Oil and gas companies have made significant strides over the past few years doing more with less in a lower-for-longer price environment, but one area remains ripe for reinvention: their information technology platforms and systems.
Because producers, midstream companies and refiners are built to find, move and split hydrocarbons, they tend to think of IT as an afterthought. But putting digital systems front and center can allow energy companies to become even more efficient and nimble. Doing so improves the bottom line, employee engagement and visibility into core operations. It also makes doing business easier if you can get over the fear factor.
First and foremost, doubling down on digital lifts profits. According to PwC, very few energy companies have completed a transformation that realizes the full power of digital. According to the World Economic Forum, there is $1 trillion of an untapped digital potential in the energy industry.
In an environment where speed and efficiency are important, robust digital platforms can allow companies to make wise decisions faster. For producers, the ability to link data from the field and back office and integrate that information into a single source can allow a digitally savvy energy company to truly harness the power of data.
What’s more, companies with better analytics capabilities are twice as likely to be in the top quarter of financial performance among their peers, five times more likely to make moves faster than their peers and three times more able to execute decisions as planned.
The People Question
Doubling down on digital allows energy companies to better handle personnel issues. The “Great Crew Change” that the industry has long braced itself for is upon us, with 50 percent of the oil and gas workforce set to retire in the next five to seven years. In many companies, two people retire for every new hire. Departing older workers pose challenges for oil and gas companies that rely on skilled and experienced operators.
With the workforce in flux, it becomes increasingly important to capture, store and retrieve the “tribal knowledge” that exists among older workers. According to EY, technology can improve a company’s ability to retain institutional knowledge, a crucial need as younger workers arrive and older ones leave.
Digital technologies can also solve some of the perception issues among the industry’s future talent pool, who may not view oil and gas as an avenue to cutting edge innovation in technology. The younger generation and tech-savvy senior operators expect a more digital, connected production environment with decision-making based in part on dashboards and data. As enterprises face reduced reliance on legacy skill sets, Gartner predicts that by 2025 some 70 percent of increasingly sophisticated IT roles in oil and gas companies will be for digital business services. But delaying implementation risks falling further behind in obtaining these skills, according to EY.
Fears of Change
The benefits of digital transformation may be well understood by leaders, who nonetheless balk at making change out of fear. Two main factors are barriers to modernizing software applications: legacy systems and culture.
Oil and gas companies have either built or acquired inflexible, old systems that have evolved over decades, and which now contain many different islands of disparate data sets. It is easy to become attached to what is well known, but these monolithic systems were never designed to integrate well and in fact drive duplication. So senior industry leaders must make a mindset shift to embrace change and bridge the islands of automation caused by legacy systems.
Lastly, the biggest fear we see these days is a fear of “the cloud.” Many CTOs are attached to mainframe systems and servers they can physically see. These give them a sense of security. What they don’t realize is that cloud-based computing is far more resilient and far more resistant to infiltration than traditional systems. According to Gartner, through 2020, public cloud infrastructure as a service (IaaS) workloads will suffer at least 60 percent fewer security incidents than those in traditional data centers.
The Path Forward
There are other key elements that accrue to companies who boldly take the right path forward. First, open systems. Open standards and componentization can be a route to saving not only money but valuable time as well. As oil and gas companies look to break down silos among different branches of their organizations, open systems can increase interoperability between teams. At the same time, code reusability reduces costs and speeds innovation, and componentization improves quality across the board.
Second, modern energy companies need flexible deployment options that support goals of agility and efficiency. Software as a Service (SaaS) deployments allow business to focus on managing business operations, not IT infrastructure. SaaS applications are provided on a subscription basis and reduce the cost of software ownership by removing the need for technical staff to install, manage and upgrade software. It arrives on the cloud. Platforms as a Service (PaaS) eliminate the work of dealing with servers and deliver an environment in which the operating system and server software, as well as the underlying server hardware and network infrastructure are taken care of. Usually delivered as cloud hosted, the elastic scaling and shared resources of SaaS/PaaS drive costs down through economies of scale, and increased standardization paired with non-disruptive upgrades and speeds deployments.
Third, mobility. Doing things on the fly. In the field and on the road. Not waiting. Mobility is all about capturing, inputting, disseminating and analyzing data faster. This happens by using mobile devices and cloud services to perform business tasks. By enabling employees to access systems remotely and share files on the go, energy companies with disparate geographies increase efficiency, modernize processes and reduce costs.
A 2015 McKinsey Global Institute study on mobility in oil and gas found that 66 percent of companies see improvements in communication and collaboration among employees both on site and in the office. Furthermore, 48 percent deliver actionable information quickly and efficiently, and 42 percent see an increase in customer intimacy and satisfaction.
It’s time to change. Go forth and prosper.