At UtiliPoint, we tend to be evangelists for information technology.  Whether its information technology in energy trading, utilities, pipelines, or transmission companies, we understand the value and importance of selecting, implementing, and using the right software solution.  However, it can at times be difficult to quantify the impacts of making the wrong decisions where software is concerned.  Selecting the wrong product or not implementing it correctly does not usually result in catastrophic loss; rather the effects are more erosive.   Reduced productivity, increased overhead, lost revenue opportunity, and improperly sized hedges generally do not make headlines.  Every month, there are multiple players in the energy space that will quietly lose, or fail to make, a million dollars.  How?  They didn’t see an opportunity because their systems couldn’t communicate with each other, so, the Gulf Coast desk didn’t see a 12 month basis opportunity in the northeast; or because the scheduling group cannot effectively manage tariffs in their scheduling system, they can’t effectively reconcile invoices and therefore don’t notice that they are being overcharged by a pipeline on a firm contract and have been for 2 years; or the financial desk didn’t get a hedge right sized because they couldn’t get an accurate portfolio view of their physical position.  There’s a thousand ways to lose money in this business.  But, unless a company invites you in to do an audit, there is rarely an opportunity to create an accurate ROI case for selecting the right system and for implementing it correctly. 

The recent high profile catastrophic losses in energy trading companies, like that of Amaranth, cannot be blamed on systems.  Rather, most are a matter of very poor decision making.  Several years ago, there was a huge loss that was the result of “fat fingering” a deal, but it would be difficult to make the case that a different system would have solved that.  No, we are generally left to discuss, in somewhat anecdotal terms, the advantages of the right system and a proper implementation, stressing what could go wrong if they don’t do it, but rarely being able to make a financial case based on the company’s past performance.So, when a company losses $6.1 BILLION because they failed to manage their IT systems correctly, that is news!  And while it was not an energy company, it is still a great cautionary tale for any enterprise that relies on IT systems to conduct their business.  It happened at Airbus Industries, the champion of European industry.  Simply put, they failed to ensure that their software was in sync between factories, leading one factory to produce wiring harnesses that were too short.  This lead to cascading failures in the production line, causing the assembly of their flagship product, the giant A380 airplane, to come to screeching halt.  All told, the decision not to force an upgrade to their design software across all their factories, has cost Airbus $6.1 BILLION and has delayed the introduction of their crown jewel aircraft by two years.  Now that’s an ROI argument that I could do something with.