Managing the Risk of ETRM Implementations by Patrick Reames

Last month UtiliPoint completed a “snapshot” survey of companies which had recently completed ETRM implementation projects. One of the more startling results from that survey was the fact that more than a quarter of the 35 respondents said that their projects were not successful. Given that the average cost of an ETRM implementation project (according to the survey and UtiliPoint's prior research) is more than TWO times the cost of the license, the cost of an implementation failure can easily exceed several million dollars.

So, what can be done to ameliorate the risks and help ensure that your project does not become one of the failures? As anyone with experience in implementing large scale projects of this nature can tell you, there are many established “rules of the road”—put your best, most knowledgeable people on the project; create and execute against a comprehensive plan; ensure that senior management is onboard and involved; ensure that the vendor is dedicating quality resources to your project; and utilize professional project management techniques and methodologies. These are but a few of the elements that are necessary to make a large scale project successful.

However, the realities of running a business can and generally will conflict with many of these rules. Can you afford to dedicate your very best people to the project, removing them from their day to day responsibilities? Can you convince your executive staff to provide the dollars and resources necessary and ensure that whatever process changes are required are made and enforced? Can you exert enough influence on your vendor to ensure their best resources are dedicated to the project? Do you have the necessary project management skills in-house to guide the project to success? Ultimately, all projects involve some compromise in terms of balancing the ideal vs. the practical reality of limited resources.

We wanted to find what single element, more than any other, should never be compromised—the element that may ultimately determine whether your ETRM implementation project is successful or not. So, we asked many of the industry's leading authorities, those people who are responsible for delivering successful ETRM implementation projects—the system and services providers - a group of individuals that brings with them the experience of hundreds of ETRM projects.

So, the question was asked…

“Acknowledging the fact that every customer is unique in terms of resources, assets and business process—what, more than any other, is the most important element in ensuring success for an ETRM implementation project?”
Austin Morris, Managing Partner—Energy, SunGard Consulting Services: “I would have to say it would be having senior management support and ongoing, active involvement throughout the entire project. This includes post-implementation. One of the quickest ways to have an ETRM system fail after implementation is to have the users go back to previous processes and not successfully continue to use the ETRM system. These projects can be hard on the user community and without the senior management support the projects will have a low probability of long-term success. In addition, confirm that upper management has clear expectations about the length, resource commitments, and costs of the project, and they confirm they understand and agree with the benefits to be expected from the system. This will help ensure their support throughout the entire effort.”

Ian Clarke, Senior Manager, The Structure Group: “The selection and implementation of an ETRM system requires an organizations' solid commitment, from senior management, to traders and analysts. Engendering a sense of ownership at all levels provides a strong foundation that contributes to the project's success. Above all, the right resources need to be available at the right times to minimize delays and to ensure that the right functionality is put in place. For example, business users should not only be actively involved in the requirements-definition phase, but also during demonstrations and system testing; after all, they will be the primary users of the system. They should be apprised of implementation progress to minimize surprises and avoid scope creep. External resources also play a vital role because their experience in previous ETRM projects helps identify and mitigate areas of risk and enables them to manage expectations, which often run high with both the client, who wants to get as much as possible, and the vendor, who strives to please the client, yet runs the risk of over-promising.”

Claudine Trottman, Manager—Risk Solutions, RiskAdvisory (A Division of SAS) : “The success of an ETRM implementation is heavily correlated to the amount of time that knowledgeable resources - from both the customer and vendor organizations—dedicate to training, establishing best practices, defining roles, compiling data and identifying custom requirements. Without dedicated resources, organizations may shorten the necessary implementation phases in order to accommodate the “go-live” date, leading to a scramble by the time the production roll-out date approaches. The consequences can be painful. Months of process overhauls and data-cleanup efforts may ensue. Having dedicated and experienced resources on hand during the entire length of the project—and especially from the beginning—will ensure that the ETRM system's integration into the company's overall strategy is successful, efficient and complete.”

Alan Somerville, VP Operations, EMEA, Global Energy Decisions:
“…The most important success factor is a solid project approach; if a project is not executed professionally by dedicated staff, against a well defined and practical plan then the possibility of success is significantly reduced. Project scope is a significant factor to get right from day one; the more complex or demanding the requirements, the more complex and risky the implementation. Many implementations fail due to extended requirements which do little to provide improved business benefits and do not justify the time, money or risks of including them in scope. Selection of a vendor who can work effectively with a company is important to get right up front. Evidence proves that executing a successful ETRM implementation project is as much about effective project management, rigor of approach and processes as it is about functionality and scope.”

Mike Burger, Managing Director, Business Consulting, MRE Consulting: “ETRM projects are complex and unique, and they do not have only one key to success. I believe they require four critical ingredients, with the most important being experienced, commercial representatives participating on the project (not new employees or "part-time" resources). Additionally, software selection should be unbiased and scored against fully documented requirements; the system's vendor must provide adequate support and be committed to the project's success, particularly if significant customization is required; and a comprehensive project management methodology should be employed, with particular attention to change management. It is possible for a project to succeed without all four components, e.g. by relying on particularly strong business or technical resources. However, projects which do not address these areas have greater risk of delay or failure.”

Don Jefferis, Managing Director—Northeast Markets, Energy Consulting Practice, Sirius Solutions LLLP: “A passionate, visionary and empowered executive champion. ETRM systems implementations are challenging in the best of times—and only become more so as energy trading companies continue to expand product coverage, commodities coverage and geographic reach. As much as each company strives to select or design its 'perfect' ETRM system, commercially-driven requirements change, internal business processes evolve, and the challenges of the ETRM course selected all work in concert to challenge every system implementation. No substitute exists to protect a project's success like an empowered executive champion with a balanced, seasoned blend of both business and IT perspectives who possesses the authority and organizational following to hold cross-functional groups accountable for 'on plan' delivery. The ability to stay on the plan—calling the shots when able, mediating when appropriate, and casting the tie-breaker when necessary—all contribute greatly to success.”

Mack Miller, Vice President of Energy Services, North America, OpenLink: “Apart from the obvious answer of selecting the right ETRM software solution, the clients of our most successful projects share one commonality—intelligent, resourceful, and highly-engaged Executive Leadership from the conception to the adoption of the new solution. Successful and competent Executive Leadership Teams clearly establish and communicate the mission and objectives of the ETRM implementation, select the most qualified employees for the team, offer them results-based financial incentives, and actively monitor the project milestones. Accomplished Executive Leadership Teams control their own destiny by being careful to avoid outsourcing chain of command and decision-making roles to external entities. Instead, they cast them into supporting roles for the project, as these temporary entities do not own or live with the final solution.”

Brad Hamlin, Vice President, Client Operations for Americas, Triple Point Technology: “A crucial factor in a successful ETRM implementation is the active participation and support of the client's management. Building on a positive foundation set by supportive client leadership, proactive and regular communication is absolutely critical throughout the implementation process. Clear agreement on what defines project success within the targeted project timeline, when combined with the proper allocation of client and vendor resources from all the relevant business areas, makes for a winning ETRM implementation. Using this strategy, Triple Point has executed several successful implementations of large institutions that have taken less than four months from contract signing to full production.”

Dave Stangler and Manuel Santos, Directors of ETRM Solutions, Open Access Technology International, Inc. (OATI): “OATI has found that the most important factor for a successful project is ownership of the project jointly by OATI and the Customer from the top to the bottom of their respective organizations. This includes full participation and commitment to the project by the Customer in all impacted areas of the business. This ownership lends itself to cooperation, mutual understanding, customer pride, and ultimately a Customer whose needs have been met.”

Scott Roltsch, Vice President—Services, Allegro: “Most common factors that limit success are the state of the data being entered into the system and the readiness of the people to embrace the new system. If you have the best software in the world but load existing data from several disparate systems without cleansing, you will likely have many duplicated master records such as counterparties, trades, locations and the like. When the users try to use it all, they will be very frustrated at the system's inability to present the correct information. Similarly, if the users of a new system are not prepared to use it, if they don't have the desire, or understand the benefits to them and the company, it will not be utilized correctly. In either situation although the software performs exactly as it should, without data or behavior correction, the system will ultimately be viewed as a failure. Even with after the fact fixes it will never be seen as a huge success.”

John England, Managing Partner—Global Energy Markets, Deloitte & Touche LLP: “Successful implementations are not the product of any one factor, but require a combination of several key elements. If I had to pick the most important one, it would be involvement from the client, from executives to users, in all phases of the project. A strong mandate from executives is essential for broad adoption and to effect changes in the organization, such as reducing reliance on manual and spreadsheet driven processes. Lack of user involvement will increase the risk of key functionality being omitted, and will result in key decisions being pushed to the parallel test phase, potentially causing implementation delays. I would also note the importance of a comprehensive plan that includes focus on parallel testing and business process, areas that are frequently under-scoped.”

Masud Haq, Vice President, Sapient Corporation: “Most ETRM implementations pave the cow path by automating existing processes. Doing so on budget with incremental ROI is often declared a success. Our teams' mindset is to achieve breakthrough business results by innovating with our clients. To do this we define the desired business value with our clients, and create a detailed blueprint of the desired future state—the innovation needs to happen here. Beyond that, you need a strong team with relevant business and technology knowledge who can identify and prioritize the gaps in detail between the blueprint and the ETRM package(s), create the right plan, and execute with world class precision. ETRM implementations can fail even before the technical design—clients often find out in the testing phase or later.”

Alex Penner, VP of Services Europe, SunGard Energy Solutions: “Many factors contribute to the successful implementation of ETRM solutions, but success hinges on the delivery of business value to the economic buyers and business users. This requires upfront work on business test cases, commitment to in-depth training, and internal champions within the user group. We bring to implementations strong project management methodologies and certified project leaders with both domain and product expertise. These factors are necessary to success, but not sufficient. Senior business leader endorsement and involvement throughout the project is the most critical success factor helping to ensure the availability of the appropriate resources, the close collaboration of the IT team and the user community, and a focus on adding business value. The business will be the ultimate judge of success and this makes senior business leadership commitment the most critical success factor.”

Clearly, based upon these responses, no organization should undertake the implementation of an ETRM system without ensuring the organization, top to bottom, is properly aligned to, and supportive of, project scope and goals. Active executive involvement is clearly a key. The organization's leadership must unambiguously support the project and actively encourage the participation of all stakeholders in the process. It falls upon them to ensure key personnel are properly incentivized to not only participate, but to own both the project and its result. Executive management must lead this process, not merely react to issues that may arise. They should be in front of the project, proactively eliminating internal barriers and quickly resolving conflicts.

Regardless of your organization's size, if you have made the commitment to deploy a new ETRM system, you have, by extension, made the decision to risk large amounts of your company's resources—personnel, dollars, time, and opportunity. If successful, you will realize the benefit of having a system that will add real value to your business in terms of better decision making, improved efficiency, regulatory compliance, improved record keeping, etc. If unsuccessful, not only will you not realize these benefits, but you will have lost time, money, opportunity and quite possibly, the willingness of your organization to try again.