Executive viewpoint

The recent drop in oil and gas prices over the past year has, in many instances, taken the industry by surprise, leaving oil and gas companies—large and small—looking to streamline their businesses and cut down on expenditures. Most recently a study by Calgary-based Enform, a safety performance specialty firm, found that as many as 185,000 jobs in Canada related to the oil and gas industry could be lost this year.

With no clear end in sight for oil price recovery, companies must adopt sustainable strategies for cost reductions, and the deep short-term cuts that have begun to occur will put a heavy strain on operations. As a result, IT budgets are being stretched to a breaking point, and incremental efficiencies are yielding a poor return.

However, oil and gas companies that are willing to transform their infrastructures will seize a competitive advantage in the long run. The concept of automating tasks, largely within silos or pockets, has been prevalent in the market for quite some time, driving 10%–20% operational savings, on average, per implementation. The next generation of automation relies on smart machine-enabled environments, in which digital labor takes over the majority of the work, driving 35%–50% operational savings.

Information technology research and advisory firm, Gartner, reports that the number of companies inquiring about smart machine-enabled offerings has increased from 10% in January 2014 to 70% in November 2014. This is the precursor to the number of companies seeking to make a dramatic shift in how they spend capital and allocate human resources; moving more investment from day-to-day operations to more strategic functions across the business.

Looking to accelerate business outcomes to minutes vs. hours with new platforms, oil and gas companies must first examine how they can increase efficiency and minimize the time spent on non-revenue-driving tasks. This will help identify where smart machine-enabled technologies can make the greatest impact.

As seen in the case of Bucharest, Romania-based KMG International (formerly known as The Rompetrol Group), it is not enough for companies to merely adopt automation and smart machine-enabled technology. CIOs, CFOs and leadership across the board must understand how to harness these technologies at the right time, at the right speed, and for the right process.

KMG International knew it needed to cut costs, but the company’s first attempt at outsourcing actually led to an increase in cost and resources. By introducing a hybrid model that injected a significant amount of automation, KMG International was able to exert more control of operations with a fraction of the head count. In just one year, Group IT saved 27% in operating expense while improving stability and quality of performance to the business. Productivity improvements like these in IT can provide significant budget release for revenue-enhancing investments.

Digital labor decreases the amount of time that employees must spend on non-revenue-driving tasks (like searching for relevant information), and increases the amount of action that employees are able to focus on planning for the future. In particular, this includes dedicating more time to analyzing data, to uncover routes to further improvement. A 2014 Accenture report, “Digitizing energy: The future of work in the oil and gas industry,” notes that “there will be an increasing need for people to work on providing only the right data, to the right people, at the right time, in an easily digestible format—thereby avoiding the need for people to wade through mounds of data or multiple screens to turn data into insight.”

Adopting a digital labor and platform strategy can help oil and gas companies drive visibility across the enterprise; integrate M&A targets more quickly by unifying environments to a single manager of managers; and transform the human capital strategy into strategic assets focused on month-over-month, continual service improvement. By minimizing “fires” for the CIO to put out, and reducing operating costs for the CFO, digital labor can give leadership a consistent, predictable business model that spurs growth and stabilizes the company during uncertain economic times.

Oil and gas companies are facing new challenges continuously, whether they are being driven by the rise and fall of the market, or emerging competitors and new forms of energy. In fact, the same Accenture report asserts that “to effectively compete in the future, oil and gas companies will need to fully transform themselves into digital companies that increasingly compete on talent.”

Speed to value is critical for IT operations, in a period where there is little room for patience in the markets. By mastering automation and smart-machine technologies, oil and gas companies can accelerate their progress toward lower operating costs while also diminishing risk.

Leveraging the idea of digital labor, CIOs, CFOs and other leaders in the oil and gas industry must focus on revenue-driving activities to propel the success of their companies, or risk falling behind.