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6 REASONS
BUILDING YOUR OWN CTRM SOFTWARE
COSTS MORE THAN YOU THINK

Discover Why Next-generation Commodity Management


Software Gives You the Flexibility Your Business Needs
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Build or Buy?
CAN AN OFF-THE-SHELF CTRM SOLUTION REALLY GIVE YOU THE FLEXIBILITY YOU NEED?

If you’ve thought about building your own commodity trading and risk management system, you’re not alone.

70%OF COMMODITY
Seventy percent of commodity businesses have at least
considered building their own CTRM solution.1

BUSINESSES

It makes sense. Building your own CTRM software in-house can seem like a great idea on the surface. There
are primarily two reasons why commodity businesses consider building their own software:

1. Some Businesses Think an Off-the-shelf Commodity Management System Can’t Give Them the Flexibility They Need

There’s no doubt commodity organizations know their business better than anyone else. They know the ins and outs of their
day-to-day operations and the small, complex idiosyncrasies and nuances that make their businesses unique and special.

It’s easy to think no packaged CTRM software is ever going fit their business perfectly, so why spend money on licensing,
installation, and configuration when they can build a solution themselves? Why not develop a solution on their own time, with
their own resources?

These organizations know they need flexible commodity management software built and configured specifically for their
business to meet their unique needs, and they’re pretty certain no enterprise software company can offer the amount of
customization they’ll need.

We’ll cover this problem in-depth on page 11, but the majority of this e-book will focus on the second problem, which is:

2. Some Businesses Think They Can’t Make the Investment in Enterprise Commodity Management Software

This makes sense, especially when you consider:

31% 25%
Thirty-one percent of commodity Twenty-five percent of commodity
businesses said that budget businesses said their software
constraints have been their budget decreased over the last
biggest IT/systems challenge in year, while 48 percent said their
OF COMMODITY OF COMMODITY
the last 12 months.2 budget stayed the same.3
BUSINESSES BUSINESSES

Budgets are tight for many commodity businesses. After all, their main focus is to maximize profitability for their organization.

The truth is BUYING enterprise software comes with a transparent and fixed cost, but BUILDING your
own commodity management software comes with many hidden costs you may not have considered.

KEEP READING TO LEARN MORE ABOUT THOSE HIDDEN COSTS.

1
ETRM / CTRM Software - To Build or Buy? That Is the Question. Commodity Technology Advisory. CTRM Center. March 14, 2016.
2
Stella Farrington. Survey: CTRM System Upgrades Fail to Impress. Risk.net. March 21, 2017.
3
Ibid
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6 Reasons Building Your Own


CTRM Software Costs More than You Think
LEARN MORE ABOUT THE HIDDEN COSTS THAT COME WITH HOMEGROWN SOLUTIONS

The way we see it, there are (at least) 6 costs associated with building your own CTRM solution:

COST OF RESOURCES

COST OF TIME

COST OF NOT ADHERING TO BEST PRACTICES

COST OF INACCURACY

COST OF FALLING BEHIND

COST OF LOSING INTELLECTUAL PROPERTY

A next-generation commodity management software can help you account for these costs. But before we talk about that
next-generation software, let’s dive into the costs associated with building your own CTRM solution.
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Cost of Resources
Reason No. 1

BUILDING YOUR OWN CTRM SOLUTION TAKES UP A


CONSIDERABLE AMOUNT OF RESOURCES

We know from experience that companies whose core business is not software development, but who embark on a
mission to develop software, often soon regret it.

Software development and maintenance is a serious discipline. If development isn’t a key strength in your organization,
you’ll be hard-pressed to direct enough talent toward the project to keep it on course. Remember:

31% 25%
Thirty-one percent of commodity Twenty-five percent of commodity
businesses said that budget businesses said their software
constraints have been their budget decreased over the last
biggest IT/systems challenge in year, while 48 percent said their
OF COMMODITY the last 12 months.4 OF COMMODITY budget stayed the same.5
BUSINESSES BUSINESSES

The knowledge base and workforce it requires to drive a development project to successful completion is significant.
As your team’s focus strays from your core mission, the project languishes, costs accumulate, and hours slip away.

Keeping Pace and Scope with an Ever-changing Technology Landscape

Ultimately, new technology, industry circumstances, or a changing regulatory environment may have erased any gains
and moved the work beyond its original scope. A vicious cycle of upgrade and replace takes over. At that stage, the
IT department can be so vested that the only viable option may appear to be putting more money in and keeping the
process going.

In the case of a CTRM project, building your own software can be full of considerable challenges, especially as you’re
trying to stay focused on volatile commodities markets that are subject to new regulations and shifts in supply and
demand.

• A functional business understanding in order to write requirements


• Logistics functionalities
• Support for a centralized master data system
ADDITIONAL
• Business intelligence, analytics, and data warehousing considerations
RESOURCE-CONSUMING
• System security between departments and business units, particularly if the
CONSIDERATIONS FOR BUILDING A
business has both regulated and non-regulated components
CTRM SOLUTION
• Role-based access to protect sensitive information
• Audit trail abilities to capture all changes to records
• Integration with various online trading platforms, corporate financial systems,
terminal automation systems and internal and external market data
• System availability on mobile devices
• Unit, system, performance, and user-acceptance testing years.

Buying enterprise software can be a significant investment, but it’s not


nearly as significant of an investment as creating your own software.
4
Stella Farrington. Survey: CTRM System Upgrades Fail to Impress. Risk.net. March 21, 2017.
5
Ibid.
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Cost of Time
Reason No. 2

BUILDING YOUR OWN CTRM SOLUTION TAKES


MORE TIME THAN YOU THINK

It’s not unusual for large companies, who actually have the system development life cycle process knowledge,
software development methodologies, and related tools, to tackle an in-house project. However, in doing so, they
may find that they spend millions of dollars and countless man-hours pushing a project uphill for customizable user
workflows and operational efficiency.

Buying Out-of-the Box vs. Starting from Scratch

When you buy a next-generation commodity management solution, you’re already purchasing an incredible amount
of man-hours built by hundreds of people over 30 years of expertise. You’re buying software that’s been tested and
configured to the top 280 commodity businesses already. Starting from scratch is literally the ground floor. It’s going
to take you a lot of time to even get up and running.

• Will the system scale to fit your business needs as you grow?

• Will you be able to expand quickly and reliably, without adding


ADDITIONAL
resources or changing course?
TIME-CONSUMING
QUESTIONS TO ASK • Can your CTRM solution efficiently manage added volume and
YOURSELF changing data points?


Building your own CTRM software sounds great, until you
consider that writing software distracts from your core business.
Staff requirements and the specialized skill sets it takes to
actually write the code, drive the development, and maintain the
solution are different than trading or business skills.”

— Michael Hinton, Allegro Chief Strategy and Customer Officer 6

Don’t let building your own software distract from your core business.
Your employees’ time is better spent elsewhere.
6
CTRM Thought Leaders Panel Addresses “Build Vs. Buy.” Commodity Technology Advisory. CTRM Center.
Feb. 26, 2016.
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Cost of Not Adhering to Best Practices


Reason No. 3

DO YOUR EMPLOYEES HAVE 30 YEARS OF INDUSTRY EXPERTISE IN


BUILDING ENTERPRISE COMMODITY MANAGEMENT SOFTWARE?

Allegro has been building scalable commodity management software for over 30 years. Over those years, we’ve
worked with over 280 leading commodity businesses and collaborated with those businesses to adopt best practices.

The Cost of Working in a Silo

Odds are your IT team is very skilled at what they do. But the likelihood that they could build a CTRM solution that will
keep your organization competitive in a volatile, complex, and uncertain market isn’t good.

To keep your organization competitive in your industry, your CTRM solution is going to need to move at the speed
and scale of the market. Your competitors? They’re likely using a next-generation commodity management system.
Building a system that’s anything less than best-of-breed will put you behind them.

It’s important to bring in skill from outside of your silo. Otherwise, you’re setting yourself up for failure.

YOU’RE ONLY AS GOOD


as the people and tools you surround yourself with.

Having a next-generation commodity management software is like having a partner with more than
30 years of industry expertise on your team.
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Cost of Inaccuracies
Reason No. 4

A FLAW IN YOUR SELF-BUILT CTRM SOLUTION


COULD BE CATASTROPHIC

Let’s not forget the sheer amount of risk and maintenance organizations using legacy solutions must endure when
they use their own CTRM software. If there’s a time that a legacy solution is ever not in compliance with regulations,
those organizations could find themselves paying substantial penalties and putting their businesses at risk.

Keeping Up with Compliance

On top of that, sustaining regulatory compliance, real-time position visibility, robust risk management, and precise
controls is substantial. But compliance and maintenance are table stakes when you’re dealing with CTRM software.
Those are the minimum requirements. Remember also, that developing your own CTRM software is subject to
manual error, which creates a whole new type of compliance risk.

Maintaining Credibility

Your credibility is another important consideration to take into account when you think about the risk of inaccuracy.
If your organization deals with any kind of third party, like an investor, you’re going to have to explain to your third
party why you decided to build your own CTRM solution instead of using a tried-and-true vendor. Investors will
want to know you have modern, reliable tools capable of handling complexity and minimizing issues. Building your
own CTRM software just won’t cut it.

• Is compliance embedded in every business process across the


organization?

ADDITIONAL • Is the system capable of integrating multiple commodities and


RISK QUESTIONS geographies, physical and financial assets, and front, middle,
TO ASK YOURSELF and back office operations?

When you think about the risks and costs associated with the possible inaccuracies that come
with building your own CTRM solution, it becomes clear that building your own commodity
management software opens you up to much more risk.
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Cost of Falling Behind


Reason No. 5

DOES YOUR IT DEPARTMENT HAVE ADVANCED ANALYTICS CAPABILITIES?

The commodity industry is at a proverbial tipping point today. The market has never been more volatile, more
complex, or more uncertain than it is now. Is your IT department able to build advanced analytics capabilities
into your homegrown solution?

Data-driven Organizations Stand to Gain the Most in a Complex and Volatile Market

With the commodity industry at this tipping point, organizations can’t afford to put off something as important
as analytics. Studies have found that data-driven businesses have higher output and productivity and that
analytics drives tremendous return on investment.

Today, the organizations that stand to reap the most from this market volatility are using world-class analytics
to lead to better:

PHYSICAL ASSET OPTIMIZATION PORTFOLIO VALUATION REAL OPTION PRICING

Additionally, the volume of data in the world is growing at an unprecedented rate, but raw data alone is not
enough for enhanced commodity management in today’s volatile market. The key to success lies in extracting
knowledge from the data, which can be done with forward-compatible enterprise commodity management
software and advanced analytics.

Advanced Analytics Is Difficult for Any IT Department

The truth is it’s tough for IT departments to keep up with what’s happening in big data and advanced analytics.
In fact, having a commodity management software partner who has truly invested in advanced analytics is rare.
It’s unlikely an in-house team would be able to develop an advanced analytics solution for your homegrown
CTRM system.

94% 84%
of commodity businesses believe of commodity businesses
advanced analytics are key to are planning to improve
future growth their organization’s analytics
OF COMMODITY OF COMMODITY capabilities within the next 3 years
BUSINESSES BUSINESSES

— Allegro survey of 150 commodity executives

Commodity organizations need to invest in a vendor that delivers advanced


analytics, or they risk falling behind.
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Cost of Losing Intellectual Property


Reason No. 6

WHAT IF ANYONE BUILDING YOUR HOMEGROWN SOLUTION


LEAVES YOUR COMPANY?

Here’s a universal truth: People leave organizations. You never want to think about it, but it does happen —
especially in IT. What happens if anyone on the team building your CTRM solution leaves?

Losing Proprietary Knowledge and IP

Your IT team has proprietary knowledge about the way your organization makes decisions and utilizes CTRM
software. They create functionality that’s essential to the way your business runs.

If a developer building a homegrown solution leaves your organization, they take the in-house knowledge of
their skills and what they’ve built with them. This makes it almost impossible for your organization to retain
proprietary knowledge and build your company at scale.

Not to mention, employees within your organization are going to need to figure out how your homegrown
solution functions without them — or else.


Should any of these key people leave the company, part of your product knowledge leaves
with them. By the time the investment ever sees the light of day, some of the technology
may have changed. The programming language may be on the way out. Your original scope
of needs may have evolved. Next thing you know, you’re on a treadmill going nowhere good
and stuck with a solution that is obsolete and you don’t have the budget to make it current.

— Evan Cox, Allegro Chief Technology Officer

A next-generation CTRM solution allows you to retain your proprietary knowledge and
provides a single, transparent, and integrated solution for your entire company.
In Summary: Discovering the Hidden Costs of
Building Your Own CTRM Software

HOMEGROWN SOLUTIONS COST MORE THAN YOU THINK


When a company decides to build a homegrown CTRM solution, they need to consider:

1. COST OF RESOURCES
Building your own CTRM solution takes up a considerable amount of resources when you try to keep pace
and scope with an ever-changing technology landscape.

2. COST OF TIME
Don’t let building your own software distract from your core business. Your employees’ time is better spent
elsewhere.

3. COST OF NOT ADHERING TO BEST PRACTICES


Odds are your IT team is very skilled at what they do. But the likelihood that they could build a CTRM
solution that will keep your organization competitive in a volatile, complex, and uncertain market isn’t good.

4. COST OF INACCURACY
When you think about the risks and costs associated with the possible inaccuracies that come with building
your own CTRM solution, it becomes clear that building your own commodity management software opens
you up to much more risk.

5. COST OF FALLING BEHIND


Commodity organizations need to invest in a vendor that delivers advanced analytics, or they risk falling
behind.

6. COST OF LOSING INTELLECTUAL PROPERTY


A next-generation CTRM solution allows you to retain your proprietary knowledge and provides a single,
transparent, and integrated solution for your entire company.

There are three key elements homegrown solutions just can’t touch.
Read on to discover those key elements.
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3 Features and Benefits You Won’t Find in a


Homegrown Solution
TAKE TOTAL CONTROL OF YOUR BUSINESS WITH CTRM SOFTWARE

You may know your business very well, but we know commodity management software better than anyone else.
We’ve been building and leading the commodity management software industry for over 30 years.

Over those 30 years, we’ve built a robust, flexible, and next-generation commodity management platform with
advanced analytics that’s unbeatable thanks to three proprietary elements:

1. Unmatched Industry Expertise

From the executive staff to the support team, Allegro experts understand what makes commodity
businesses flourish. In fact, we estimate that Allegro’s team collectively has more than 1,000 years of
industry and domain experience. Unlike some of our competitors, we were built for commodities from
the ground up. We speak your language, and we know exactly what it takes to meet your objectives,
whether you’re in the Americas, Europe, the Middle East, Africa, or the Asia-Pacific region.

2. Configured CTRM Software for Easier Upgrades

With standard CTRM solutions, you have to create custom branch or scripting outside of your core code
for unique business processes. Allegro Horizon gives you configurable software to match your unique
business processes, allowing you to conduct easier upgrades, so your processes move forward in the
core solution.

3. Built-in Best Practices from 280 Leading Customers

Standard CTRM solutions give you business flow determined by a small sampling of what those vendors
believe to be true. Allegro’s Horizon CTRM software is built on market-based business process best
practices, sourced from 280 of the biggest names in commodity management — right out of the box.

See what some of our customers who decided to move from a


homegrown system to Allegro have to say.
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Don’t Just Take Our Word for It


SEE WHAT SOME CUSTOMERS HAD TO SAY AFTER MOVING
FROM A HOMEGROWN SYSTEM TO ALLEGRO


With the legacy system we had prior to Allegro, we could not manage all our commodity
risk properly. We had probably 8 to 10 small applications around the core risk management
system, and it wasn’t sufficient..

— Manny Neupane, Senior Manager, ETRM Applications, at Capital Power

Mocoh Selects Allegro’s ETRM Software Solution

To support its tremendous growth, Mocoh required a best-of-breed CTRM software platform to replace its
homegrown commodity management solution. The company identified the need for an enterprise solution with
a component architecture that streamlines business processes, enables robust risk management, improves
operational control, and provides timely and accurate data for better decision support.


“We surveyed all the major solutions in the market, and Allegro’s proven industry track record,
software extensibility, and domain expertise made its solution the obvious choice for Mocoh’s
trading and risk management strategy.”

— Michael Hacking, CEO, Mocoh SA

Don’t wait. Find out how you can talk to a CTRM expert today.
The Next Generation of Commodity Management
Software and Advanced Analytics Is Waiting for You
We’re Ready to Change Your Business

Stop relying on spreadsheets, your own homegrown software, or outdated CTRM software for your commodity trading and risk
management. In a volatile, complex, and uncertain market, you need the global leader in commodity management software and
advanced analytics to help you control how your business grows. There’s simply too much at stake to leave to anyone else.

Contact Allegro Today

About Allegro Development Corp.

Allegro is the global leader in commodity management software and advanced analytics for companies that buy, sell, produce, or
consume commodities. For over 30 years, Allegro has delivered position visibility, risk management, comprehensive controls, regulatory
compliance, and analytics through a forward-compatible, next-generation architecture that empowers commodity organizations to
make data-driven decisions. Allegro’s proven CTRM software innovation and flexibility, coupled with a strong global network of industry
partners and industry-leading analytics, makes its solutions the best on the market for full commodity portfolio management.

ALLEGRO BY THE NUMBERS


Take a Look at Some of the Numbers We’re Proud of

30 YEARS IN BUSINESS

6 400
EMPLOYEES
CONTINENTS

7,000 280
CUSTOMERS
USERS

Headquartered in Dallas, Texas, Allegro has offices in Houston, Dubai, Jakarta, Singapore,
London, and Zurich. To learn more, visit Allegro’s website at www.allegrodev.com.