Stranded – When CTRM Buyers Get Left Behind
By Larry Hickey, FRM
AN AUSPICIOUS BEGINNING: It’s the Commodity Trading and Risk Management (CTRM) equivalent of a wedding. You’re live! If you’re like most, the trip to the altar took longer and cost more than you expected. But your shiny new system will indeed plug most of the holes that motivated the selection process. The unbridled optimism that followed the system selection has evolved during the implementation into a more sober understanding of the strengths and weaknesses of the new system, but a reservoir of goodwill and optimism remains ...
... Until It’s Gone Despite a promising start, the company’s
relationship with the CTRM vendor may ultimately founder for one or more reasons. By coming into the relationship with knowledge of four common pitfalls and lessons learned from prior implementations, the CTRM buyer may be able to mitigate the risks contractually. Call it a ‘pre-nup’ for CTRM buyers.
Change of Control The most obvious way a buyer can be
stranded is when the vendor simply goes out of business, as Vedaris did in 2004. Happily, this is a rare occurrence owing to the high value of an installed client base and the relatively low cost of maintaining existing software. Vendors seldom go out of business. They are typically bought by a larger vendor. If your vendor is taken over, there is reason
to be concerned. Usually, the company being acquired is small and focused on a single product – your system. The acquirer is probably bigger and managing a portfolio of several products. Yours may or may not be a top priority for the acquirer. In an extreme case, the problem might play
If this happens to you, take a close
look at the acquirer. Do they already have a product with a functional footprint similar to yours? If so, they will be under immediate pressure to reduce the cost of supporting disparate systems. The migration to a new product may be driven by the
CTRM Buyer
out this way. The acquirer promises to support your product and continues to collect annual maintenance fees, which can range
... the company’s relationship with the CTRM vendor may ultimately founder for one or more reasons
from 20-40% of the license fee. But the fees are diverted to fund the development of some new application, let’s call it ‘Ain’tItGreat!’, which may or may not be appropriate to your needs and may never be completed.
CTRM Vendor
acquirer’s needs, not yours. Plus there will likely be a turf battle between the groups to determine who will lead the blended unit. Notwithstanding high minded statements about technology and solutions, bet on the application associated with the politically stronger team to emerge the winner. Dick Couron is no stranger to change of control at CTRM firms, essentially
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