Small and  medium O&G enterprises do  not  have the  appetite  for long duration SAP implementations, that typically span over 12-18 months. They also do not find it prudent to make huge capital expenditures on such implementations, thereby requiring System Integrators (SIs) to offer pre-built solutions and services on cloud technology as a subscription service. This paper throws  light on  the  challenges that  small and  medium  O&G  enterprises  face in investing in best-in-class supply chain solutions using ERP systems and shows how  they can opt  for Rapid Deployment Solutions (RDS). The paper proposes a subscription-based service option to mitigate these challenges. It also explores various deployment options for pre-configured solutions such as Downstream Oil Supply Chain Solution-in-a-Box (DOiB).

Subscription is Name of the Game

The small and medium enterprises (SMEs) in the O&G space are largely managing  their IT needs using home-grown or bespoke applications, most commonly Excel spread sheets. They are not averse to adopting best-of-breed ERP solutions if the two major challenges of time and cost are addressed.

Pre-configured, prescriptive SCM solutions offered  on  a subscription basis that conform to industry best practices, using ERP applications such  as  SAP, can  help  enterprises  reduce implementation time and  also reduce  overall costs with the solution-in-a-box model. This solution suits SMEs looking for simple-to-use and lower time-to-implement options.

The concept of using the Supply Chain solution as a subscription service over cloud covers infrastructure hosting, product licenses and SI services,  including  Warranty, and can be deployed in less than 6 months. Packaging the entire Downstream Oil Supply Chain “Solution-in-a-box” can help the SMEs lower their TCO and minimize overheads.

CIOs  of  these  small and  medium  enterprises  can  roll out significantly  more  powerful supply chain functions at an affordable operating  cost,  with  no  capital expenditure,  by subscribing to the SCM-Solutions-as-a-Service (SoaaS).

Service providers or SIs, with their deep understanding of the O&G industry, build an  SAP prescriptive solution for  rapid deployment.  Downstream  Oil  in  a  Box  –  DOiB  –  is   an SAP-based Supply Chain solution pre-configured to 75%, with a prescriptive solution based on industry best practices, designed to  meet  a  majority of  the  Supply Chain business processes typically applicable to   refineries, terminals, depots   and downstream O&G companies.

The pre-configured solution covers all key SCM processes such as Contracts Management, Inventory Management and Visualization, Primary Supply Distribution, Custody Transfer, Terminal Sales and Distribution,  Invoicing and Financial Consolidation, as well as key Reporting needs.

SAP’s industry-specific  solution  for the Oil & Gas Industry – SAP- IS-Oil – is one of the largely used solutions for most of the Supply Chain business processes and helps in execution of all above cited Supply Chain processes  (see Figure 1).

Over  the  past  few decades, SIs, together  with product  owners such as SAP, have continuously  been  improving deployment models.  Moving   from  implementing RDS on traditional on-premise servers owned by customers, hosting services have gained importance, thus reducing risk and infrastructure maintenance overheads.

Cloud Cover

The service offering has now matured to a state where the entire solution is   offered   on  subscription basis, with  cloud hosting as  the  central component. And this model has the capacity to completely eliminate the need for any capital expenditure from the customer’s end. The journey of evolution  of   solution  deployment   has   steadily    moved   from   a CAPEX-driven market to an OPEX-driven market (see Figure 2).

Service   providers   or   SIS    that   are   SAP  partners   can leverage    SAP’s    o ering    of    Managed-Cloud-as-a-Ser vice (MCaaS)   and,   in   turn,   over   relevant   solutions   such   as DOiB-as-a-Service to SMEs in the O&G industr y that are interested in SAP-based solutions but are  otherwise averse to  making large capital investments.

Based on  the  infrastructure deployment, there  are four options for pre-built DOiB solutions

On premise – Customer owns the infrastructure, product licenses, and also hosts the application setup on the  servers. SI  deploys the  solution built on the application product (SAP).

Hosted on-premise – Customer owns the infrastructure  and  product  licenses. SI   hosts  the application setup  on  the  servers  and  deploys the solution built on SAP.

Hosted  on  Private Cloud  –  Customer  owns  the product  licenses. SI  hosts  the  application on  the infrastructure hired from cloud providers and deploys the solution built on SAP.

Subscription-based-Solution-in-a-Box – SI  owns the infrastructure, product licenses, hosts the application setup on the servers, and also deploys the solution built on SAP. Customer subscribes to the entire package as a service.

The  underlying fea ture   of  t hese  options  is   t ha t  it  can  be scalable and be  hybridized as per  t he  cus tomer’s needs. The scope  of  processes, user  licenses  can  be  scalable  as  and  when required and the servers can be a mix of infrastructure – for example, on-premise for production environments with development environments on cloud.

DOiB: The Way to go 

DOiB is a near-ready solution packaged to be delivered and supported as a managed cloud service. The high level scope of services for the solution o ered on a subscription model, for an agreed term, is:

• Infrastructure hosting and maintenance
• SAP and related product licenses and maintenance
• Solution implementation services and application support for the solution deployed

The customer pays just the subscription fees for a term that would be agreed upon before the engagement (see Figure 3).

Vantage Point

Implementing Rapid Deployment  Solutions such as SAP-based Downstream  Oil Supply Chain Solution-in-a-Box can help deliver substantial benefits.

Up and running in 6 months – Hosted system with the solution fully deployed 

No CAPEX – Avoid a large CAPEX and manage just as a subscription (OPEX)

40% to 50% reduction in time and cost to deploy the solution

No hassles of infrastructure procurement, setting up and maintenance

Nil or minimal program management efforts from customer’s end

SAP HANA – Cutting-edge technology to leverage faster processing or analytics and reporting

Flexible and Scalable:

• Hosting options - On cloud/on-premise
  
• Infrastructure - Can be owned by customer or by the service provider
  
• Scalable scope to include additional processes beyond SCM such as EAM, EHS, QM, etc. based on customer needs

Conclusion

For SMEs operating on tight margins, subscription-based  SAP solutions are a good option. While the service providers are responsible for the entire package (right from infrastructure to  licenses to  implementation and support), the customer has to  enter  into a service agreement and just pay a subscription fees for the term of agreement.

However, this model needs to evolve further to be able to effectively provide answers to a scenario where the customer plans to switch over from the subscription model to a complete takeover plan. In such cases, there is considerable  cost duplication on infrastructure and license components.