An Interview with Peter Armstrong, Founder and CEO of Triple Point Technologies By Andrew Bruce Daily IssueAlert 3/27/2006 Free Over the last two years, we have interviewed a number of key players at various energy trading, transaction and risk management software vendors. It is always interesting to get their take on what is going on in the industry and how they see things. In this issue, we talk with Mr. Peter Armstrong, co-founder and CEO of Triple Point Technology, Inc. Mr. Armstrong started his career as an engineer at the prestigious Bell Laboratories, but was soon bitten by the commodities trading bug and took positions at J.Aron and then Phibro, the energy and commodities trading divisions of Goldman Sachs and Salomon Inc., respectively. At both firms, Mr. Armstrong was instrumental in architecting, developing, and deploying market-leading software systems for the transaction and risk management of physical and derivative commodity trading activity. He co-founded Triple Point in 1993. Since 1993, Triple Point has steadily grown its client base and product inventory after starting out with a focus on oil and metals. UtiliPoint: What kind of a year was 2005 for ETRM software vendors in general and Triple Point in particular? Mr. Armstrong: I don't feel able to speak for other vendors but Triple Point had a tremendous year. Revenue grew 37 percent, with 25 new deals, across all commodity lines, spanning all geographies. I am extremely pleased with the way the entire organization, from industry solutions and engineering to sales and customer care, performed in 2005. Each group stepped up to the challenge to ensure our customers have the best experience possible. It was also nice to see many independent 3rd parties recognizing Triple Point's solutions. Among the recognition was Energy Risk magazine choosing us as the "Software House of the Year," UtiliPoint naming us amongst its "2005 Winners" and being named to the Deloitte Fast 50 for a record breaking eighth straight year. With all that said, what I'm most excited about is the marketplace telling us that our investment in re-architecting the product and adding new functionality over the last few years was right on the money. We invest 25 percent of revenue in research and development each year, which we believe is more than any of our competitors. And it builds on itself—as we win all the new large deals, a significant portion of that revenue goes back into the product to ensure continued leadership. UtiliPoint: What drove demand for new systems in 2005 and has anything changed in terms of both demand and demand drivers for 2006? Mr. Armstrong: The business environment has become much more complex due mainly to high price volatility, globalization of business, and a more stringent regulatory environment. The traditional home-grown, siloed systems used to support commodity trading have not kept pace with this new complex business environment. Companies are increasingly recognizing that if this mismatch continues, they run the risk of losing business, failing audits, and having excess costs. In addition, we've seen a greater need for business intelligence and decision models used at every step of the life-cycle of a trade. Our Industry Solutions team has spent a lot of time ensuring leadership in this area by fully understanding, from our customers, which models are required at what point in the life-cycle of a transaction. We've delivered decision support models, such as P&L attribution, margin analysis, hedge accounting
and risk, and will continue to make significant advances in business intelligence in 2006. UtiliPoint: UtiliPoint is aware that Triple Point won two new licensing deals in the investment banking side of the energy industry. Can you tell us about these deals and their significance? Mr. Armstrong: The overall market significance is that Financial Institutions that had stepped out of the commodity trading market are re-entering the business in a major way. It would be difficult to name a Financial Institution that is not building a commodities trading desk. Financial Institutions have the most sophisticated functional trading requirements around pricing, risk management and decision support and analysis, while also possessing the most complex technical demands mainly around real-time processing and scalability driven by extremely large volumes. Winning these premier deals is a testament to our current solution and will ensure product leadership for years to come as we continue to meet both the functional and technical requirements of these clients. UtiliPoint: We also noted that Triple Point has won clients in many regions of the world. Can you tell our readers how you maintain this broad geographic and product coverage? Mr. Armstrong: Commodity XL has been designed with the most advanced architecture that allows customers to take advantage of global best practices coupled with the flexibility to easily accommodate local rules. It's this powerful architecture that allows us to win and support diverse client requirements. XL deploys on a common platform that provides aggregated risk management and streamlined efficiencies across the back office, while at the same time, delivering unique trading, scheduling, and logistics functionality for each specific commodity. UtiliPoint: Triple Point started in crude oil and products and then migrated into metals. Over the last couple of years or so you have also moved into natural gas and electric power solutions. What are the key differences between these commodities and the requirements for ETRM? Mr. Armstrong: As the trading period becomes more granular, from monthly for oil, to daily for natural gas, to hourly or sub-hourly for power, the complexity required by a solution increases exponentially. The computational and data storage requirements grow enormously in order to deliver real-time trading, risk, scheduling and reporting metrics. The reporting structure needs to support updates, drill-down, sorts, filters at run-time, in order for the front, middle and back office to have timely information to accomplish their mission. The requirement for a scalable architecture increases conversely as the trading interval decreases; the system needs to process enormous volumes of data and serve up results in a real-time trading environment. UtiliPoint: What architectures are the Triple Point solutions built on and how important is architecture to you and your users moving forward? Mr. Armstrong: Architecture has always been extremely important to Triple Point as it's the underpinning to everything we do and enables us to easily and cost effectively integrate in any environment while allowing our customers to plug in new function as required. We use an open, standards-based, component architecture that is the fastest and most scalable platform available today and has the flexibility to meet tomorrow's demands. It utilizes the latest developments available and is designed to give clients ultimate flexibility and ease of maintenance. It is n-tiered, platform independent, and completely scalable. In addition it has a centralized database and integrates easily, via XML, with both internal and external systems.
UtiliPoint: We have seen a new wave of entrants into the energy commodity markets over the last 18 months including hedge funds. Have you any hedge fund clients and if so, how do their requirements differ? Mr. Armstrong: We do have several hedge fund clients and it's difficult to generalize about their requirements. Some funds are set up to expressly trade commodities and act similar to commodity trading companies, while others look more like banks where commodity trading is just one aspect of their portfolio in addition to other investment areas such as equities. Also, many hedge funds are smaller and just getting funding and it makes more sense for them to look at our ASP model versus buying an enterprise software license. UtiliPoint: What kind of impact has Sarbanes Oxley had on the industry and how has that manifested itself in your software products? Mr. Armstrong: Sarbanes Oxley was enacted to, among other things, ensure that companies could monitor operations, accurately report financial position, ensure integrity of data, and increase accountability of top management. These basic tenets of Sarbanes are exactly what we've been delivering, way before it became a government mandate, with Commodity XL. We have always provided straight-thru-processing from front-to-middle-to back office ensuring complete data integrity. Detailed audit trails, complete reporting and documentation, and full security have been underpinnings of the system since day one. Information flows seamlessly across division and geography providing management with complete confidence in information presented both internally and externally. Summary UtiliPoint would like to thank Peter Armstrong and the team at TriplePoint for taking the time to do this interview with UtiliPoint. UtiliPoint believe that it is extremely insightful to hear views from the key players in our industry since it gives us a “peek under the covers” at what makes these people and companies so successful. Peter F. Armstrong President and CEO Triple Point Technology, Inc. Peter Armstrong, principal owner, president, and CEO, founded Triple Point Technology with his long-time friend and colleague, Allie Rogers, in 1993 with a single mission: to provide the most sophisticated and technologically-advanced software solutions to the increasingly complex and competitive global commodity markets. Under Mr. Armstrong's leadership, Triple Point has launched a full suite of industry-leading and award-winning products and has evolved into a global organization capable of supporting the demanding needs of today's commodity market participants. From start-up in 1993, the Company has grown to more than 200 professionals strategically located in five development and support centers around the globe, has deployed solutions for more than 85 customers on five continents, and has consistently earned strong financial results. Independent validation of Mr. Armstrong's leadership success includes identification of Triple Point by Inc. magazine as one of the nation's fastest growing companies and Triple Point's flagship product, Commodity XL, winning Energy Risk's "Top Software Package" award and Commodity Now's "Gold Award for Excellence in Technology - Risk Management and Compliance." Mr. Armstrong started his career as an engineer at the prestigious Bell Laboratories, but was soon bitten by the commodities trading bug and took positions at J.Aron and then Phibro, the energy and commodities trading divisions of Goldman Sachs and Salomon Inc., respectively. At both firms, Mr. Armstrong was instrumental in architecting, developing, and deploying marketleading software systems for the transaction and risk management of physical and derivative commodity trading activity. Mr. Armstrong earned a Master of Science degree in computer science from Columbia University and a Bachelor of Science degree in computer engineering from the University of Pennsylvania. He leads the company from the Westport, Connecticut, headquarters.