EKA Software - The Risk Mitigators
Date: Monday , February 02, 2009
A young trader back in the nineties was working at the 'coffee desk' with a leading commodity trading house in South East Asia. He worked with big names in the industry like Nestle, P&G, Lavazza to name a few. During his stint there he realized that the biggest of commodity houses still used obsolete IT systems to run the business, and there were far too many loopholes in their internal processes. Then came the vision to provide a comprehensive Commodity Trade and Risk Management (CTRM) software product that would streamline and strengthen operations, provide organization-wide visibility and decision support tools for top management.
Identifying the need in the market and with a little knowledge of software development, Manav Garg, decided to quit his job in 2001 to start a company - Eka Software Solutions. Today Eka Software is a leading provider of commodity trade and risk management software for managing physical trading, position, P&L, risk, logistics and finance operations for agriculture and metals markets.
Commodity markets are known for their complexity, and the high degree of risk and uncertainty that surround them. Buyers, traders and producers of commodities have to deal with complicated supply chains that involve complex contracts, pricing structures and financial derivative instruments. Added to this there is a tremendous amount of price and demand/supply volatility, along with the challenges associated with multiple-time zones, currencies and modes of transportation, languages, taxation, local laws, as well as stringent government regulations and compliance requirements.
To manage these complexities and associated risks, commodity firms must have the ability to view and manage positions and exposure on a real-time basis. In this scenario, it is mission critical for organization-wide information to be processed, analyzed and made available in real-time. Needless to say, the right IT systems can provide substantial differentiation and competitive advantage to firms that deploy them. The ongoing turmoil in the global financial markets and continuing uncertainty are putting even higher pressure on firms and thereby accentuating this need.
Eka – an integrated enterprise product
Here’s where Eka Software comes into picture. “What is required is a robust, specialist commodity trading and risk management system to handle all this. It is not enough to have risk management solely covering trading. Operational, regulatory, and counter party risks must all be managed on a common platform,” elaborates Manav Garg, CEO.
“Given the interrelated and complex nature of the market, calculating exposure now requires a highly specialized and sophisticated product, showing aggregated risk on a real-time basis,” continues Garg, who believes that without such a product it’s impossible to carry out business efficiently.
When the scale of operations is global and the volume of trade is high, every risk is magnified. “This has resulted in the need for solutions that have built-in checks and balances for minimizing risks,” he adds.
“Our product helps organizations integrate their trading of both “physical and futures” operations on a single platform, and helps traders and risk managers manage their business by identifying costs and exposures in real time,” adds Garg. The product also integrates with various systems including live feeds, ERPs, financial and accounting systems to provide a seamless flow of information throughout the organization.
And opportunity knocked…
In 2001, Manav realized the opportunity and the need in the market for robust software to handle the nuances of the commodities market. He traveled extensively to understand the needs of the global customer. “Too many organizations rely on outdated systems they started out with, long after the point when they should have been phased out. Many still rely on spreadsheets - they look at the familiarity, flexibility and reporting capacity that individual users like, but fail to realize that what works for one trader will almost certainly not work for a team of five, ten or more. This is because spreadsheets tend to be private tools that are never synchronized across the organization” says Garg. They tend to fall apart when used as an enterprise tool because they are neither designed nor developed with the rigor of application development. The resultant material losses can be significant.
Many organizations have also deployed ERP modules from the financial and manufacturing perspective, but these do not have the capability to negotiate financial fluctuations.
“I strongly believe that IT is an enabler in every field. The market needed a combination of physical and financial software that could handle these more effectively. I wanted to harness the power of technology to ease these pain points and solve the problems of those engaged in the trading of commodities,” recalls Garg.
One man’s vision…
With the vision of building and selling a robust commodity-trading product, Garg eventually quit his job in 2001 and launched his own firm, Eka Software Solutions, in the same year. He traveled almost 20 days a month to present his new product to prospective clients across Europe, Asia and the U.S. Garg personally visited over 60 companies at that point in time, which gave him a fair idea of what clients really needed. However, remembers Garg, “Convincing overseas clients that an Indian company could deliver world-class software and getting the Indian workforce initiated into a product mindset rather than a service mindset were real challenges.”
What is intriguing is that he had very little exposure to software development, and had to rely on his core knowledge of the commodities market on how to sell and to whom. This electrical engineer turned commodity trader and a graduate from the Indian Institute of Foreign Trade (IIFT) always believed in taking calculated risks. Turning entrepreneur was one of those risks. “When I quit my job all I knew was what a customer wanted and how I could deliver it to them,” recalls Garg.
After visiting prospective clients and engaging them, his challenge was building the product to enable the concept. Since the challenges in creating a disruptive technology solution from scratch are manifold, Garg outsourced the development of Eka’s Commodity Trade and Risk Management (CTRM) product to Bangalore based Trigyn Technologies. This allowed him to concentrate more on understanding customers and growing the business.
With time, Garg felt the need to build his own technology development team, and Eka started its full-fledged operations in 2004. Since then, there’s been no looking back for Eka, which has a team of nearly 200, with more than 150 specialists across domain consulting, product engineering, QA and support. Today, Eka has a client base across Europe, the U.S and Asia. And the growth story continues!
“Our initial strategy was to focus on mid-sized companies, and as we progressively made the solution more sophisticated, we have taken the product to larger companies. When we spoke with mid-sized companies, we saw that cost and revenue were driving factors. For larger companies, on the other hand, visibility and controls were as important as costs and revenue. Moreover, larger clients look at multi-commodity functionality, which technologically is quite challenging, since different commodity groups have different requirements,” says Garg. Eka therefore has made considerable R&D spends over the last few years to systematically upgrade the product in terms of functionality, design and technology.
“The team behind Eka comes from a trading background. Therefore we fully understand what commodity organizations go through on a daily basis. And above, we all inherently understand how important it is to manage positions and risks in today’s volatile economic scenario.”
“At Eka, we’ve also understand the need for cost-effectiveness of every application delivered. This is reflected in our Global Delivery Model that ensures high client satisfaction and lower total cost of ownerships,”Garg adds.
From a technology standpoint, Eka has a multi-tiered architecture comprising of a front-end user interface layer, a middle layer of business logic, a back-end persistent (database) layer, and an embedded reporting tool. The selection of technologies was made to ensure that Eka delivered on key parameters such as solution flexibility, scalability, performance and security.
“The Web-based application interface enables a single-server deployment, with all office locations connected over the Internet, intranet or network,” states Garg. This ensures that information on contracts, cargo statuses, hedges, P&L, position, stocks, invoicing, receivables, is always updated and available in real-time across the organization, without the need for any additional tools. Along with the thin-client nature of the application, this significantly reduces the cost of hardware, deployment and maintenance over the immediate and long term”.
Taste of Success
Eka’s first customer in agriculture was a large European softs commodity trader. The client had struggled with an earlier vendor, and with operations across Europe, US and Asia, needed a global solution that would and needed to address their business requirements, and be a platform for their future growth. “We worked very closely with them in defining their current and future needs. We formed a very close partnership approach and that laid the necessary foundations for a successful implementation. The engagement included data migration, integration with their accounting packages, product customization and several reporting and analytical tools designed to provide answers on position, P&L and operations,” explains Garg.
As the client base on the agriculture side grew, Eka’s next step was to extend the product for the Metals market. This was done ground-up, taking inputs from each segment of the metals supply chain. The product manages the complete lifecycle of physical and derivative trading for all LME and Comex traded metals (Aluminum, Alloy, Copper, Zinc, Lead, Nickel and Tin). It also handles trading and distribution of various types of ferroalloys (ferrochrome, ferrosilicon, ferromanganese) and scrap products.
“Today, Eka is fully integrated software that caters to the agriculture and metals markets. It completely streamlines all operations for commodity firms - from contracts to shipment, finance, risk management and reporting. A single-input philosophy, combined with automatic document handling and real-time reporting, ensure maximum efficiency and greater profit,” explains Garg.
Eka’s products control the flow and management of data across different desks, office locations and profit centers. “In other words, senior management can get a global perspective of the entire business across commodities, whereas line managers can have selective access relevant to their operations,” clarifies Garg.
Garg summarizes the journey as being fulfilling. Creating a world-class enterprise product was not easy and came with its fair share of challenges – creating a vision and business plan, convincing investors, hiring a technical and operations team with a common “product mindset”, convincing global customers to consider a software product made in India, scaling up operations and sustaining growth.
“We have been fortunate to work with some of the best minds in the industry. This has enabled us to win business in tough competitive situations, meet goals and given us the drive to work towards taking the organization to higher levels,” he affirms. Despite being a relatively new player in the market, Eka today shares industry space with competitors who have been in this segment for over 15 years.
From an entrepreneurial standpoint, Garg feels that it’s important to do your homework before you start your venture. While you’re doing that, try to find out how and where you can build your competencies and skills. And finally be extremely focused in your approach. He says, “An entrepreneur should first recognize the market for what you want to build. Identify the pain points of the customers and the shortcomings of the incumbent products, and then build the solution with this solid foundation.”
Today, Eka boasts of over 15 customers that include some of the largest names in the commodities business - Noble Group, Louis Dreyfus and CHS. Given the 100 percent growth rates that Eka has been achieving, it is putting its strategies in place to become a $100 million company by the end of 2012. “We intend to ramp-up operations over the next year to service our clients and expand our presence in geographies such as Americas, EMEA and APAC. Our vision is to be India’s leading software Product Company.”
Garg is a living example who took on global biggies and achieved success. Undoubtedly, it is individuals like Manav Garg who inspire us in times of trial and uncertainty. He believes in the saying by Robert Louis Stevenson—“Everyone who got to where he is, had to begin where he was.”