'Commodity Markets Have Traditionally Been Poorly Served By IT Vendors'

In rare instances, one hears about IT players offering solutions for dealing in the commodity market. Manav Garg, CEO and founder, Eka Software Solutions, talks about his view on the various problems of and solutions for the commodity market.

In the commodity market, the fluctuations are many and unpredictable too, how do your products help companies tackle this?

First and foremost, our system allows firms to comprehensively and properly record their business transactions. This by itself is a major value addition given the complexity of the commodities market; there are hardly any software products available that properly cater to this requirement. You will be surprised by the number of companies that still rely on spreadsheets to manage their millions of dollars worth of transactions.

Once all the data is recorded properly, the next thing is visibility of the current state of the business. It is absolutely vital to have an accurate and up-to-date organisation-wide view of the business, without which decision making gets reduced to guess work. Our products process transactional data and convert it into meaningful information that allows users to better perform their business.

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For instance, without accurate knowledge of how much commodity exposure exists, hedging decisions by the risk manager or trader could go completely haywire. We have heard of numerous occasions when this has happened.

Getting on to the high levels of market fluctuation, the absence of real-time information on exposure is a huge risk that could lead of massive losses. We therefore, consolidate global positions of both physical and financial contracts in real time, so that hedging and other decisions can be taken accurately.

The third area is analytics and performance management. We have numerous tools that allow managers to analyse past performances, identify strategies that worked, and weed out inefficiencies. Net, what happens is that managers are freed from mundane and routine transactional activities, and are able to focus their attention to the market. This increased responsiveness is able to help them maximise opportunities while minimising risk.

Recession is the period where commodities gain the most because of their essential nature. How do your products help companies make better profit in such times?

That may not necessarily be true, as there could be cutbacks in consumption also. For instance, the global recession caused a construction slowdown that resulted in a sharp reduction in the demand for many base metals (copper, aluminum, etc). What is most challenging is the high degree of market volatility in the commodity markets, and it is in situations such as these where our products add value.

I’d mentioned above the most basic value-adds – control, visibility, manageability and analysis of information. In addition to these, the system provides numerous ‘cues’ that assist managers in going about their day-to-day business – simple ones such as daily reminders and alerts on pricing and operations information, and more complex ones around real-time visibility over price risk, market spreads, potential loss-making trades and positions, cost inefficiencies, foreign exchange exposure, documentation requirements, inventory management, counter-party exposure, VaR, etc.

Do you have a specialised ERP solution for the commodity market?

Commodity markets have traditionally been poorly served by IT vendors. Standard ERP packages just don’t have the capability to manage financial trades such as futures and options. And as such financial contracts are coupled so tightly with the physical side of the business, ERP packages are just not up to the mark. Eka is a specialised solution for the commodity market. It fully integrates all aspects of the business, both physical and financial. It includes modules on physical contracts, inventory, logistics, financial contracts, derivatives, forex, position management and P&L.

Your company is entering the energy sector. What are the thought points behind this move?

We believe we can deliver greater value than the existing vendors in the energy space. Moreover, there are cross linkages across commodity groups, and several of our customers in agriculture and metals have energy requirements. We would like to have a comprehensive offering that caters across the breadth of commodity markets.

What is unique about the products of Eka Software?

The unique aspect about our product is the holistic manner in which it looks at the client’s business. This is quite unlike other vendors, who provide incomplete solutions. For instance, most vendors are very poor in their ability to comprehensively capture and manage physical cargo movement, its associated risks and numerous accounting and financial implications. Our solution overcomes this and maps and reflects our customers’ complete business. Our technology set follows next, which is 100 percent Java-enabled, Web-based, SOA architecture oriented, n-tier, and Web 2.0 compatible.