10 considerations before moving to a cloud-based CTRM


  • Jim Andrews and Mayank Moudgil
  • Published: 04 October 2018

Energy and commodity trading firms are increasingly embracing cloud-delivered technologies and products as they seek to reduce costs and improve their technology infrastructures. According to Commodity Technology Advisory (ComTech) projected spending for Commodity Trading & Risk Management (CTRM) products in the cloud will soon outpace “traditional” on-premise installs within the next 5 years, as cloud spending grows by 18-20 percent per year versus less than 4 percent for on-premise software.

For those considering moving from software residing on their own (or leased) servers to cloud-based solutions for critical E/CTRM capabilities, there are several considerations, many of which may not be obvious at first glance. And, while the benefits of cloud deployment have been broadly advertised, i.e. reduced cost, easier system upkeep and upgrades, and improved system availability and performance - there are numerous potential complexities to be considered and addressed prior to undertaking a move to the cloud.

1. Understanding the TRM vendor’s approach to cloud offerings

This is a critical first step and often dramatically influences your decision. If a vendor has simply done a “lift-and-shift” then they may not be fully taking advantage of cloud capabilities. Essentially, it’s the same system in a shared data center. On the other hand, E/CTRM systems which are “born” in the cloud are often architected to take full advantage of cloud capabilities.

2. Managing what will stay “on premise” vs. the cloud

While the E/CTRM system might move to the cloud, chances are a lot of the other IT applications and decision-making tools (e.g., proprietary models) will still stay “on premise” for some time to come. The integration needs between “on premise” and the cloud needs to be thoroughly analyzed, scoped and designed in advance to avoid issues during implementation, cut-over and in-production use (as data volumes and frequencies increase over time).

Integration with other web-delivered or cloud based external parties such as exchanges, broker systems and market data solutions should also be a key consideration when selecting and implementing a cloud-based solution. Architecting your integration based on an API approach can help to reduce cost and lead time of interfacing between systems and can allow faster, cheaper, and better innovation at scale.

3. Locking down data security

Security for any solution is and should be a topic of extended discussions at the C-level. For cloud implementation and applications, data security is a shared responsibility between the cloud vendors and clients. The vendors provide myriad tools for data security, but the real ownership of data security and access privileges lies with the client. Also complicating matters, different services on cloud require various levels of client engagement and security configuration. Discussing a cloud vendor’s use of penetration testing can help customers make sure their solution and data are secure.

4. Managing cloud resources

Process improvements offered by cloud resources are often discussed, as speed is a major selling point for cloud-based solutions since they have the capability to harness “just in time” computing power to deal with peak loads. The management of those cloud resources however, is seldom planned for. An important aspect of a cloud-based architecture is the ability to co-locate or distribute and deploy the workload to various areas of the globe based on user presence and load demands.

Organizations with a wide spread geographical footprint should plan the location of their cloud assets accordingly to ensure there are no pockets of users in remote locations/countries which might be adversely impacted, particularly those in developing regions such as Africa. While most major cloud providers have a global footprint and can provide coverage in a variety of scenarios, those scenarios should be fully vetted prior to making any commitments for computing resources.

5. Reliability of the Network

Network reliability needs to be paramount in any ETRM solution and a cloud-based solution is no different. The Onus will ultimately be on the client company to maintain the network on their side to be able to connect to the cloud services. We have seen clients struggle for upwards of 6 months to maintain a consistent and reliable connection between on-premise applications (e.g. engine parameters and reporting tools) and cloud applications. Issues range from DNS server issues to firewall and network glitches. These issues surface and re-surface after the firmware and server upgrades on the client side. Having a dedicated team investigate these issues can help to ensure success.

6. Realizing the impact of “hassle free” upgrades

An additional often touted benefit of a cloud-based E/CTRM system is hassle free upgrades. Some vendors even claim “transparent upgrades” in which the system will be upgraded automatically with bug fixes and new features as soon as they are released. Organizations need to carefully consider the benefits of this feature, considering its impacts on integration, system stability and any required “system freezes” that can occur at peak trading periods depending on geographic location.

Additionally, activities such as data loading or extract efforts, often occurring during M&A activity, usually are scheduled during non-peak hours – potentially the same time that a vendor may perform a system update. A system which provides the ability to opt-in and opt-out of these upgrades and/or schedule them at the client’s convenience could provide the flexibility which energy and trading organizations often need. Furthermore, if your company has a strict policy stating all code changes must be tested prior to deploying into production, either the policy must be adjusted, or arrangements must be made with the vendor to accommodate some level of testing prior to their moving new code into production.

7. Versatility

A good cloud-based E/CTRM system should be configurable to a client’s needs and provide them the flexibility to use certain optional modules/features of the system based on a client’s asset mix, geographic market requirements or industry segment (i.e. producer, trader, midstream processor, energy marketer, etc.). A “one size fits all” solution might leave smaller or specialized organizations requiring less broad functionality than the vendor’s average client paying for capabilities they don’t need; or larger and/or more complex business may find the functionality lacking as they grow and may need to create “side-car” code to augment the core capabilities of the system. In either case, the costs and burdens of improper sizing or lack of configurability to address current and future functional requirements could quickly undermine the initial value proposition of such a cloud-based solution.

8. Maintaining regulatory compliance

As regulatory and stakeholder scrutiny becomes more intense and invasive, an E/CTRM system is the system of record for an organization, regardless of actual system location, and should not only be able to support compliance in the markets you operate, the system should also be able to provide adequate access and analysis by compliance and audit (internal and external) teams. Some of the key requirements in this area include provisioning of adequate work-flow management capabilitcapabilities for approval requirements (deals, contracts, credit, etc.), supporting of a flexible segregation of duties matrix, and availability of detailed audit and user activity reports on demand, including logging of screen views and data inserts, updates or deletes.

9. Allocating budgetary resources

When evaluating a cloud solution and its deployment, clients often do not consider how these systems and their costs are accounted for in corporate budgets and treated in financial reporting. Licensing a cloud solution usually involves a move from a large, initial Capital Expenditure (CapEx) outlay to a smaller but recurring Operational Expense (OpEx). This necessitates a shift in thinking when it comes to IT budgets and roadmap planning. Cloud licenses, essentially rentals, can provide much needed flexibility, enabling organizations to wind down or walk away from solutions which do not turn out as intended without a significant write-off as might occur with a solution on a set amortization schedule. Of course, should the decision be made to replace an existing solution prior to what was expected or budgeted at the time of its initial deployment, the ancillary costs of such a move and its impact to the larger enterprise architecture would need to be thoroughly considered.

Many TRM vendors offer cloud services which allows for one-stop shopping for cloud/license payments. This can be a cost-effective way for a firm to manage things, as they usually get a discount if they use a vendor for both cloud services and software license.

10. Managing People and Organizational Change

A move to the cloud can be an opportunity to redeploy IT and business analysts to be more “customer focused,” rather than “system focused.” In other words, these valuable human resources can now spend most their time on helping the business grow and take better advantage of the analytical and decision tools at their disposal. IT staff are not bogged down by “run & maintain” duties. This can also provide organizations the ability to enhance and upgrade their talent pool by retraining their IT teams to be more “results oriented” and not “issue driven.” However, the process and potential complexities of reorganizing these staff responsibilities must be recognized and planned for to achieve the optimal outcome. Without a proper transition plan, staff who are fully or partially dedicated to supporting an on-premises system may become insecure about their futures, potentially resulting in loss of critical skills during a period in which such skills are most needed.

The increasing adoption of cloud solutions in the E/CTRM markets is unmistakable evidence the benefits of the cloud have become a very attractive value proposition for many companies. Of course, realizing these benefits and transitioning to a cloud solution is never as simple as just signing-up and logging-in to the software. Companies holding assets or operating in multiple commodities or geographic locations will face challenging deployment and implementation issues; without proper planning and an understanding of the unique issues involved, the initial value proposition promised by cloud solutions can be quickly undermined or vanish entirely.



Jim Andrews is a Principal Consultant for the Capco Energy Solutions business. An enterprise solution and integration architect, Jim provides technical leadership for clients seeking to rapidly innovate and deliver on digital transformation plans. Jim helps clients navigate the ever-changing technology landscape through development of data strategies and architecture roadmaps. He has delivered value for more than 20 years of service to his clients, working with diverse, international teams.

Mayank Moudgil is an Associate Partner and industry thought leader, Mayank leads the Trading & Risk Management (TRM) practice for Capco Energy Solutions. Mayank has worked for a wide variety of energy, commodities and financial services clients across the globe, acting as a trusted advisor by helping drive organizational efficiencies through a blend transformative programs and innovative strategies. He is also regarded as a subject matter expert on multiple technologies and TRM platforms.