There was never a better time to build your own CTRM

In the last article, we touched on the acquisition activity in the CTRM software space and its impact on users before looking at opting for a custom build approach instead. We continue that theme with a look at how technology is making a custom build a more attractive and cost-effective option than ever before.

In the space of less than a few months, Ion acquired Allegro, Trayport acquired Visotech and EnergyOne acquired Contigo. In fact, this software sector has a long history of merger and acquisitions going back to the late 1990’s when Caminus attempted a roll up of many vendors and was eventually swallowed up by SunGard. Brady was also extremely acquisitive over the last decade. There are many more examples of vendors buying market share in the space the most recent being Ion. But for buyers of CTRM software, this M&A activity can be deeply unsettling. Will the new owner continue to maintain the software? Will it retain the original vendors staffs, or will there be a constant drain of product knowledge at the vendor as people move on? Will the new vendor seek to dramatically increase support costs? These are just a few examples of the issues such M&A activity can create. There are many others.

Against this backdrop, this software sector has also been one of rapid and often sudden requirements changes. For example, the collapse of the US energy merchant suddenly created a need for more attention on credit risk, and the financial crisis resulted in significant regulations placed on the industry. Meanwhile, the rise of renewables has had quite an impact on ETRM software requirements and tariffs, and trade wars are placing a lot more emphasis on supply chains and political, and operational risks. Meanwhile, technology moves quickly too. A move to the cloud where load can be optimized, and costs smoothed is one pertinent example.

At Adaptive, we follow all of these trends and issues and we see that the evolution and adoption of technologies can have a huge impact on the buy versus build decisions facing CTRM users. With a combination of opensource software and the cloud, building an agile CTRM solution can be done by building on an increasingly smaller layer of technology that can quickly deliver an agile and custom solution to the business. With opensource, aspects of the design and build puzzle have already been solved reducing the amount of specific work required to deliver the solution and the cost of build is coming down.

Adaptive has built Hydra, a resilient and available platform on which new development can be accelerated. This enterprise-ready platform takes the most complex elements of real-time trading, and makes them simple to develop, deploy and operate. Out of the box, Hydra provides;

  • A responsive, resilient enterprise infrastructure that is at the same time scalable, secure, auditable and delivers extreme performance,
  • Reduced delivery risks,
  • Reduced operational costs – cloud-enabled, less downtime and observability,
  • Speeds up trading software development programs by allowing the development teams to focus on the business requirements rather than infrastructure and therefore reducing time to market,
  • The ability to retain the competitive IP in the business.

Hydra is made up of four components including a fault tolerant container for event-driven services, a framework for communication (LAN, Web and Hydra LiveQuery), an enterprise WebSocket implementation and a control center to help manage automated deployment, cluster management, cloud infrastructure, service management and monitoring. By starting with Hydra, we are able to design, deliver and support cloud-deployed, agile custom CTRM solutions quickly and more cost effectively.

It’s a fact that bespoke development is a better approach than standard package implementation to delivering a better fit to business needs. Rather than being forced to modify your business processes to suit the software, the software is built to fit your approach and in doing so, you retain your competitive edge. Historically and despite the fact there are so many different commercial CTRM solutions available, only the very largest commodity businesses have been able to afford a custom build. Technology is now levelling the playing field bringing down the costs of custom development for a significantly broader set of users. Meanwhile, we would argue that the rash of acquisitions among the vendors in the space is focusing the minds of buyers.

Imagine spending millions of dollars selecting and implementing a commercial CTRM solution only to have the vendor acquired by another – perhaps one who you had rejected back in the selection stage. You had made many compromises to get the package to fit the business and yet it still didn’t quite do what you had hoped. But now you wonder, will the acquirer continue to develop the platform, or will it try to force you to adopt its solution? Will it respect and honor the agreements you had in place or try to extract more money from you – a stranded customer? Will the people that you have dealt with, grown to know and trust now leave or be let go?

This is why we founded Adaptive in 2012. We recognized that real-time technology is fundamentally changing businesses within the financial, capital and commodities markets and while these systems are complex and need the very best people and IP to successfully deliver them, advancements in technology and methodologies have made this approach much more affordable and desirable. We see this more than ever in the CTRM software sector and we are working with clients to deliver agile, resilient and real-time solutions that fit the business like a glove.

Author


Matt Barret

CEO and Founder, Adaptive Financial Consulting Ltd.
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