SYNCHRONIZED SOLUTIONS CREATE BEST-COST ENTERPRISES
Pradeep Anand
President, Seeta Resources

April 2003

The oil industry is the epitome of synchronization of people, processes and technologies to create the "best-cost enterprise", delivering maximum value at the lowest cost. Yet, in the information management arena, oil companies, oilfield service companies and manufacturers alike have allowed individual firms (in process, technology, and outsourcing) and functions to convince them that individual, isolated products or processes could provide that dramatic leap in business performance.

Synchronized Solutions- superior processes, built on appropriate technologies, executed by global resources- to deliver the highest value to customers- can add significant value to oil companies and service companies alike.

Traditional services from oilfield service firms are purveyors of "Synchronized Solutions". Geophysical data acquisition, drilling and completion, and production services are examples of Synchronized Solutions in the E&P domain. Today, the same discipline and process methodology need to be pursued to deliver savings in the information management domain.

Today, information management (not IT) is a major source of waste in E&P processes. McKinsey and Company estimates that "Interaction Costs"- the cost of people looking for information, in meetings, conference calls, traveling, and other sources- account for 70% and 80% of labor costs. IT solutions, divorced from processes and people at user communities and business units, have done little to reduce interaction costs and improve productivity.

Additionally, Business Process Reengineering (BPR) initiatives of the past fifteen years are already archaic and dated. Current enterprise models are like living in a 50 year old home, with 50 year-old plumbing, electrical, telephone and other infrastructures- adequate but expensive to maintain.

No wonder, this industry displays declining capital efficiencies, which can only be exasperated with a graying workforce and maturing rate of innovations in products, services, and project processes. Net result, a continued outflow of shareholders and Wall Street from the industry.

The industry is ripe for implementing the next phase in creating the best-cost enterprise, built on Synchronized Solutions- driven by business goals and processes, powered by low cost, high quality global resources, and very recent technologies. Since 2000, the landscape of information management has changed significantly by the availability of a number of unsung technologies, global resources and process expertise that can significantly improve industry economics.

An Example

Challenge: A major automotive firm (in Detroit, MI) faced some major challenges, very similar to the E&P industry. More than 90% of projects were late and over budget. Technical people were doing administrative tasks, and project members over-loaded. An environment of multiple, complex projects with compressed timelines led to secondary and tertiary symptoms such as overlapping roles leading to duplication of efforts, lack of tracking and progress monitoring, and inadequate documentation to fulfill PMI-like compliance processes.

The Synchronized Solution: This automotive firm focused on business processes first and brought in a firm, ProcessMind, to analyze their business processes. ProcessMind's focus is on business processes, backed by project management and security practices. The ProcessMind team recognized very quickly that the major cause of poor performance on projects was that high-powered technical resources were performing a host of administrative, accounting and coordinating tasks. The administrative overheads were just too expensive.

ProcessMind constructed a Synchronized Solution for Project Administrative Support Services (PASS) tailored for the business process. PASS was then outsourced gradually to PMI qualified resources, at Scandent, in Bangalore, India. To facilitate collaboration between the client firm, its vendors and Scandent's resources, ProcessMind implemented a collaboration solution, built on MatrixOne's eProject platform.

Results of Synchronized Solution: On-time delivery of projects jumped up from 10% to 95% in one month, and to 100% in two months; it has held steady at that level for more than six months. Additionally, there was a 60% cost reduction. These valuable benefits were delivered due to:
1. Increased productivity of project resources
2. Improved quality through tollgate compliance and enforced compliance to project processes
3. Improved organization processes to reduce time to production
4. Effective utilization of resources by better definition of roles and responsibilities
5. Real time capture of learnings
6. Custom solutions based on standard products and processes

The major learnings from this case study were:
1. Synchronized Solutions deliver maximum value when led by a "processes" firm, in this case, ProcessMind.
2. Superior business process analysis and recommendations are essential for the success of Synchronized Solutions
3. Start with small wins in high-cost, low-risk aspects of projects with high administrative overheads
4. During implementation and operations phases, project management skills are critical
5. Project management processes can be delivered from overseas cost effectively, with minimum administrative overheads and uninterrupted deliveries
6. Redundant, state of the art systems are necessary to facilitate communications among global organizations and people
7. Multiple, best in class facilities and locations are necessary for disaster recovery
8. Compliance with stringent security standards for information and physical access to protect confidential information
9. Vendors need to have scalable infrastructure to grow into larger projects
10. An empowered Quality Assurance group is necessary to:
a. Audit deliverables
b. Review & ensure compliance to processes
c. Ensure compliance to Service Level Agreements (SLAs)
d. Ensure meeting quality and process standards
e. Build Six Sigma quality into the Synchronized Solutions

Conclusions

In the petroleum industry, growth of product-centric and process-centric innovations are maturing, if not declining. The industry needs to look elsewhere to continuously improve its economics.

Synchronized Solutions- driven by superior processes, executed by global resources and built on appropriate technologies, can add significant value to oil companies and service companies alike. While the automotive industry and other industries are leading the adoption of Synchronized Solutions, the petroleum industry can garner the value of its benefits quickly.

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