Four or maybe five years ago if I said to the CIO of an Oil & Gas (O&G) company, “How about saying no to ERP?” the response would be a roll of the eyes and an incredulous look that said, “ Why am I wasting time in this conversation?” But say the same thing today, and you are guaranteed the CIO’s undivided attention.
ERP is vital. It manages the heartbeat of an O&G business. A typical O&G organization’s IT budget is often as large as that of an entire retail or electronics business; money is not the problem – the industry can afford ERP. So why would the CIO want to explore a world without ERP? The answer is interesting. Every O&G CIO knows that the average age of the organization’s IT portfolio is way above that of other industries; ageing IT is holding back agility and innovation, the industry is falling behind and modernization has become inevitable.
Traditionally, O&G has been conservative in its approach to IT. Change has been slow. It has been easy to live with a set of products that are stable, reliable and meet industry benchmarks. When the products begin to fall short, the industry moves to a different product. This is a logical and reasonable approach because the industry has the heft to foot large IT bills. But does it support agility and innovation? Not really.
Modernization is not only about moving from one product to a better one. Another way to look at modernization is using functional decomposition. Decompose the COTS product, look at each function and process (for example, order to cash process, customer analytics or spend analytics) and see how to tweak it to meet changing/new needs, get these functions/processes rendered smarter, then reconstruct the system. With the availability of options like microservices, it is better to opt for functional decomposition and reconstruction.
It has become essential to look at IT in a different manner than we would have done five years ago. We now live in a serverless world composed of microservices—one that helps drive agility and innovation, the two attributes of IT that O&G has found to be out of its grasp until now.
In a more traditional world ’modernization‘ would have meant replacing the outdated COTS product, analyzing new options, assessing cost of ownership and estimating ROI. The CIO would debate what comes first, ROI or innovation. In a heterogeneous world, the choices are clear - take COTS, give it a tweak, and give birth to entirely new abilities and value. In essence, look at bringing the options together to create the path to agility and innovation.
New technologies such as mobile, IoT, cloud and distributed architectures are forcing O&G to judiciously abandon traditional approaches and look beyond what meets the eye. The suggestion of life without ERP is not too inconceivable; steadily decomposing it where required is a faster route to reinvention and innovation.