ETRMs in a Changing World: Insights from the CEO of Triarc Solutions

HOWARD WALPER

Hello everyone. My name is Howard Walper, and I'm with commodities people. Today I have the pleasure to be here with Sterling Carmean, who's the CEO of Triarc Solutions, a group that's focused on consulting, support, and staffing services solely focused on right angles. And he's been working with right angles personally for about two decades. Isn't that right, Sterling?

STERLING CARMEAN

Yes. Great.

HOWARD WALPER

Well, it's a pleasure to welcome you here today and be part of this interview. Today we're going to be talking a little bit about ETRM technology and how it's changing and how it's adapting to new types of business and the new speed of business. So why don't we kick things off with the question, what is the current state of the ETRM industry right now?

STERLING CARMEAN

Yeah, well, Howard, thanks for having me. Yeah, it's interesting, we are in an interesting moment right now. I think it's a bit of an unprecedented moment in comparison to where we've been over the last 1520 and 30 years. I'd say right now, all major platforms for CTRM ETRM are currently held by one vendor, which is interesting because that certainly removes a bit of the competitive activity between the larger platforms that we've seen in previous years and decades. So that's kind of what's happening on the vendor side, I think. On the commodity business side, industry continues to change and grow. Nothing on the commercial side has slowed. I think these customers and businesses are very much alive and flowing and need technological support from vendors around the space. So it's really a bit of an interesting moment that we find ourselves in right now.

HOWARD WALPER

And when it comes to technology, I guess one of the places to start really is with the customer. Right? So what are some of the challenges customers are facing right now in utilizing this type of system?

STERLING CARMEAN

Yeah, I think there are a few of them. I think that total cost of ownership is a major one. Certainly we all appreciate systems are expensive, but really wrapping your arms around the total cost of that can be really significant. When we look at It budgets for customers, I find this surprising, but initial implementations are still proving to be challenges. Sometimes it's not a 100% success rate, and certainly in those scenarios, you always have three groups kind of responsible for the success of a new implementation: the customer, the si, the system integrator, and the vendor. And so certainly from our perspective, a project doesn't go wrong without some kind of misbehaving of at least a couple of at least two of the three of those. So we're seeing those that's a little bit shocking that those continue to be challenging for some groups. We're not seeing a 100% success rate there. I'd also say that these systems are largely not intuitive and thus bringing one of these kinds of on board at your business can prove to be a challenge of training for employees. That's a difficult hurdle in some scenarios. These systems are also largely difficult to support. And I'd kind of say that it's challenging to see that. And we feel for customers when those moments happen. But I think we're seeing kind of lower vendor support, as I spoke about a minute ago, that once you kind of lose that competitive activity between different major providers, then suddenly support is one of those areas that can start to slow down, but also very much in house for businesses. I think it's difficult for them to find competent resources who they can hire in house because right now there is a tightly constrained resource market. From an employment standpoint, it's very difficult to find individuals. So I think that's tough. And I'd probably say that all in all, one of the kinds of final changes that customers face is that really these CTRM systems were not built with user experience as a focus. To say that is even a little light hearted as well, because years ago it was all about can you get transactions in? What kind of speed to market opportunities are going by, how can we capitalize on those from the vendor space in CTRM? But I think there's going to be a new focus in the next generation tools and in the years to come on really, that customer experience, user experience. It's hard that all of us have now lived more than a decade with a smartphone in our pocket and we'd say that most of those applications are nearly pretty in comparison to what we're seeing in CTRM ETRM. And I think we're going to see a push for those platforms to kind of have a bit of a facelift.

HOWARD WALPER

Now, are these ETRM tools positioned to support the change, the continuing change in the commodity trading business?

STERLING CARMEAN

Yeah, I think I would probably answer no to this one, that they're not and maybe not in the traditional ways that people would expect. So I think Etrms are really fantastic engines. They are, relatively speaking, stable platforms to work with. And I think a lot of people have even gone so far as to use the phrase that they're mature. And I'm not a big fan of that word. I think that makes us think of, oh man, this is a mature platform, no continued innovation is necessary. It is kind of what it is. Put that thing in park and we're good to go. I think I would prefer the word established platform. So established that we know what they do, they're doing it consistently. It's stable from that standpoint. But I don't think mature is quite right because I think there is a future opportunity here. I think there's a traditional expectation that I was speaking to a second ago that ETRM vendors will see the need from the market, understand it, make a change inside their platform, come out with whether that's features or specific components to meet those needs. And that they are the one stop shop for solutioning really within the market. And I think that's what it has been for a long time and I think that's been great. But again, I think the environment is moving away from that right now. And as we recognize that these are great engines, but in many ways they're also kind of large. These behemoth kinds of ships are very difficult to turn. Not saying it's not possible, just saying that it can take a little bit to do that. I think it's a wrong expectation that customers in the market may have today to expect that they would work in a pattern where a customer communicates a challenge to the vendor, vendor absorbs that, gets a little more feedback, then builds a feature that comes all the way back around to meet that customer need. I think the timeline that is possible to deliver that sequence is getting longer and longer. And so I think customers who aren't aware of this could be growing in frustration when really I think we've probably crossed the line that that's not really a reasonable expectation.

HOWARD WALPER

So if that's not a reasonable expectation, what are the solutions to these challenges?

STERLING CARMEAN

Yeah, I appreciate what I'm saying could sound like bad news, but this is kind of how markets change and shift over time. Certainly these are just the advancements and iterations that they go through. I think right now we're going to see an increasing responsibility on third parties and actually customers themselves to create complementary, and I sometimes call them satellite systems around these kind of monolithic CTRM engines. And I think we're already seeing that in recent years. It's becoming fairly common. Actually. I'll give one quick example of reporting. So we see people shifting from the reporting styles within these systems and it's very common to shift these things out to tableau power, Bi, Excel, all sorts of things. And that's pretty common from kind of trading shop to trading shop. So that is almost an expected component of an initial implementation these days. So I think that is going to gain ground for the customers who are tech savvy. I think we're going to see them starting to realize that they can meet their own needs. Got you. So it'll just be interesting to see how that goes. But I also think that the question is how is it that customers and third parties can provide these satellite systems? Well, this is going to put pressure on a topic that I've talked about before, but is interoperability. And so this concept basically means the ability of a system to speak very quickly and readily with many other systems within its ecosystem in the right angle space. I would speak to that. I think this has been a massive success by the vendor to create quite literally hundreds of open APIs. What is the interoperability grade that I would give to that platform? I'd probably give it an A plus at this point. And so it's very open and they are cooperating with those sorts of ideas and saying, yes, we want our data to be accessible to other systems and we want to be able to bring data in and out from other systems as well. I think we're going to see increasing pressure for these major systems to have very open front doors and side doors, back doors, all these things. We need lots of APIs really to put it in kind of straight tech speak. So I think that'll be a big component of the future.

HOWARD WALPER

Excellent. Well, let's take a little shift here. I think a lot of companies are looking for the perfect system, maybe not seeing something that suits their needs and deciding to build their own. So we have this build versus buy question out there when it comes to systems. When a company is looking at this option, build versus buy, maybe what should they be considering?

STERLING CARMEAN

Yeah, I've spent time interestingly on all three of the sides of one hand, I've worked with a vendor and been part of a software creation and delivery team. I've worked on the client side, having to receive that software, having to deal with the kind of constant advancements of the business and from an It standpoint, trying to keep up with them. And I've worked on the consulting side to try to bring both a vendor product and a customer need to be able to bridge those things together with solutions. This is an interesting question to me. I actually think that it's really a question of the mentality and what is the culture of that customer, that organization, in order to decide, are you prepared to build or buy? And I would say maybe a question I would ask, just a summary statement would be if someone's watching this thinking should we build or buy? I think I would ask the question, do you want to be a software creator or a customer? And let's kind of describe what those two worlds look like a little bit. So in the world of a software creator, I love technology and so I don't mind being a technology guy because I enjoy it. But I can appreciate it, not everyone does. And so you're going to need to either be a deep technology individual or have a culture of that where you as an organization, your organization sees a competitive advantage to the technologies that you all utilize. So if you're looking around your shop and thinking, man, I can point to a couple of examples where we were bleeding edge, then maybe you do have a culture of kind of rapid technology adoption. You're interested in staying on the forefront. So then let's evaluate the world of a customer. The world of a customer is focused on finding their advancement and their advantage, I should say, in their business is perhaps more on a commercial side and they don't see the value of the investment from a creator standpoint, that would necessitate that. So they just want to if somebody just needs to help me we joke all the time that we use plumbing as an example. It's like I just need somebody to come in and help me put in this faucet. Please. I just need that faucet to work. It just needs to be there. I have other things to do in the house, but the faucet is not my focus. I just need to get that thing working. So if that's a little bit more of your culture, your narrative, I think that probably a customer worldview would be an appropriate one. And I will say certainly we could probably talk about that question for 15 or 20 minutes. There's a lot to dig into there and it's been done successfully. Both sides have been successful in the past and frankly, both sides have struggled in the past. So it's not like, hey, I just want the 100% success path. Tell me whichever one of those it is. It's certainly more nuanced than that.

HOWARD WALPER

There's a really good answer to that question and I've asked that question many times to many people. So thank you for that. There's a lot of newish, I guess, products out there. Things like LCFS products, PPAs, virtual PPAs, and a lot more LNG out there. First of all, is the average ETRM able to handle those products? And really, is there an all in one solution out there or should people be looking at several different technologies and if so, how do you harmonize these technologies? Which I guess relates back to what you were saying about a lot of APIs, but I'd love your perspective on this.

STERLING CARMEAN

Yeah, this is a great question. I actually feel like this is probably one of the hardest things for new customers to come to. The knowledge of this is very similar to you are completely as a customer entering a new space. Oftentimes there are very few circumstances where people have very few customer to customer relationships where they can talk about, well, what technology do you use, how is that working for you? It is very challenging to get down to the bottom of what is right for them. I think there are a few components that make this hard and then we can talk about how you overcome those components or those challenges. So one component that makes this very difficult is that often, historically, when someone says, hey, I run in this sort of commodity space. I do AGS or I do liquids, energy, or I do gas or whatever it is, and they say, well, I want to put out an RFP for this, or something like that, unfortunately, which it's the salespeople's job, I get it. But unfortunately, a variety of platforms will respond to that. And the real truth of the matter is there is actually not all that much overlap between different systems. And yes, there are some. And these certain markets and things, it's very rare that you will see a legitimate kind of head to head battle of a system who is attempting to handle one specific commodity space. It's very rare that they will legitimately be evenly matched. Maybe just that fact alone is a helpful tool for customers to know that you should be continuing to dig in and say, but really, where are you? Show me the spread of your customer base. How are you solving these problems that are true for my commodity space, et cetera. So I think that's one thing that has been unexpected to me as I've kind of grown up in this space is I came in thinking there was all this competition. In reality, these are just really great salespeople who are doing their jobs excellently. But when you get right down to it, there are usually only one or two that would be a right fit for that commodity space. So that's just something to keep in mind. So the second piece I would say is to pursue recommendations. So even before you go into a conversation where it's like, what are all the options? Spend a real amount of time working on your commercial network and get connected to other organizations and see what are the challenges they've experienced. Just really you can learn a lot taking somebody out to dinner and saying, hey, tell me the journey that you've walked. And I think most people don't want other people to experience difficulty and we have compassion for one another. I think people are prone to share those lessons and I think that can save your organization seven figure sorts of numbers easily. So I think those would be the two right there. And then maybe the last one is maybe finding a relationship with an Si or a software selection provider who is going to kind of tell you things that might not be comfortable to hear and maybe you got to get somebody to shoot you straight and sometimes that can be difficult. But there are those people out there. I'll just say it like now, speaking.

HOWARD WALPER

Of good salesmen, sterling, I'd be remiss if I didn't mention that you can also get some good information on this at our Energy Trading Week and Commodity Trading Week conferences in London and Houston and Singapore. So I just had to get that in there. Since you mentioned good, let's wrap this up with a look at the future. And you've touched on this throughout this talk, but maybe as sort of a statement that we can leave people with where do you think the CTRM industry is going? What do you think the future of CTRM is going to be technologically?

STERLING CARMEAN

Yeah, I think that there is a massive opportunity for innovation happening right now. I do think that there is a moment here in the market where we're seeing this congealing of all platforms or not all. I appreciate many platforms. One vendor is creating an opportunity for people to press against the status quo. And I think that that is really in capital markets. These are capital opportunities that people love to see this kind of open market, free trade. Let's compete and may the best win. I think everyone in this sector is highly aligned to that sort of thinking. I think that there is an opportunity to see a major step of innovation happen right now, as we have kind of almost cleared the field, so to speak, with each of the major platforms kind of running in their specific lane, as it were. Now there's a huge opportunity for new entries. And I do think that that new entry, when we think that, we think, oh my gosh, it's going to be so difficult for somebody to build the next CTRM system. That's years and years of work to do. Who is going to invest in that? And I think I would say I think the future looks maybe a little different than how we've seen that problem solved in the past. And so I am just with everyone I'm speaking to, I'm trying to encourage that your organization can set the bar of innovation is not too high, that your organization can step into this space. We have a number of customers that we aren't consulting to build their thing. They are engaging us to teach them how to build the tools for themselves. And we are so excited for that. So we need people seeing the problems in their area, building solutions for them and working through those kinds of things together. So I think we're certainly growing up in an era where my kids can code on an iPad now and that wasn't the case 25 years ago, right? So the barrier to entry for people to understand technological concepts is much lower. And so I think this is a great moment for us to be stepping forward as a market. I think there is a risk that we view technological advancement as someone else's problem if we do that. I think we run a serious risk of stagnation in this market over the next ten and 15 years. Should the market stay as it is today, there will be no material leap forward. And so it's really upon each one of us who have the ability to make an impact to do that now and to make a change and to hear the needs of customers, to understand the innovation that users are expecting in this new generation of technology and to work hard together to deliver those things. So I think it's an incredibly exciting moment and I think that with each of us running in our lanes, I think we can make this a completely different world five and ten years from now.

HOWARD WALPER

That's a great way to wrap it up. I really appreciate your perspective and so thank you very much for being part of this today.

STERLING CARMEAN

Yeah. Thank you, Howard. Good to see you. It's been great.

HOWARD WALPER

Everybody, once again, thank you to sterling Carmine from Triarc solutions for being our guest today. Please continue to check back for more insight from the industry here at energy trading insider and commodity trading insider. And, of course, check out some of the energy trading week commodity trading week conferences at a location near you. So thank you very much and have a great day. Bye.