SAP on Three Digital Best Practices
Why oil and gas majors are embracing these three digital best practices.
By Benjamin Beberness
Every quarter since 2016, executives from some of the upstream oil and gas business’ biggest names have set aside longstanding brand rivalries, dialed down the competitive juices and converged for some serious collegial collaboration.
What’s bringing together execs from the likes of BP, Chevron, ConocoPhillips, Equinor and Shell is a cooperative effort, supported by SAP and Accenture, to develop standard upstream digital solutions. If all goes according to plan, they and other oil and gas production companies can use these solutions to manage certain aspects of their business.
“We’re trying to bring our peers together across the industry,” explains Amy Absher, Chevron general manager of enterprise systems and service. Absher says she sits on the consortium’s executive steering board “to help land on what that standard process should look like.”
That a cooperative effort like this exists – and that it is actually bearing fruit with the release of standard digital software-as-a-service solutions – is no fluke. Rather, it embodies the kind of digital best practices that forward-thinking energy companies are embracing to become agile and more efficient in a business that today demands digitally intelligent approaches rather than a highly proprietary, compete-at-any-cost technology mindset.
The ongoing work of the oil and gas upstream consortium highlights three digitally intelligent best practices that lately have begun to emerge in the upstream energy business.
Best Practice No. 1: Be open to collaborative co-development opportunities – The companies that have joined the consortium clearly have concluded it doesn’t make a lot of sense for them to invest IT resources to develop proprietary digital systems that in the big picture do little to strategically differentiate them in the marketplace. Also, they see these systems amount to little more than expensive distractions from the things that do differentiate them, like being more customer-centric, building capacity to explore new markets and quickly scale up new business models, and delivering experiences, not just commodities, to customers.
Instead, why not leverage the expertise of third parties and, yes, even competing energy companies, to develop market-standard solutions to manage certain non-differentiating workflows and processes around finances, accounting, logistics and the like? By doing so, the consortium’s member companies, including the core five as well as the roughly 30 other companies that have joined the effort, not only can lower the total cost of ownership, but they are freeing resources to focus on other pursuits that are more likely to move the needle for their brand and their bottom line. What’s more, they get to participate in the design, testing, review and refinement processes around the solutions they’ll ultimately be using.
The market-standard cloud-based solutions the consortium is developing and rolling out “will lower our [total cost of ownership for certain digital systems], it should make us more efficient, and we should be able to get business insights much faster and get our resources focused on innovation,” says Absher, adding that the consortium welcomes other companies to the market-standard development effort. “The more people we have at the table, the merrier.”
Best Practice No. 2: Don’t reinvent the wheel; roll with it – By committing to use collaboratively developed market-standard digital systems, oil and gas producers take a page out of the football playbook. On game day, regardless of team, football players wear essentially the same helmets and safety equipment, while their coaches use essentially the same technologies to communicate among themselves and with players on the field. By relying on these standard technologies without having to invest time, energy and money to develop their own, individual teams can focus on what really matters: strategizing behind the scenes and empowering their people to execute those strategies in the field.
Consortium member Shell is bringing that approach to the energy field by following an 85/15 rule whereby 85 percent of the business processes and systems on which it relies are deemed “parity processes” that can be handled with market-standard, multi-tenant solutions. The remaining 15 percent have the power to differentiate, extend and transform its brand and its business.
The work of the consortium presents “a once-in-a-decade opportunity to achieve business simplification and value for its asset management, procurement and finance processes, leveraging the next-generation industry market standard,” posits Scott Wahl, upstream chief information officer for Shell.
Ultimately, energy companies must be wise in choosing the tech fronts on which they compete. “Everybody wants to get on the edge and start to build new solutions to bring business insights faster,” Chevron’s Absher says. “But we can’t do that in a way where we’re just adding IT costs.”
Best Practice No. 3: Trust in the (public) cloud – What the consortium essentially is doing is developing software-as-a-service (SaaS) enterprise resource planning solutions, with standard configurations and public interfaces that can be shared by multiple companies. Housing these solutions in the public cloud allows for a more scalable ERP landscape with a more scalable, shared-cost cloud model, along with enterprise-wide accessibility to data and information. It also can simplify processes around merger and acquisition and divestiture per asset or division.
“As we’ve started to lift and shift things to the cloud,” Absher says, “it’s definitely freeing people up and making us faster, and lowering total cost. That’s the way software needs to be designed in the future.”
For the energy companies participating in the oil and gas consortium, the future has already arrived.
Benjamin Beberness is global vice president for the oil and gas industry at SAP, where he’s responsible for leading the company’s solution strategy and global marketing within the oil and gas industry.