When an organization decides to implement an Energy Trading and Risk Management (ETRM) system, they generally pursue the following steps:

Step 1: A system selection team is formed consisting of representation from the trading, operations, risk, information technology, accounting and purchasing organizations.

Step 2: A list of requirements and priorities is developed.

Step 3: The team facilitates a system selection process consisting of a request for proposal, review of responses and attendance of vendor demonstrations to select a tool that will address the requirements at the most reasonable cost.

There is a critical flaw in this approach. Organizational change management personnel are usually added to the project team after system selection – sometimes not until the project is in trouble and, as a consequence, key requirements relating to human factors are seldom considered. Failure to capture these requirements, and more importantly, including them in scoring each vendor’s product, could lead to increased cost of implementation and an under-estimated cost of ongoing maintenance.

ETRMs are as unique as snowflakes. Take, for example, Triple Point’s, CommodityXL 7.x (CXL) and Allegro Development’s Allegro 8x. Both ETRMs are regarded as leaders in the marketplace. Both applications support financial and physical trade capture, risk analysis and reporting, operations (logistics) management and settlement. However, many would suggest that Allegro offers a more open architecture and user configuration flexibility, while CXL has a more closed architecture that encourages the organization to adopt processes more in-line with the “out of the box” design. These application characteristics or “personalities” may be considered a plus or minus depending on the company’s organizational approach and skills, i.e., its “personality.”

Companies in the energy space are as different as ETRMs. The organizational approach for some companies is hierarchical and bureaucratic with strictly defined roles and controls, while others are flatter, flexible, and more entrepreneurial. Neither culture is necessarily wrong, but there is a reason why some people like the iPhone while others prefer the Android. Also some companies have a very high technical skill level internally to custom tailor their ETRM, while others prefer to do things “out-of-the-box”.

It is important to note that ETRM capability must always be considered a higher priority and given more weight than the ETRM’s personality. The ETRM’s and organization’s personalities do not have to match, however knowing that they are aligned or not does matter and must be considered in implementation planning.

Failure to consider the personality of an organization may result in a longer implementation time due to additional requirements, system enhancements or business process changes requiring additional training and change management activities. Any customization of the applications will most likely result in higher operational and IT support costs over time. In most cases, these costs are discovered when it is too late to make another decision

This additional cost exposure may be minimized by performing an organizational readiness study or at the very least, including a change management resource on the selection team. This professional will assist the team in identifying organizational characteristics that if considered early may very well lead the team to a more cost-effective and therefore successful implementation.