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<p align="left"><font face="Arial"><strong><small>About The Author:</small></strong></font></p>
<font size="3"><p align="left"></font><font size="2">Jeffrey Frost, a PMTC Senior Partner,
has years of experience as a banking treasury executive, trading room technology
innovator, and Internet electronic commerce pioneer. </font></p>
<p align="left"><font size="2">While Jeffrey's prior executive and entrepreneurial roles
have demanded numerous skills, much of his career has revolved around one simple theme:
The use of new computing technologies applied to existing information to create profitable
new business alternatives. </font></p>
<p align="left"><font size="2"><a href="http://www.pmtcweb.com/" target="_blank">The Power
Marketing Technology Consortium</a> is an IT and electronic commerce power marketing
consulting organization which integrates and supports technologies related to energy
trading and marketing.</font></p>
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<td width="75%" valign="top"><img src="..\images/techcor2.gif" alt="Technology Corner" align="top" border="0"><p><b><u>April 1998</u><br>
</b><font size="6"><strong>POWER MARKETING SOFTWARE SURVEY REVEALS LOW ADOPTION RATES</strong></font></p>
<p><strong>by Jeffrey Frost -- Power Marketing Technology Consortium<br>
</strong><font face="Arial" size="2">(<em>originally published by PMA OnLine Magazine:
04/98</em>)</font></p>
<blockquote>
<p><em><a href="http://www.pmtcweb.com/" target="_blank">The Power Marketing Technology
Consortium</a> (PMTC) is pleased to join PMA’s list of regular contributors to the
PMA ONLINE Magazine. In this space, we will be discussing the enabling software
applications required to support today’s power marketing organizations. Your feedback
is always welcome (<a href="mailto:[email protected]">[email protected]</a>).</em></p>
</blockquote>
<p>From August through December, PMTC conducted a software survey among power marketers.
To generate responses three channels were employed, using the same questionnaire for all
three: surface mail, email, Web form. Over 25 useful responses were received.</p>
<p>The most startling finding overall is the surprisingly low adoption rate by power
marketers of the latest third party applications. Exactly what kinds of applications?</p>
<p>The survey generated data about four major classes of power marketing applications:<ul>
<li>Risk Management and Trade Processing Suites (RMTP)</li>
<li>Market Data Services (news and prices) and Market Data Distribution Systems</li>
<li>Transmission & Distribution Support (Automating OASIS and ISO Interfaces)</li>
<li>Electronic Commerce Applications</li>
</ul>
<p><strong>Risk Management and Trade Processing Suites (RMTP)</strong></p>
<p>RMTP Suites, defined here as encompassing four core elements: Sales Force Automation
(front office), Analysis/Decision Support(front office), Transaction Processing (back
office), Risk Management (middle office) are the single most critical element in a Power
Marketer’s applications suite. See Developing A Power Marketer’s Mission
Critical Applications (www.pmtcweb.com/mca.htm) for a full discussion.</p>
<p>Given the central role of transaction processing and risk management and given their
inherent complexity, the low rate of adoption of third party solutions was surprising.
Approximately half of the respondents were operating on home-built systems. Most such
home-built applications, according to respondents, are generally of limited scope and
sophistication.</p>
<p>Among the forty plus application vendors in the RMTP space, over half did not receive a
single mention. Further, not a single vendor had as much as a 10% market share among
respondents. In other words, today even the market leaders appear to have a limited number
of installations and a limited market share.</p>
<p>Is lack of the latest tools all that big of a deal? At least two external data sources
lead one to conclude that "Yes This Is A Very Big Deal". Douglas-Westwood
Associates conducted in-depth interviews with sixty energy traders. They found that 47% of
a trader’s time is spent dealing with information (collecting it, analyzing it,
sharing it, using it). Two-thirds of the traders wanted more and better information in
order to do their jobs better. Good Risk Management and Trade Processing (RMTP) suites
deal with this problem.</p>
<p>Studies in the mid 1990’s in the capital markets arena found a number of reasons
for unexpected losses suffered by large sophisticated financial houses. Among those
reasons were model and/or assumption problems, improper hedging techniques, input error in
model, model algorithm errors, model programming errors, and systems failure. Good RMTP
systems provide safety vis-�-vis these problems. Yes the relatively low adoption rates
found is a big deal when both trader effectiveness and institutional risk are negatively
impacted.</p>
<p><strong>Market Data Services (news and prices) and Market Data Distribution Systems</strong></p>
<p>Use of real time news and pricing data feeds was almost universal. Major vendors such
as Bloomberg, Dow Jones/Telerate (now Bridge Data owned), Knight Ridder/Bridge and
Reuters, plus a few secondary sources, are clearly indispensable.</p>
<p><strong>Transmission & Distribution Support (Automating OASIS and ISO Interfaces)</strong></p>
<p>ISO interfaces are still in development in most cases, so not much surfaces around this
topic. In the OASIS interface software market, about one-third of our respondents are
engaging third party interface software instead of just going directly to OASIS sites. No
vendor appears to have an overwhelming market share at this time, though ABB and Power
Navigator were mentioned slightly more than any others.</p>
<p><strong>Electronic Commerce Applications</strong></p>
<p>There is as expected widespread use of Intranet and Internet Web Sites. Also as
expected, Microsoft and Netscape are the vendors of choice. Unfortunately the data does
not really reveal how these sites are being utilized. Based, however, on visiting a number
of sites, it is obvious that this too is an area where the potential has not yet been
tapped by most energy marketing participants. Of course there are a number of specialty
endeavors which are being highly publicized. For example, there are several Internet based
energy markets, also known as "electronic exchanges", both wholesale and retail.
A future column will examine some aspects of these electronic exchanges.</p>
<p><strong>User Satisfaction</strong></p>
<p>The PMTC survey did generate user satisfaction data. In view of the fact that very few
application vendors had a significant number of respondent users, the satisfaction data is
not being published in order to avoid unfairly drawing statistically indefensible
conclusions. More importantly, it is important not to inadvertently identify the survey
respondents (some newer vendors only have a couple of customers altogether). Even though
respondents did reveal some apparent user satisfaction differentials between vendors, the
data is regretfully being held confidential.</p>
<p><strong>Conclusions, Questions, and Reader Feedback</strong></p>
<p>Even after allowing for an Information Technology insider’s bias toward
technologically advanced solutions, the average applications profile reflected by
respondents was surprising. We pose the question to you readers. Why has the power
marketing marketplace moved so slowly to prepare itself for the deregulated future? Here
is a list of possible answers. Which of these or other reasons would explain the findings
in your opinion? ([email protected])</p>
<p><strong>Speculative Explanations:</strong><ol>
<li>for most of the market deregulation is still a long way off; </li>
<li>third party software has been examined and found wanting; </li>
<li>most power marketers are not doing much business; </li>
<li>most power marketers do not yet use derivatives nor employ complicated contracts; </li>
<li>lethargy and inertia; </li>
<li>perceiving systems investments as costs/expenses rather than as a source of back office
cost reduction and front office profit enhancement.</li>
</ol>
<p> </p>
<blockquote>
<p><em><strong>Disclaimer</strong></em></p>
<blockquote>
<p><a href="http://www.pmtcweb.com/" target="_blank">The Power Marketing Technology
Consortium</a> (PMTC) consults on applications, but has none of its own. Nor does PMTC
have any financial interest in the recommendations it makes to its clients regarding
particular vendors. PMTC funded and performed this research solely as a means to better
serve its target market.</p>
</blockquote>
</blockquote>
<hr color="#FFFF00">
<blockquote>
<font size="3"><p>Jeffrey Frost, a PMTC Senior Partner, has years of experience as a
banking treasury executive, trading room technology innovator, and Internet electronic
commerce pioneer. While Jeffrey's prior executive and entrepreneurial roles have demanded
numerous skills, much of his career has revolved around one simple theme: The use of new
computing technologies applied to existing information to create profitable new business
alternatives. </font></p>
<p><a href="http://www.pmtcweb.com/" target="_blank">The Power Marketing Technology
Consortium</a> is an IT and electronic commerce power marketing consulting organization
which integrates and supports technologies related to energy trading and marketing.</p>
<p align="left">Jeffrey C. Frost may be contacted at (802) 864-9903; e-mail: <a href="mailto:[email protected]">[email protected]</a></p>
</blockquote>
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