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In The News
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July, 2005
Dealing With Orphaned Scheduling Systems
Do you find that you have an orphaned or out-of-date application, like a gas scheduling system? Are you concerned about the future roadmap that your vendor is providing? Matt Frye of OpenLink considers these issues.
By MATTHEW FRYE
The energy business and the corresponding application software
market have changed significantly over the past decade.
And there have been numerous mergers and acquisitions
(M&A) of energy software vendors over the years as well.
Because most first-generation software applications were siloed with a
unique speciality (for example, gas scheduling or deal capture system),
most deployments included significant interfaces. As a result, most
energy companies wound up with patchworks of systems and significant
manual workarounds.
Why have so many gas software developers come and gone over the years? There are a variety of reasons but the most important explanation is the collective inability to evolve from a module-centric framework to a comprehensive straight-through-processing architecture and one that supports the full life cycle of gas transactions.
In some cases, software developers have been purchased by their competitors, while others have disappeared altogether. With most mergers, the acquiring companies were more interested in gaining the customers than the underlying software assets. Consequently, these newly orphaned systems were placed on limited life-support. Existing customers of these out-of-date systems simply put up with the limited service and virtually no future enhancements, or, in some instances, were never provided with necessary upgrade conversions to new systems offered by the acquiring firms.
This can create many problems for companies left in possession of orphaned or grandfathered software: from growth strategies, new business initiatives, M&A activities, new gas products and new trading protocols/hubs to integration with other new systems to name a few. Nevertheless, even thinly supported applications can limp along for years as the burden might just be shifted to manual workarounds. Eventually, though, energy companies must replace their old systems to effectively manage business growth as well as technology changes.
Since the surviving systems offered by the merged companies usually bear little resemblance to the orphaned ones, any ostensible upgrade path will actually become a full migration project. Therefore, companies should evaluate all available solutions, not just those offered by the surviving vendor. Essentially, this is where OpenLink can add tremendous strength and value, primarily in the gas logistic arena.
OpenLink is unencumbered by isolated, legacy, scheduling-centric designs. We have delivered the first natural gas logistics product — gMotion — that is an intrinsic component of a robust, risk-based straight-through-processing environment. gMotion is actually OpenLink's ground breaking alternative to siloed and orphaned scheduling systems. Designed and developed to increase productivity and eliminate integration issues, gMotion allows organisations to greatly improve the efficiency of scheduling- related activities, including the management and valuation of storage balances, allocation of best available volumes, and maintenance of tariff rates databases.
The product of extensive research and development (R&D), gMotion offers flexible, user-friendly filtering and query capabilities for nomination management, allowing users to create bookout or back-to-back nominations, paths into and out of interconnections and pools, and movements into or out of storage facilities and park-and-loan contracts. Users can manage imbalance accounts by transportation contracts (standard or zone-based) and create operational balancing agreements (OBAs) for specific meter locations. Cash-out and non-cash-out imbalance support is also provided so that proper imbalance positions will always be monitored and displayed.
The system also provides enhanced and expanded operations capabilities, such as detailed invoice generation and tracking, intelligent support of prior period adjustments, and the capture and management of complex transportation and storage entitlements. However, transportation and storage entitlements should be within an open, real-time framework to provide robust interface capabilities to external systems. This framework also maintains a strong tariff rates database, which contains comprehensive rate structures (including daily and monthly tiers, seasonal-based charges, and mileage-based rates), so that transportation and storage charges can be calculated accurately and seamlessly.
More critically, the trading benefits are obvious: schedulers and cash traders can exchange ideas on possible execution strategies in real time, providing an effective mechanism for furthering inter-group efficiency and managing expected operational variances. gMotion also provides a seamless flow of transaction data from trading and risk operations to scheduling for next-day, real-time scheduling.
gMotion is also highly adaptable and has been built to accommodate all the pipelines on the North American grid. Regardless of the client's geographic focus, clients will be able to customise the module to suit their specific needs. The standard gMotion application allows traders to manage their volumes on third-party pipelines. In addition, gMotion has an optional on-system module that allows the pipeline operator to manage volumes on its own pipeline.
To support the demanding front- to back-office requirements of gas players, gMotion complements Endur, OpenLink's proven trading, risk management and transaction-processing environment for energy commodities. Empowering Endur with scheduling and related front- and back-office capabilities, gMotion completes OpenLink's comprehensive physical and financial natural gas transaction processing functionality.
If you do decide to evaluate all available scheduling solutions, including gMotion, you may also want to avoid making another common mistake: not looking at the true, total costs of the competing solutions. The temptation is always there to select the solution with the lowest price tag, which is usually a relatively small component of the total project cost. The common-sense saying of "you get what you pay for" definitely applies here. The simple fact is that a cheaper solution with limited capabilities usually requires more add-on patches and/or manual workarounds. In the end, you wind up paying more. Finally, given the energy software industry's not-so-stellar record in product development/investment, how comfortable would you be with under-capitalised companies supporting your mission-critical applications? Once again, working with these under-capitalised companies would likely decrease your bottom line, simply because service after the sale (ie, consulting support and a substantial R&D budget for maintenance and future enhancements), should not be beyond your initial investment analysis.
"To upgrade or not to upgrade," that is the question for many gas companies trapped with orphaned scheduling systems. If you decide that now is the right time to upgrade your antiquated system, OpenLink's gMotion product is your solution.
About OpenLink
Founded in 1992, OpenLink is a leading provider of energy and financial trading, risk management, and operations software solutions. The company's Next Generation eXtensible (NGX) platform supports the most rigorous business requirements of firms trading in energy, interest rate derivatives, fixed income securities, foreign exchange, money markets, metals, and soft commodities. OpenLink's global client base includes AMP Capital Investors, Austin Energy, Banco de México, Bank of America, Bank for International Settlements, Bank of Canada, Bank of Scotland Treasury PLC, Bridgeline Holdings, Citigroup Global Market, Inc., Deutsche Bank, Edison Mission Marketing & Trading, Enbridge, Mirant, Nexen, Petróleos Mexicanos, Sequent, Shell, Statoil and Vattenfall Europe Trading. Headquartered in Long Island, New York, and with offices in London, Houston, New York City, Berlin, Sydney, and São Paulo, OpenLink employs more than 300 professionals worldwide.
Matthew Frye is managing director of OpenLink's Houston, Texas division. He has 20 years' experience in energy markets, including trading, risk management and operations software. Frye leads a team of business analysts and software engineers focused on dynamic, integrated solutions for energy trading firms.
Copyright © 2005 Incisive Financial Publishing.
All rights reserved. Used by permission.
First published in Energy Risk Technology Special Report - July 2005
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