CTRM Selections – Getting Started

CTRM selections are the first step in defining software and supporting processes your company will utilize for years to come. It is important to take a step back and ensure that your team is prepared, and you are ready to start the search. 

In this article we will describe areas for you to consider, as well as questions to evaluate in the selection process of an CTRM. The intent is to help energy and commodity companies frame their internal conversations and begin preparations for the selection of potential vendor(s). Given that this is the beginning of a larger multi-step process of implementing, and ultimately supporting a critical business system, we must first set the foundation with a well-run selection. Below are some initial questions to consider before we review the steps of the selection process. 

Discussion Topics

1. Pre-Selection Questions
2. Include all Affected Departments Early
3. Determine the Minimum Requirements from an CTRM
4. Set Appropriate Internal Expectations
5. Evaluate Through an RFI/RFP Process
6. Engage Vendors Through Structured Demos
7. Keep the Vendor Accountable
8. Final Thoughts

Pre-Selection Questions

Do we need an CTRM? 

Before we dive into the selection, the first decision a company must make is if they need a system, be it a new or replacement system.  The answer in today’s age is almost always “Yes” that a system is needed, but for some start up or very small companies, spreadsheets may be sufficient especially if most of their activities are outsourced. For companies with an existing CTRM, replacements are generally being evaluated to be replaced for two reasons; the existing system is not meeting the current or future needs of the company, or the system is losing support from the vendor.

Keeping in mind that an CTRM system is generally a large, complex system addressing multiple functional areas and generally a key component of a companies set of processes it is important to select the correct system. As a result, the system selection process is very critical, and the appropriate resources should be allocated to it.

If a company decides that a system selection should be considered the following should be asked:

Am I ready for a system selection?

What this, and some follow up questions, should address is stopping companies from getting ahead of themselves in the selection process. Too many times we have seen the process stalled, time and money wasted on repeating steps and lost momentum because organizations have not prepared themselves to undertake the project. Some key questions to consider before starting the vendor engagement process are:

Do we have a budget for the implementation?

This one might go without saying, but its important to remember a selection is a project within itself, prior to moving onto the larger project of implementing the chosen system. Plan to budget for the selection itself, and not just as a part of the implementation. Generally, the licensing and implementation costs will be estimated early on, but be prepared to adjust them as the selection process unfolds.

Is their internal capacity from IT and the business users to undertake this project? 

A good system selection takes time and will require involvement from IT, and especially the functional areas within the company. Is there also someone who can function as project manager? Plan to allocate enough time from them to the project and determine how this will impact their day to day tasks and how to address that impact. 

Do we have inhouse technical and system selection and implementation knowledge?

Determine if there is broad expertise in CTRM systems and project management within the company to assist in the project. We have seen many cases where companies have selected a system that was not correct for their requirements due to not defining the correct requirements or asking the correct questions of the vendors.

Do we know what requirements and processes we need from the system and can we describe them?

For a selection to be successful the company needs to understand what they require from the system and be able to communicate the requirements to other project team members and vendors. Can you describe your business processes or have the workflows been outlined or documented? Although they may change based on the selected system, this knowledge early is key to structuring the conversation with vendors. 

Do we need outside assistance from a third party? 

If the answer any of the above three questions are no, then outside assistance should be used. The process of the selection of this individual or company is also very important. Ensure they have detailed experience in CTRMs and that they are not directly associated with a particular vendor.

Now that you have answered these questions, it’s time to move on to taking the steps for a successful selection process. Below you will find advice and considerations that we think will help.

Include all Affected Departments Early

Although these system selections are quite often driven by one major group (i.e. Risk Management, Finance, Front office) many departments are impacted by these systems. All stakeholders should be identified, and the affected groups should be actively involved in the selection process, requirements definition and system evaluation processes. Many groups will be affected by the implementation and their cooperation and effort will be required for a successful implementation and ongoing running of the CTRM. Two additional significant benefits may arise from early inclusion into the process; an additional insight into the requirements of those departments and secondly the potential benefits for those areas both in cost savings that can be applied to the project and increased controls that may exist (i.e. reduced copying of data, re-entering of data). The earlier the involvement of these groups the potential for more buy in to the system and the process of implementing it.

Key Takeaways

1. Create a team that has representation from all major groups
2. Ensure responsibilities and authority is communicated clearly
3. Set project goals as a team
4. Inclusion provides an opportunity to for groups to learn other functional areas

Determine the Minimum Requirements from an CTRM

Selecting and implementing a system is not a trivial matter and a company should determine the minimum requirements for a new CTRM. These are the absolute must haves and can be fairly high level at this point. This will be used to determine at the very least which systems do not meet the requirements and can be excluded early. This process should not determine the “how” it is done unless it is critical; different vendors may have different ways the objective can be achieved. In selecting the final solution compare the vendors capabilities against this initial minimum requirement list; surprisingly sometimes these are forgotten as other features are presented. One other important factor is to determine the minimum time frame you want to run the selected system. In some cases, especially for smaller companies that are starting up, it may be that the system is required for a short time frame and may affect the type of system required and amount of effort in the selection process.

Key Takeaways

1. Determine must have, should have, and could have requirements
2. Expect to change some of your business processes 
3. Remember that no system can cover every requirement out of the box

Set Appropriate Internal Expectations

Set appropriate expectations throughout the organization as to what an CTRM system can provide. These expectations should be discussed with the executive level, but also at the staff level in all the departments who will be using the system. There is an internal sales activity that generally has to happen to sell the system to various groups but it is important to not oversell the benefits and undersell the amount of work that will be required to implement a system. This only leads to a frustrated internal client group.

Key Takeaways

1. Be honest with team expectations
2. Ensure everyone is aware of what is taking place and when
3. Some groups will be resistant to change
4. Outline what a successful selection means for the company 

Evaluate Through an RFI/RFP Process

Many RFI/RFPs have a large checklist of functions that the vendor is required to respond to. Typically, they are asked to indicate if a feature is available in the system and if so, is the feature base functionality or a work around. If it is not available, the vendor is typically asked if it can be achieved by development or not supported at all. Many vendors, knowing that not checking boxes will lose them an opportunity to progress further in the selection process, will be very liberal in their definition of what the system supports. As a result, the answers to these questions should be used only as an indication of the capability of the systems.  ‘Truthful’ vendors can be penalized by this process if it removes them from the next steps.

Given the above, based on requirements that the CTRM is defined as achieving for the company, consider some detailed questions on the areas that are known to be troublesome for CTRM systems and are important to the company. The detailed questions should ask if the system handles the functionality and if so, how the system performs these functions. Some examples might be how inventory is valued in the system for valuation and position management, how complex physical pricing is captured and valued (i.e. tiered pricing, floor and ceiling pricing, netback pricing), how does unit of measure conversion work within the system including rounding rules that differ by contract, how is security implemented and at what level? The answers should assist in determining the capabilities, flexibility of the system and will be the base for more detailed questions that are asked in the demo process.

Key Takeaways

1. Do not assume functionality exists
2. Terminology differences between vendors can cause confusion
3. Start to identify areas that should be addressed in more detail
4. Keep track of answers to be discussed as part of the demo

Engage Vendors Through Structured Demos

Create detailed demo scripts that test the complex functions that the company requires. Demo scripts require a significant amount of work for both the company and the vendor and therefore scripts to determine the general look and feel type of functionality are less important. All vendors will have a preferred way of showing look and feel and general system functionality. In the demo make sure the scripts are run live and data is entered into the system during the demo (to the extent possible). Discourage the presentation of results in pre-set Excel or PowerPoint presentations; this generally means the vendor had to manipulate the process or data.

For most companies, a one-day demo is not sufficient to cover the details of the system. Details are very important and these take time. For moderate to complex functional requirements a minimum of 2 days will be required. In the demo, after the initial questions of “does the system do x” the other question for more complex functions that should be asked is “how does the system do x”. The most thorough demo that I was involved in was an onsite 4-day demo for each vendor at a U.S. power and gas utility that had at least 20 client participants for the majority of the demo sessions. By the end of the process they had a very good idea of the capabilities of each system and how the vendor products fit within their company requirements. A 4-day demo is overkill for most companies but does serve as an example of the amount of information that can be evaluated for these systems especially if the company has a portfolio including multiple commodities and complex physical transactions.

Include IT in the entire process but especially the demos and have sessions that relate to IT topics such as deployment technologies, security, etc. but also business-related IT issues like data access, ad hoc reporting capabilities, data audit and permissions.

Key Takeaways

1. Create a checklist to ensure your team knows what to be looking for ahead of time
2. Spend the time on the demo and plan for follow up sessions
3. Repeat important scenarios as needed
4. Ensure IT involvement 

Keep the Vendor Accountable

Throughout the selection process it is important to keep the vendor accountable. By this I mean that the vendor should be clear on what is available in the system, how the functionality is provided and just as importantly what is not available in the system. There are many cases where companies select a system and when implementing find out they were mistaken on what they thought they were getting. It should be made clear in the RFI/RFP that the vendor is committed to delivering everything they indicate is in the solution. Another suggestion is to record all demos and conversations that are related to functionality provided by the vendor. Lastly, many companies will provide a road map which will include the functionality that is requested but not currently available. Consider ways to tie the vendor to those commitments. This may involve some requirements definitions and cost estimates.

Key Takeaways

1. Inform the vendor that they are committed to all responses they give
2. Record all communication regarding requirements and vendor responses where possible
3. Ensure missing functionality is costed and attempt to fix those cost estimates

Final Thoughts

Preparing for, and ultimately proceeding with, a selection can help a company not only narrow down potential vendors but gather a better understanding of internal business processes and company goals. It’s important to spend this time upfront as understanding your requirements and team responsibilities will pay dividends in the implementation phase.

Quite often this process gives rise to the fact that not one, but rather multiple vendors should be chosen to proceed with a more detailed dive into their capabilities. This allows companies that have the time and budget to explore detailed gap analysis and costing, as well as proof of concept sessions or workshops  before proceeding to contracting. We will explore these phases in further detail in future articles. 

However, if you’ve determined an CTRM is right for your business, and you’ve selected a partner, the next steps are contracts, implementation and long-term support. We hope these topics help facilitate a conversation and put your company on the right track for a successful system selection. 

If you would like to discuss any of the topic areas further, please feel free to contact us at TruPoint Advisory.

Regards,

Andy Bout

Managing Partner | TruPoint Advisory      

“TruPoint Advisory provides experienced CTRM Selection, Implementation and Consultancy services across all energy markets”