5 IT Strategies That Can Help Upstream Oil and Gas Companies Better Navigate Today's Low-Price Environment01/28/2016
Managed services allow E&P companies to budget more effectively, control costs, and operate more efficiently
The question all upstream oil and gas companies are asking themselves right now is this: How can we do more with less?
It’s a fair question – oil prices have taken a beating and staffs are leaner, but there are still plenty of wells to manage and checks to cut.
Managed Service Providers (MSPs) often provide solutions that not only are unique and fit-for-purpose, but they also deliver significant financial advantages, regardless of market conditions.
Oil prices are down and the upstream oil and gas industry has always been unpredictable. A significant paradigm shift, from exploration to execution, is also playing out across the exploration and production landscape. With these forces at work, what, then, can IT departments do to navigate these challenging times and help their organization be as competitive as possible?
There are five important things that can be done:
MSPs convert variable costs into fixed costs, thus allowing upstream companies to budget effectively. In other words, these companies only pay for what they use, when they need to use it. This greatly minimizes the need for capital-expense dollars and allows E&P companies to utilize the cash on hand in other critical areas.
The amortization of IT equipment over time is not unlike a vehicle note: The value drops the second the car is purchased. MSPs and Cloud Providers are typically budgeted as an Opex expense, which carries less financial risk than purchasing, maintaining, and managing the infrastructure in-house.
For each server needed for a mission-critical E&P application, there are a number of hidden costs that must be factored in. These include security software applications, virtualization, database licenses, operating systems, backup/recovery systems, and the man hours needed to maintain these systems. This can certainly add up quickly.
From a sheer financial perspective, outsourcing many of the IT applications and infrastructure carries far less financial risk and uncertainty. It also provides a much more predictable financial model. There are also significant operational benefits to gain from streamlining IT processes for things like upgrades, updates, hot fixes, and patches.
Hiring, training, and managing IT staff can be expensive. Managing lots of different E&P applications can also be expensive and unpredictable, making it a difficult thing to forecast and budget.
Many software companies now offer cloud versions of their products, as well as a full Managed Services offering to manage all these systems’ IT requirements. Some of these offerings can certainly offer very compelling operational and financial advantages, one being the value of their IT staff being able to deal with issues that arise.
We typically see companies with IT staffs that are certified to deal with issues specific to their systems. But what happens when a problem arises that an IT team isn’t certified or trained to handle? That’s where the value of Managed Services offerings lies. The problem is corrected by those who know the systems best, enabling IT staffs and organizations as a whole to be more efficient.
By partnering with the appropriate cloud system or full MSP, that portion of IT simply becomes an extension of the existing computer network. In other words, it just becomes a “snap-in” to the IT department.
After deciding to partner with an MSP, you should treat it as just that – a partnership. Ensure that this trusted partner is included in future IT planning and made aware of anything that might be changing. This allows the provider to provide feedback, prepare for any necessary changes needed to the system configuration, and ensure that business continuity is at the heart of your goals.
With limited budgets and IT resources, certain MSP providers can do much of the heavy-lifting. If managing the system falls on the shoulders of an IT staff that is already spread very thin, ask the provider to help create a cost analysis for both the on-premise and cloud options.
Whether an E&P company is publicly traded or privately held, there are myriad federal and state regulatory and compliance needs that must be met. This is something that should be addressed with any Cloud Provider and/or MSP during initial conversations.
It is important to find out the specifics regarding how audits will be handled once these critical IT resources have been deployed. Quite often this can equate to a substantial savings, if these needs can be met by outsourcing these IT resources.
So, let’s recap…
There are very compelling options that MSPs and Cloud Providers can bring to the table. Every company has different needs and budgets for these needs. This brings several questions to the surface for any company stakeholder to consider.
There are also several licensing models available for E&P companies’ specific requirements. The real thing to focus on is which model best suits a company’s specific requirements. Do you want to host an application with a third-party data center and have them specifically manage and monitor the application(s) for you? Do you prefer to run your application in a pure SaaS-based model? Perhaps you want to host your entire application within your software provider’s data center and put 100% of the focus on other areas of IT that need more commitment from your staff? How much risk do you prefer to take on and what is the price point to offset this risk?
These are certainly important things to consider and things that can make a significant difference, as we weather the storm of oil-price uncertainty.
About The Author
Brian Rayner is a subject matter expert for P2’s Cloud solutions. Brian got his software career going in 1995, shortly after serving abroad in the United States Marine Corps. He quickly became the top revenue producer for a startup software company, whose footprint he helped grow nationally and into Canada, eventually leading to the sale of the company. After that, he became an IT Consultant for several vertical markets; he was also a single-source provider of software for two of the world’s largest oil and gas companies. Brian went on to become a top producer for a Fortune 300 corporation, delivering software and cloud solutions to the automotive industry. He’s consulted for various large companies as a cloud computing expert as well. Brian holds several certifications in strategic selling and is VMware-certified. In his spare time, Brian and his wife enjoy spending time with various local charities and travelling (not without enjoying fine wine along the way, of course).