Quantified : ETRM Designed for Natural Gas
Previously, I wrote about the chronic application of ETRM systems within natural gas companies and how convinced buyers can become that an ETRM system will serve all their needs when, in fact, ETRM functionality lacks many crucial operational capabilities. I described how traditional multi-commodity ETRM products require significant customization to serve the business requirements of natural gas Distributors, Marketers, Pipelines, Producers, and Utilities and entirely lack retail natural gas functionality.
After posting, I received feedback from several readers. Existing ETRM users reported personal experiences that echoed my own, supplying additional examples of the downside to attempting to customize an ETRM system to handle natural gas business requirements. Others asked me to be more specific and quantify the impact businesses have felt after acquiring an ETRM product, realizing its limitations and then trying to transform their acquisition into the product they required and expected it to be. It turns out there are plenty of examples of companies whose ETRM implementations have failed to meet expectations, let alone resemble “the demo”, and the bigger challenge is not quantifying one, but rather selecting one from the many to highlight.
Here is one that is hard to forget … a medium-sized company in the business of both natural gas and power – tens of thousands of users, including residential and C&I, spanning multiple states. Being a multi-commodity business, this company naturally looked to an ETRM solution to address its requirements. And, in its case, it discovered one that, at the time, was promoting “retail business functionality” as well. In the COO’s words, “We thought we were all set with everything we needed until implementation started to reveal considerable customizations necessary to yield the functionality we thought we saw in the demo. We spent close to $2M on the software and the initial implementation statement of work weighed in at about the same cost. It was about halfway through implementation when cracks began to appear. We were being asked, “How do you want us to handle this and how do you want us to handle that?” We weren’t and still aren’t ETRM experts, so we asked for recommendations and alternatives. All that was provided equated to extensive custom development effort and a prolonged implementation timeline. Suddenly, our ~6-month implementation was more than double, and a raft of change orders followed suit, ballooning our costs.”
Fast forward 2 ½ years and the customizations finally stopped, not because they were completed, but rather because company leadership saw no end in sight and insufficient value being delivered to the business, resulting in executive intervention that put an end to further custom development and associated costs. So, where are they now? After almost $5M in sunk cost, their business team reverted to using spreadsheets. Annual maintenance on the unfinished implementation is ~$375k, just for software maintenance, excluding additional customization work. So, you can see, the numbers can add up rather quickly and painfully without ever yielding a return on investment.
You may ask, how do companies get themselves into these jams? Several factors come into play, including, 1) following in the footsteps of ETRM acquisitions others have made, 2) trusting an inexperienced consultant’s recommendation and/or 3) not having in-house resources with experience using, evaluating, selecting, and implementing an ETRM system. This last one is a biggie and a leading contributor to the number of change orders and corresponding additional costs incurred.
The good news for companies requiring a “rescue plan” and for others who have thus far avoided the multi-commodity ETRM experience is that a purpose-built, fully integrated retail and wholesale natural gas operations software solution exists! Its capabilities are off-the-shelf, offering fully integrated natural gas functionality, eliminating the time, cost and risk of ETRM software customizations. It’s not classified as an ETRM product, so won’t get it from any of the ETRM vendors. Its functionality spans all day-to-day business operations from the wellhead to the pipeline to the city gate to the meter. It houses all retail and wholesale operations data in one central repository, simultaneously accessible for all business users via a standard user interface and has been in production for 25+ years – it’s called nGenue.
Engage us, and we’ll show you how to make a breakthrough. It’s what we do for natural gas companies, and we are experts in our field.
~ Ken
