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What will I Save by using Molecule?

We frequently get questions asking how our pricing model works, especially as compared to other vendors in the ETRM/CTRM industry. In answering the question "What will I Save?", we first need to understand the pricing model for legacy (or on-premise) software.

Legacy Systems

Typically, with on-premise (or even single-tenant cloud) software like an ETRM, pricing has three components:

  • Perpetual License Fee
  • Annual Maintenance
  • Services (i.e., installation)

For a mid-size ETRM/CTRM customer, let's say the license fee is $1m on a 4-year contract. This is the most negotiable part of the contract because 1) it's not where the real money is paid and 2) the underlying variable cost (what it costs to send you the software) is essentially $0.

The annual maintenance fee, however, is where the margin gets real. Annual maintenance is often 20% of the standard pre-negotiation license fee. So, $200k/year in this example. This is less negotiable because this money pays for the development team. We've also heard of this as "the money that pays for new features and bug fixes," which makes our sales team go crazy.

Services – now here's where the major cost lies. On a greenfield ETRM/CTRM implementation, services can start at several hundred thousand dollars. However, implementations typically go into the millions, or even tens of millions (not because they're budgeted that way, but because they quietly end up ballooning in scope and time). The cost is unbounded – and from what we've seen, services is typically 75% of the total cost to the customer of an ETRM/CTRM installation. (CTRMCenter has an article on this, here). This is the case for numerous good and bad reasons. But, from our perspective, the most important reason is that because of a time-and-expense billing schedule, vendors are not incentivized to keep billing for services low.

Molecule

Molecule is different. In general, users pay a single package price, plus applicable sales tax. That's it. The price includes implementation, "paying for new features," the license fee, etc.

We have a minor fee schedule for a handful of things like new users, custom reports, and re-configuration of the application – but most of our customers never pay any additional fees.

Package prices are calculated, on purpose, to be roughly equivalent to the 4-year amortized license fee + maintenance fees of another ETRM/CTRM. This takes into account that license fees are often heavily discounted for smaller customers – but the point is, we're not aiming for the lowest license fees in the industry.

What users just don't pay for with Molecule is implementation. We take on the risk of new implementations knowing that the payoff for our customers (and for us) is enormous. We are aggressive about bounding the total cost and time of the implementation – because we are incentivized to do so. We do things like:

  • Assigning an expert project manager on Day 1
  • Avoiding implementation-related travel, if at all possible
  • Figuring out what "success" means for the customer, and keeping laser-focused on that goal
  • Building tooling for our Customer Success (support & implementation) team, so that they can get their job done more quickly

This is how we create the most value. We believe that implementation costs, in Six Sigma terms, are waste (muda, mura, and/or muri). Our customers don't benefit from paying tons of money for implementation, and neither does our enterprise value.

Summary

Basically, our customers pay industry-standard software fees – but end up saving 75% of the total cost of an ETRM/CTRM because we don't charge for implementation.

Ion + Allegro = Clarity

Last week, Ion Trading announced the acquisition of Allegro. This puts nearly all of the $10m+ revenue, all-in-one CTRM/ETRM solutions under one roof. By my estimate, 60% of the market is now served by Ion products: OpenLink Endur, RightAngle, Triple Point CommodityXL, Aspect DSC, and now Allegro Horizon. Of the largest vendors, only Eka, Brady, and possibly FIS are left.

We're now on our 4th Ion acquisition (or dozenth, or more, if we look outside ETRM) -- and we have the playbook data to guess at the company's direction.

What does this mean for a customer getting into the market? A few things:

  • If you need an all-in-one, on-premise or hosted solution, and you absolutely must check all the boxes on an RFP, buy the solution that Ion prescribes.
  • If you only have one specific, focused need (for example, behind-the-citygate gas scheduling), one of the other 90+ legacy vendors will work.
  • However, if total cost of ownership, modern tech, and an innovative delivery model are more important than a huge feature list, look at the handful of larger new entrants (including us). We can fulfill the important parts of an ETRM/CTRM (like forward/option valuation, connections to exchanges, and VaR) and connect with other systems that specialize where we don’t (such as invoicing, GL, or another ETRM).

We’re thrilled to see all of the large, legacy vendors pulled under one roof. It makes the “us vs. them” story we’ve been telling since 2012 so much clearer. Molecule was founded because we believed ETRMs were way harder than they needed to be - from setup, to retirement, and every way in between. At every implementation we witnessed, customer employees were running around, busy and angry, every day, for months -- or even years.

We designed Molecule not to be that way. From the beginning, our goals have been: 1) easy-to-use, modern technology, 2) unparalleled service, and 3) no implementation fees.

So, over the next few weeks, to celebrate the consolidation of the ETRM/CTRM software products with which we've seen customers struggle, we’re running a new campaign called “Don't Fight.” It celebrates the new vs. the old, legacy software models vs. 21st-century ones, and, most importantly, the way enterprise software should be: frictionless.

Keep your eyes peeled for some "Don't Fight" fun from the Molecule marketing team!

Tackling ISOs and FTRs

From a development roadmap point of view, Molecule's decision to connect with ISOs and value FTRs was a bit of an outlier. We tend to have a solid understanding of what our customers want, and we use this insight to build features with wild-eyed speed and focused precision. ISO connectivity and valuing FTRs came about in a different fashion, however.

As Sameer, our CEO, and I sat in a room (OR at the table with eight execs representing one of the largest European utilities), the conversation unfolded in an unpredictable way. Deal capture and risk is our bread and butter, so we demonstrated how Molecule automates as much as possible. We believed we had nailed everything around what they could possibly need from a risk management platform, and we felt we had won the room. Our free implementation and implementation time frame (typically 90 days or less) was the icing on the cake. It was a great meeting.

Then someone asked about ISOs and FTRs. At the time, we did not have this feature. The challenge was laid out. Could we add that in the 90 day implementation for a deal to happen? As Sameer considered the industry's need for features around congestion, I held my breath. As you can surely guess, the answer came swiftly: yes.

Our in-house Development Team started banging out code before the ink could dry on the deal. Starting with SPP and PJM, we dived deep into valuing FTRs.

During the implementation process, Molecule aimed to provide support for FTRs, Virtuals, & day ahead power. The challenge landed on the lap of our SVP of Engineering, Paul Kaisharis. Speaking with Paul, he was quick to discuss the challenges around delivering our new solution: "understanding the domain terms and normalizing those terms as well as the implementation across the various ISOs." He was equally quick to discuss what he was most proud of: "creating a standard implementation that allows us to add support for a new ISO in just a few days."

Kyle McRoberts, a key member of our Customer Success team, chimed in as well, "I’d say the most challenging and rewarding part of the FTR implementation was simply the volume. Right now we have close to 7,000 paths available in Molecule, each with a peak and off peak product. The other challenge is that we simply don’t know when new paths are needed until the auction results are posted. We’ve got a process in place now to create new paths when needed (for example, over 500 today) mostly without the customer knowing they needed to be created."

Joe, our VP of Customer Success, was another integral piece in the FTR puzzle. He said, "the challenge: the large number of moving parts involved in this implementation and putting them all together working with multiple vendors as well as divisions within the client organization. What we are most proud of: implementing FTRs with a large number of paths with multiple ISOs for a big multinational company in a short period of time."

We are by no means a custom shop. Molecule builds modern deal capture and risk for everyone. Every customer benefits from our two-week release cycle with free updates and support. Paying for 'future code' is absurd to us. We love our customers. And we listen to them. We take their suggestions and look at the industry with the future of commodity trading in mind. Then we build kickass tech.

What's next? Physical scheduling. Stay tuned.

Top Questions Our Sales Team is Asked

Sometimes you want more information than what a company highlights on their website before requesting a demo and ending up in a marketing and sales funnel. We get it. We want to provide you with more details about Molecule and our platform so you feel good about sending in that demo request (which you can schedule easily right here)!

Here are common questions prospective customers ask our sales team:

TRADES SUPPORTED

Does Molecule support positions tradable on ICE and CME (e.g. lookback options, monthly options, etc.)?

We support pretty much everything on ICE, including lookbacks and monthly options. There has been nothing to date that we can’t support.

Molecule really shines with ICE, CME, on exchange trades, but I have off-exchange/ OTC trades. Can you handle these as well?

We can! Molecule has an awesome natural language processor that handles all OTC/ off-exchange trades in a simple interface. Just type in the search box the same way you would say the trade out loud, and hit enter. It books, position automatically updates, and VaR recalculates. It just works.

FTRs?

One of our favorites! Yes. Molecule connects to ISOs and provides position and settlements. Virtuals as well.

REPORTING

What kind of reports can you provide?

With every subscription, we have custom reports included in the package. We have a baked-in BI tool, and we work with you to set up interactive visual reports. These can be as complex as you want so that you can see the data you need – however you need to see data to make the best decisions.

How long will it take Molecule to calculate and finalize our end of day reporting? We have a specific time reports must be submitted. Can we specify a deadline in Molecule?

Molecule recalculates EOD with every new trade booked in near real time. It’s automatic, accurate, and almost like magic. Since it's ready whenever you want, there's no need to set a deadline.

What VaR models does Molecule run?

Monte Carlo and Delta Gamma.

Can we include our own asset models in the system?

Yes. The platform has an assets area where we can integrate pretty much anything. Some can be rather complex, but we haven’t run into something we can’t include yet. We enjoy working together to figure out each customer’s unique assets and how to integrate into Molecule in a smart way.

PLATFORM FUNCTIONALITY

Some of my team wants to stick with spreadsheets. Is that a problem?

No issue at all. Molecule’s API ties into your Excel sheets. This way you know everyone is on the same page and all information is automatic and accurate.

Can we view different traders’ activity from a management point of view?

There are a few ways you could set this up in Molecule. We can help you determine what best fits your worldview and implement in the right way.

Sometimes we want to roll out new trading strategies. Is there a way we can keep track of these?

Yes! Within Molecule you can set up tags for various strategies and view by tag.

IMPLEMENTATION

What are your implementation fees?

$0 - and that’s not a typo! We really charge $0 to get up and running with Molecule.

Really?

Yes. Really!

While on the subject of implementation… how long does your process take?

In most cases, 90 days or less.

SUPPORT & UPDATES

How do software updates work? I’m guessing there are additional fees?

We regularly (approximately every two weeks) push updates live for all of our customers. These costs are all included in our prices, so you don’t need to budget any extra for them… or wait years to see improvements.

Will we have to hire a consultant, developer, or budget for tickets?

We believe software should just work and have won customers on our awesome support team. If you need something, simply let us know. There are no additional costs, and most tickets we resolve in under an hour.

Molecule updates every two weeks? With such an aggressive release cycle, how do you all ensure a stable code environment?

We love this question! Let’s geek out. First, every code change is tested as part of a full automatic regression test, through our Continuous Integration suite. Then, we manually test every change. Next, we sanity-check the app by hand. Finally, we backtest a year’s worth of valuation data using our newest code, just to see if anything would have changed. Our biggest goal is no (bad) surprises. Our QA process is the most robust you’ll find in this space.

After all this, schedule your demo with us so we can answer your other questions.

Happy 2019!

This time last year, Molecule had just moved into a new office, and our team was preparing for what promised to be another big year of company growth. 2018 did not fail to deliver. We did not fail to deliver. It’s always great to look back at the plans you had for a year and see how well you did. Here’s what we expected from 2018.

So what actually happened?

When 2018 began, we had been serving exchange-trading customers for several years, with some exposure to bilateral markets. Our team in Houston consisted of a handful of developers and a small support/implementation team.

In January, Paul Kaisharis joined our team as SVP Software Engineering. We also welcomed new hires to our dev and sales teams. Molecule now has a team of 16 – developers, project managers, implementation & support analysts, team leads, and more – supporting trading in bilateral crude, gas, chemicals, and electricity markets. Our deal volume has risen significantly, as has the diversity of our user count.

Our development team has stayed busy with many software updates, 24 in total. Here’s an overview of our software update process. We use this to push updates live approximately every two weeks -- with more stringent QA testing than typically seen in the industry.

  • Connectivity to multiple ISOs for downloading a variety of products
  • Custom fields on trades
  • The ability to use an IR curve to mark options
  • The ability to batch generate reports/invoices/etc.
  • A new P&L feature, currently in Beta, for YTD/MTD/QTD leg-level P&Ls
  • APIs for uploading trades, additional filters, and more
  • Improvements for bilateral trading, such as better options support, strike interpolation, and VaR
  • Lots of new FCM reconciliation functionality, including supporting new banks, multi-bank reconciliation, and the ability to generate trades from a statement
  • Many performance improvements, such as our “fast lane” for exchange-trading customers, UI-related performance improvements, and chunking for large uploads.

The team (primarily Sameer and Dustin) attended several conferences. You may have spotted them at E-World (Germany), Platts Digital Commodities Summit (US), ComRisk (UK), ETOT (UK), or FIA (US). Sameer spoke at several of them, and the team led workshops at ComRisk and ETOT -- all focused on risk management and the cloud.

In Q4, we launched a new logo and website. If you follow Molecule on LinkedIn, you may have noticed the animated version of our logo. Please follow the Molecule LinkedIn page for industry news, company announcements, and tech tips.

Throughout our changes over the past year, we’ve remained committed to our core values. To that end, we were proud to have signed the Amicus Brief fighting against prejudicial immigration policy. This policy issue is a critical one to Molecule and our customers, because diversity is simply a given in our industry — and it’s core to what we believe about America, our home. We took a stand because it’s that important to us, and we hope to see a change for the better in the years to come.

We’ve gotten lots of great feedback on our product, and our roadmap, as well – and 2019 has lots more to come. We’ve had/are having many conversations with customers about our roadmap, but here are some highlights:

  • A specific focus on boiling down common issues/requests – and fixing small usability issues, system-wide. First up are the Trade entry process and the Trades screen.
  • Finishing our v2 API – which should allow for much faster, more granular interactions with Molecule.
  • Reworking our Confirms workflow. We’ve received lots of feedback on our v1 features, and now have a good sense of what would work well for most companies.
  • Clearer, more flexible decomposition of spreads & swaps, and less-noisy support for hourly power.
  • Continuing work on our physical logistics features.

With that, we wish you and yours a happy, safe, healthy, and wonderful 2019!

P.S. By the way, another awesome highlight is that three(!!!) of us got engaged in 2018.