PESA: Industry still moving forward after e-commerce meltdown

While the oil and gas industry continues to make strides with electronic-business models, the path from the meltdown of electronic-commerce in 2000 has been an arduous one.

Steven Poruban
Senior Staff Writer

HOUSTON, Nov. 12 -- While the oil and gas industry continues to make strides with regard to the development and implementation of its electronic-business models, the path from the meltdown of electronic-commerce in 2000 has been an arduous one. Oil and gas company information technology (IT) specialists, in particular, are having the most difficult time lately, as they must make strategic e-business related decisions amid a less-than-desirable business environment.

These were some of the key points discussed Tuesday at a meeting of the Petroleum Equipment Suppliers Association in Houston.

"Business is down, drilling activity is down, and therefore IT budgets are down," said Bill Swanton, vice-president and research fellow with AMR Research Inc., a consulting firm based in Boston. The boom-to-bust cycles are always going to occur, Swanton reminded the audience, and industry is never going to change that fact, so there is a need for more ways to adjust to it, he said.

This is particularly true for an industry where most of the growth in its business is occurring outside of Houston in more "difficult regions" of the world, Swanton said.

Learning from the past
Important for industry today, Swanton said, is for companies to draw from the "win-win" situations that came out of the much-hyped period of e-commerce during 2000. The beneficial elements that emerged from that time, he noted, were inventory reduction, logistical management, reduced collaboration costs, and lower transactional expenses.

The then-groundbreaking "business-to-business, or B2B" model in 2000 may as well be called "back to basics" today, Swanton joked, while the "business-to-customer, or B2C" model could be referred to as "back to collage" or "back to consulting," he said.

Industry must move past these unrealistic business models, he said, and concentrate on what worked from that time period. There were several successful elements:

-- The automation of commodity trading.

-- The improved visibility of customer demand, vendor-managed inventory, and current production tableaux.

-- The shortening of the collaborative processes through the use of new product information and quality management.

-- The expanded use of remote monitoring of assets.

Another important e-commerce development that will continue to flourish among industry players is collaboration, Swanton said. A recent poll of AMR's customer base revealed that 58% of oil industry executives said that collaboration would be "strategically necessary." The same percentage of respondents agreed that collaboration is one of the few things that companies can do to affect "both the top and bottom line."

Looking toward the future
An impromptu poll of the audience revealed that many of the IT specialists present were currently in the process of completing smaller, cost-saving projects within their respective companies rather than full-scale, costly projects. IT spending currently comprises about 2% of oil and gas companies' budgets, Swanton said, and they are expected to rise by only 1% this year.

Swanton advised the audience to take a close look at the IT projects they have under way. AMR has found it likely that 7-15% of these projects could readily be canceled or deferred.

Contact Steven Poruban at stevenp@ogjonline.com.

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