2015 2020 CTRM Market Outlook
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. 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.
Content
RESEARCH AND REPORT
2015–2020
CTRM MARKET OUTLOOK
Introduction and Scope | 3
Summary of Results – 2014/2015 | 4
Market by Geography | 5
Market Outlook and Study Assumptions| 6
5-Year Market Outlook | 8
Regional Review | 8
Market by Segment | 9
Market by Commodity | 10
Discussion of Report Methodology | 12
Appendix Market Size Detail – 2014 thru 2020 | 14
© Commodity Technology Advisory LLC, 2015, All Rights Reserved.
2015–2020 CTRM Market Outlook
3
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.
© Commodity Technology Advisory LLC, 2015, All Rights Reserved.
2015–2020 CTRM Market Outlook
4
SUMMARY OF RESULTS – 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
42
50
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.
© Commodity Technology Advisory LLC, 2015, All Rights Reserved.
2015–2020 CTRM Market Outlook
5
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
2
155
1
31
369
Power
181
3
175
3
37
399
86
20
84
12
42
245
100
1
3
2
1
107
9
1
10
-
4
24
12
2
16
4
6
40
Oil and Products
NGLs
Coal
Precious Metals
Other Metals and Ores
34
10
26
9
37
117
Ags/Softs
85
20
84
24
76
288
8
-
14
3
4
30
695
59
568
58
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
© Commodity Technology Advisory LLC, 2015, All Rights Reserved.
2015–2020 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 – 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
© Commodity Technology Advisory LLC, 2015, All Rights Reserved.
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.
© Commodity Technology Advisory LLC, 2015, All Rights Reserved.
2015–2020 CTRM Market Outlook
8
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
© Commodity Technology Advisory LLC, 2015, All Rights Reserved.
2015–2020 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 region’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
© Commodity Technology Advisory LLC, 2015, All Rights Reserved.
2015–2020 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-
© Commodity Technology Advisory LLC, 2015, All Rights Reserved.
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
© Commodity Technology Advisory LLC, 2015, All Rights Reserved.
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.
© Commodity Technology Advisory LLC, 2015, All Rights Reserved.
2015–2020 CTRM Market Outlook
13
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-
© Commodity Technology Advisory LLC, 2015, All Rights Reserved.
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.
© Commodity Technology Advisory LLC, 2015, All Rights Reserved.
2015–2020 CTRM Market Outlook
15
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
42
50
58
69
81
95
111
Third Party Implementation
326
325
330
380
356
373
395
Non-Vendor Solution
273
282
281
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
83
83
83
84
84
85
85
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
43
45
46
48
49
51
52
Energy Retailers
25
26
27
27
28
29
30
C&I Energy Consumers
50
52
55
59
63
67
72
Ag Traders
157
171
181
193
206
219
234
Food and Bev (inc. Processors)
128
138
150
160
174
186
200
77
86
90
96
100
108
117
Mining
47
49
51
53
55
57
59
Metals Traders
66
67
71
75
79
84
88
Multi-Class Traders
85
93
99
104
110
115
124
1,619
1,681
1,741
1,813
1,895
1,982
2,074
Ag Producers
Total
© Commodity Technology Advisory LLC, 2015, All Rights Reserved.
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
23
23
23
24
24
24
24
Precious Metals
41
42
44
46
49
51
54
Other Metals and Ores
116
117
121
125
130
135
139
Ags/Softs
288
304
329
355
385
415
448
30
32
33
35
38
40
43
1,619
1,679
1,744
1,821
1,904
1,986
2,077
Other (Freight, Emissions, Etc.
Total
© Commodity Technology Advisory LLC, 2015, All Rights Reserved.
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 CTRMCente at:
www.ctrmcenter.com
19901 Southwest Freeway
Sugar Land TX 77479
+1 281 207 5412
Prague, Czech Republic
+420 775 718 112
Email: info@comtechadvisor y.com
2015–2020
CTRM MARKET OUTLOOK
Introduction and Scope | 3
Summary of Results – 2014/2015 | 4
Market by Geography | 5
Market Outlook and Study Assumptions| 6
5-Year Market Outlook | 8
Regional Review | 8
Market by Segment | 9
Market by Commodity | 10
Discussion of Report Methodology | 12
Appendix Market Size Detail – 2014 thru 2020 | 14
© Commodity Technology Advisory LLC, 2015, All Rights Reserved.
2015–2020 CTRM Market Outlook
3
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.
© Commodity Technology Advisory LLC, 2015, All Rights Reserved.
2015–2020 CTRM Market Outlook
4
SUMMARY OF RESULTS – 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
42
50
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.
© Commodity Technology Advisory LLC, 2015, All Rights Reserved.
2015–2020 CTRM Market Outlook
5
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
2
155
1
31
369
Power
181
3
175
3
37
399
86
20
84
12
42
245
100
1
3
2
1
107
9
1
10
-
4
24
12
2
16
4
6
40
Oil and Products
NGLs
Coal
Precious Metals
Other Metals and Ores
34
10
26
9
37
117
Ags/Softs
85
20
84
24
76
288
8
-
14
3
4
30
695
59
568
58
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
© Commodity Technology Advisory LLC, 2015, All Rights Reserved.
2015–2020 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 – 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
© Commodity Technology Advisory LLC, 2015, All Rights Reserved.
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.
© Commodity Technology Advisory LLC, 2015, All Rights Reserved.
2015–2020 CTRM Market Outlook
8
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
© Commodity Technology Advisory LLC, 2015, All Rights Reserved.
2015–2020 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 region’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
© Commodity Technology Advisory LLC, 2015, All Rights Reserved.
2015–2020 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-
© Commodity Technology Advisory LLC, 2015, All Rights Reserved.
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
© Commodity Technology Advisory LLC, 2015, All Rights Reserved.
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.
© Commodity Technology Advisory LLC, 2015, All Rights Reserved.
2015–2020 CTRM Market Outlook
13
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-
© Commodity Technology Advisory LLC, 2015, All Rights Reserved.
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.
© Commodity Technology Advisory LLC, 2015, All Rights Reserved.
2015–2020 CTRM Market Outlook
15
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
42
50
58
69
81
95
111
Third Party Implementation
326
325
330
380
356
373
395
Non-Vendor Solution
273
282
281
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
83
83
83
84
84
85
85
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
43
45
46
48
49
51
52
Energy Retailers
25
26
27
27
28
29
30
C&I Energy Consumers
50
52
55
59
63
67
72
Ag Traders
157
171
181
193
206
219
234
Food and Bev (inc. Processors)
128
138
150
160
174
186
200
77
86
90
96
100
108
117
Mining
47
49
51
53
55
57
59
Metals Traders
66
67
71
75
79
84
88
Multi-Class Traders
85
93
99
104
110
115
124
1,619
1,681
1,741
1,813
1,895
1,982
2,074
Ag Producers
Total
© Commodity Technology Advisory LLC, 2015, All Rights Reserved.
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
23
23
23
24
24
24
24
Precious Metals
41
42
44
46
49
51
54
Other Metals and Ores
116
117
121
125
130
135
139
Ags/Softs
288
304
329
355
385
415
448
30
32
33
35
38
40
43
1,619
1,679
1,744
1,821
1,904
1,986
2,077
Other (Freight, Emissions, Etc.
Total
© Commodity Technology Advisory LLC, 2015, All Rights Reserved.
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 CTRMCente at:
www.ctrmcenter.com
19901 Southwest Freeway
Sugar Land TX 77479
+1 281 207 5412
Prague, Czech Republic
+420 775 718 112
Email: info@comtechadvisor y.com
