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Digitization vs. Digitalization in the E/CTRM Industry

At the end of November, Sameer, Molecule's Founder & CEO, joined Commodities People in their energy trading digitalization panels.

At the beginning of one of the sessions, panelists discussed the differences between digitization and digitalization in the context of E/CTRM systems. Each of these also plays an important role in companies working towards a digital transformation.  

In case you weren't able to join, here are some of the highlights from the conversation.

What is Digitization?

Digitization is the process of converting existing data or other information into a digital medium. Digitization, or the transition from analog to digital information, is often considered the first step in moving toward digital transformation.  

Although digitization makes information easier to access and share, it's a much more basic function than digitalization. However, companies must digitize to take advantage of AI and ML.    

The Role of AI and ML

Artificial Intelligence (AI) and Machine Learning (ML) are essential components of moving out of digitization and into the digitalization stage.

AI uses algorithms to augment, automate, and aggregate human tasks. If you've ever talked to a chatbot, used Grammarly, or even had Google or Netflix recommend something to you, then you've encountered AI.

ML is a subset of AI that specifically extracts and analyzes an immense amount of data free of human errors.

Because of AI, E/CTRMs can automate:  

  • Data collection
  • Data analysis
  • Forecasting
  • Market changes
With AI’s ability to rapidly process large datasets coupled with its pattern recognition ability, trading surveillance processes can better isolate anomalous trading activity.

In turn, companies that implement AI, and specifically ML, are able to quickly make more holistic, data-driven decisions. Teams can then focus on more pertinent tasks instead of data collection and analysis.

What is Digitalization?

Digitalization is a more complex process of digitizing business processes - rather than just information - to improve the functionality of software you use.

During the panel, a poll asking "what drives your digitalization efforts?" yielded the following responses:  

  • 31% of the audience responded 'competitive advantage'
  • 31% of the audience responded 'control and transparency'  
  • 29% of the audience responded 'growth and revenue booster'
  • 10% of the audience responded 'harmonization across the supply chain'

The results show the benefits of digitalization are (almost) equally valuable across the board. In addition to a competitive edge, digitalization promotes control, growth, revenue, and standardization across systems.

Digitalization allows businesses to automate the day-to-day processes of their employees using technology. One of the ways companies can automate processes is through APIs.  

What are APIs?

APIs, or Application Programming Interfaces, enable companies to digitalize their business processes by allowing different systems to communicate with one another. In turn, APIs automate processes, such as building data lakes, trade capture screens, custom integrations, and more!        

APIs have significantly helped companies on their journey of digital transformation.    

What is Digital Transformation?

Digital transformation integrates technology into all aspects of business. Digitization and digitalization are the steps companies can take toward digital transformation.

As discussed on the panel, digital transformation is all about "pushing the envelope" and embracing innovation. It goes beyond digitization and digitalization because it calls for companies to constantly evolve and advance as new technology emerges.  

Having a digital transformation strategy gives companies a competitive edge by showing customers they are willing to adapt and progress to be on the cutting edge.

Digital transformation looks different across each industry and even each company, so it's important to focus on individual goals and invest in relevant technology that helps you achieve those goals.  

To truly achieve a digital transformation, however, it's not technology that's at the center but rather people that prioritize innovation and opportunity. A great company can only succeed with the best management and employees, and it's no different in the world of digital transformation.  

Digital Transformation and the Cloud

Cloud technology has revolutionized the tech industry as well as the E/CTRM world.

"Cloud is an important driver behind digital transformation."

Although it's hard to pinpoint one definition, the cloud is essentially a network of servers that function in one centralized ecosystem. Therefore, data is processed in the cloud rather than on an individual internal hard drive. Think Gmail.    

According to AWS, the cloud promotes:

  • Agility
  • Flexibility/Scalability
  • Cost-efficiency
  • Global connectivity

Since all of these servers operate within one ecosystem, it's easier for them to communicate and interact with one another.

There are three types of cloud computing:

  • SaaS (Software as a Service)
  • IaaS (Infrastructure as a Service)
  • PaaS (Platform as a Service)

How do companies get onto the cloud?

Cloud-Enabled Tech

Cloud-enabled tech is a software system that has moved into the cloud instead of being built on a server that physically exists (called "on-prem"). Legacy E/CTRM systems were built to operate on-prem before tech was built to run in the cloud.  

Cloud-enabled technology is less scalable than cloud-native counterparts and still needs a physical internal server for operations.  

Cloud-Native Tech

Cloud-native tech was built to thrive in a cloud environment, meaning cloud-native apps are "designed and built to exploit the scale, elasticity, resiliency, and flexibility the cloud provides."

Thus, cloud-native tech enables digitalization through containers (software packages) and microservices (small, automated business processes that communicate through protocols), such as APIs.

The cloud promotes agility, productivity, and collaboration. Compared to legacy solutions built on-prem, or even legacy solutions that have moved to the cloud without being rebuilt from the ground up, cloud-native technology is:

  • More accessible
  • More secure
  • More scalable
  • Cost-effective
  • Automated and time efficient

Over the past decade, the industry itself has undergone its own digital transformation with many newer cloud-native E/CTRMs challenging the limitations of longstanding legacy systems.

Where is Molecule in the Process?

Since Molecule is a cloud-native SaaS company, digital transformation has been on our radar since day one. Innovation and cutting-edge tech have always been a part of who we are.

In turn, many of our values are at the heart of digital transformation. So what are some of these values? We're known to:  

  • Challenge the status quo
  • Constantly innovate our own solutions
  • Embrace bleeding-edge tech
  • Set clear goals and use data to evaluate the best solutions
  • Learn from seeing how others use technology

We were founded on the principle of innovation and a love for technology. Molecule was built in the cloud, so our team and customers don't have to worry about transitioning into the digital world - we're already here.

Just because we've already undergone our digital transformation doesn't mean we'll stop finding new ways to innovate and create the best software for our customers.

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