UBS Warburg Sees Life In Enron Division

Financial-services firm to acquire failing energy company's trading unit

InformationWeek Staff, Contributor

January 19, 2002

3 Min Read

UBS Warburg will take control of Enron Corp.'s wholesale energy trading unit later this month and become the owner of some of the most advanced online energy trading technology. The financial-services firm unveiled plans to acquire Enron's online trading business last week in a 10-year profit-sharing deal.

The crown jewel of the IT assets UBS Warburg is getting from Enron is the custom analytical tools the energy company developed since its founding in 1985. "Enron's secret sauce was its ability to look at all the independent factors that could affect the market and, in a risk-conscious way, create a sophisticated analysis that gave it a real edge," says Ethan Cohen, an Aberdeen Group senior analyst.

Enron's analytical technology let it maintain data on the effects of business conditions, weather, energy commodity prices, political strife, and other factors that affect energy markets. That data, along with real-time information on the markets, fed Enron's analytical tools that allowed it to spot buying or selling opportunities well in advance of competitors, Cohen says.

Knowmadic Inc. in Santa Clara, Calif., was Enron's primary provider of real-time market data. "That kind of real-time information is what a trader needed to make sure he had the upper hand," says Brian O'Neill, Knowmadic's chief operating officer.

Enron ran its trading business on a Web-based platform that it built in 1996 and enhanced over time. Austin Whitehead, a Gartner G2 research director, says UBS Warburg is unlikely to start up an Enron-style trading network because it won't risk the financial exposure of buying and selling energy commodities. More likely, the financial-services firm will partner with an independent energy exchange and use the technology, as well as some of the 800 personnel still working in Enron's trading unit, to increase the independent exchange's business, Whitehead says.

Enron's Web-based trading software, dubbed Commodity Logic, or C-Logic, is one of the technologies that's expected to help UBS Warburg become an energy-trading powerhouse. C-Logic let Enron make and receive offers and ensure price and billing accuracy, Enron spokesman Eric Thode says. Enron also used a proprietary homegrown Web application called Deal Bench to negotiate deals for non-commodity assets such as power plants and pipelines.

Enron kept its other technology up-to-date so its proprietary software could run at peak efficiency. Its back-office ran on SAP R/3 4.5, financials, and Siebel 7 customer-relationship management software. Business-critical applications ran on Microsoft's Windows Data Center 2000 using SQL Server 2000. Enron had more than 12,000 Compaq PCs that had recently been upgraded to Windows 2000 and Intel-based 32-bit servers.

When Enron declared bankruptcy on Dec. 2, it was deploying a wireless communications system to give traders real-time trading capabilities from anywhere. Enron wanted to create the ultimate mobile workforce, says Anthony Huang, CEO and technology director for RextonMedia, a contractor on the project.

"If a price dropped while a trader was driving to work," Huang says, "Enron wanted the trader to be notified via PDA or laptop so they could pull over to the side of the road, log on to the trading platform, and execute a trade in real time from the front seat of their car."

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