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Articles Archive
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July 2004
Bucking The Trend
Openlink's founder Coleman Fung talks to James Ockenden about the decisions that have promoted his company to one of the leading risk management solution providers.
OpenLink's chief executive Coleman Fung sees 2004 as a turnaround year for
energy markets. "We will see decent growth through 2005 and beyond," he says.
"We're gearing up for that - we're hiring, and we're really preparing for the
restart of the business."
Fung's enthusiasm for the markets is perhaps
born from OpenLink's success through the tough years following Enron's
bankruptcy and the tightening in energy markets. "We're profitable, even though
the energy market has been depressed over the last few years. We still managed
to make money and do well enough to buy back our equity from Shell."
Shell had had a 20% stake in the company since 1998. While Fung cannot disclose how much the company paid to buy back its shares, he claims Shell's investment outperformed the average market return over the same six-year period.
Fung says OpenLink's lifeblood has been its mix of energy and financial customers - a cocktail that will continue to serve it well as financial institutions make moves into energy markets. "Some of the financial players are becoming very active in physical markets," he says. "And they're doing it in a very systematic, organized fashion: they don't just jump in and create a huge bubble - they are very vigorous, they study the market and they understand that if they want to get involved in the physical market, they need to find a way to trade and measure the other physical guys. It's very good for us as a vendor to be seeing that."
According to Fung, OpenLink's physical trading products were designed very much for physical players, not with financial institutions in mind. He says this gives his products greater depth than those of vendors who concentrate solely on financial markets. Yet Fung is unsure how this physical design is used within the "patchwork of systems" financial institutions use in their trading. "You can only take a wild guess at how many systems they have internally," he says.
Outsourcing
OpenLink is unusual among vendors in that it does not have a significant outsourced foreign development operation. Fung says the figures to support a large development operation simply do not add up. "There are savings, but if you adjust the overheads to include the efficiency and overall agility we normally expect and enjoy, the savings aren't that great," he says. "We did a study that found we could save 25%, but for me that wasn't worth setting up such a huge infrastructure overhead."
Fung prefers to direct outsourced operations to specific projects, but overall prefers to create jobs in the US and Europe. "We're going against the trend, but we're increasing our hiring in Europe and the US. We're looking at graduates with MBAs. I would rather send someone with good communication skills to a customer - they will get the job done faster and cheaper."
Fung says this is a popular move with his clients. "I had one customer say: 'What is another half million, a million bucks? If we get the job done on time and on schedule, I'm more than happy to pay that."
This attitude is becoming more prevalent, and Fung says the trend is moving towards incentive-based work: several contracts have recently included high levels of incentives and disincentives for on-time and on-budget delivery.
"We like that - it makes everyone more vigorous," he says. "We're not a body shop, we're not an Accenture - we want to get the job done and move on."
Copyright © 2004 Incisive Financial Publishing.
All rights reserved.
Used by permission.
First published in Energy Risk's Technology Special Report - July 2004
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