Czech Republic +420 775 718 112 ComTechAdvisory.com Email: info@comtechadvisory.com

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Reimagining Energy Trading and Risk Management (ETRM) With Advanced Delivery and Support

Published on May 21, 2021Computers

CTRM Center

ETRM systems are, by their nature, complex software products as the software must mirror the full complexity of the commodities industries, markets, and assets that they serve. Spanning from contract administration through invoicing and settlement, the business processes involved in commodity trading varies greatly. This variation is created by the unique combinations and nature of the physical or financial commodity or commodities traded, as well as by the industry segment (power generation/trading, gas production/trading, agricultural production/trading, etc.), the assets employed in the supply chain(s) and geographic differences (North American power vs. European vs. Japan, for example).