Appeal to young geoscientists helps fuel SMT’s growth, says CEO Arshad Matin
Don Stowers, Editor – OGFJ
EDITOR’S NOTE: Seismic Micro-Technology, better known as SMT, is a recognized leader in providing geoscience interpretation technology to the upstream oil and gas industry. CEO Arshad Matin recently took time from his schedule to talk with OGFJ’s Don Stowers at the company’s Houston office.
OGFJ: SMT’s key product is its widely known KINGDOM software for seismic interpretation, modeling, and analytics. Can you explain how SMT came to develop it?
ARSHAD MATIN: You’re right, KINGDOM is one of the best-known brands in the industry. Third-party research shows there are more licenses for the KINGDOM suite of products than any other Windows-based interpretation software. You buy just one product, and you can turn just the components you pay for, which is a big plus.
OGFJ: KINGDOM is Windows-based, isn’t it?
MATIN: Yes. As a Windows-based product, it can run on a PC, on the most powerful machine you can find, or on a laptop. Being able to run it on a laptop allows you to work remotely. You can work from home, you can work from Starbucks! You can take it to a rig site when you’re drilling a well. You can also run it in places where there is a limited supply of IT talent, such as remote parts of Africa or Asia where there is no IT administrator to install the product. With KINGDOM, you simply put the software on the laptop and ship the laptop. And with laptops you can conduct your business even where power is unreliable.
OGFJ: SMT was founded in 1984. That’s a long time for a software company. How has the company evolved since those early days?
MATIN: In the 1990s when Windows first came along, we were the first company to build a Windows-based interpretation system. Everyone else was running on mainframes or Unix. That was about 1996. At that time, our software was used mostly by individual consultants who were working for oil companies.
OGFJ: What did the software do – seismic interpretation?
MATIN: Yes, and it cost just a fraction of what the competition cost. And that’s how we started – expanding today to cover the entire geoscientific workflow. We were fortunate to be on a platform that attracted massive amounts of R&D dollars from Intel and Microsoft. They literally spent billions of dollars a year developing the Win-Tel, the Windows-Intel platform. As those platforms became more powerful and more sophisticated, it benefited us because we kept taking advantage of those new technologies. Whether it was advanced graphics capabilities, high-end performance capabilities, or improved networking capabilities, SMT customers benefited. So we rode the coattails of Microsoft and Intel, and they are pretty good partners to have. At the same time, we continued to invest a lot in R&D so that our geoscience became market leading.
OGFJ: Who are your competitors?
MATIN: Mostly the oilfield services companies, where software is not their only business. Unlike them, software is our only business. I go to bed at night thinking about software and wake up in the morning thinking about software. We’re not distracted by other business segments, and we can focus exclusively on software and how to make it better.
OGFJ: So that gives you a competitive advantage.
MATIN: Exactly. Our software was designed for geoscientists by geoscientists. That is the legacy of our founder, Tom Smith, who was himself a scientist. If you walk down these halls, you will find people who have worked for ExxonMobil’s research labs, for Schlumberger, for Chevron, – you name it. They found their home here because we are a great company to work for, and because our product is unique. We have independent third-party research that shows our product is No. 1 when it comes to functionality and ease of use. In the 13 categories measured, we are first or tied for first in nine of them.
OGFJ: Who uses your product?
MATIN: Our customers run the gamut. Historically, our sweet spot was the independent because we started out selling to independent consultants who mostly worked for independent oil companies. So we have a very large penetration among independent E&P companies. Super majors and IOCs also have growing numbers of licenses. In particular we are seeing rapid uptake by the NOCs. Why? Unlike a lot of Western oil companies, which have a mature workforce, as much as 80% to 90% of the scientists with the NOCs have less than three years’ experience. They’re in their 20s and 30s and they grew up with a PC or a laptop. They don’t want to use a Unix-based system because it’s too complicated. They prefer our product, because it is so easy to use. So the NOCs are using this software to bring a new generation of scientist into their organization. That’s the future. These are the people who will work for them for the next 30 years.
OGFJ: Where are these young scientists coming from?
MATIN: Most of them from places like India, China, Malaysia, and Brazil. You don’t become a great interpreter just by reading a few books. You learn it over the years as you sit down with more senior people. These young engineers and interpreters need something that is easy to use and that will make them more productive quickly. Another important issue for NOCs is cost. NOCs are owned by the governments, and many of them are under strict instructions that 50% of the staff have to be local citizens. They want to be less reliant on foreigners. But they can’t afford to spend an enormous amount of money on old, outdated software. Our software is easier to use and may cost 80% to 90% less than the old software. They can buy our software and give everyone a personal copy.
OGFJ: How much training is required?
MATIN: It’s easy to learn to use KINGDOM, but many of our new customers are also new to geoscience. As a result, our training program not only trains people on the software, but also on the basics of geoscience. This is very popular, especially with NOCs. We have both on-site training classes as well as training in our offices here in Houston, in London, and in Singapore. We also do one-on-one training and online webinars. We have a lot of online resources, including videos that we put up on the website.
OGFJ: With all the young people coming into the industry, are you working with any colleges or universities?
MATIN: Yes, we have a well-developed university program. We provide them with our software for free. We have donated more than $100 million worth of software to about 180 universities around the world.
OGFJ: You joined the company a couple of years ago as CEO. Why did you choose to come to SMT?
MATIN: Tom Smith, who founded the company in 1984 and served as CEO for 23 years, decided in 2007 that he wanted to reduce his role with the company. SMT is now in 95 countries and we have more than 2,500 customers. So SMT had grown very successful and Tom was ready to step down as CEO while continuing to serve on the board of directors. Tom decided to sell the company to some private equity investors, although he still owns a piece of it. At that point they wanted to bring in a new manager, so they hired me. My background is 20 years of experience in the software industry and, prior to SMT, I was running a business that was part of Symantec. Previous to that, I was a partner at McKinsey & Company.
OGFJ: How will the recession affect SMT’s growth plans?
MATIN: Like everybody else, we’re watching what’s going on in the marketplace, and like everybody else, we’ll be affected by the downturn in business. However, because of our low-cost product, we think we’re in a better position to weather the storm than our competitors. We feel we’re very well positioned. As long as there are geoscientists, there will be a need for our software.
OGFJ: Is there a way to quantify the value customers receive from your products and services?
MATIN: At the end of the day, it’s all about avoiding the risk of a dry hole. The cost of a dry hole has become even higher in this environment. We have technology that improves the odds of success. One of our customers, using our software, recently found commercially exploitable hydrocarbons in a well that a super major had given up on. And our software can reduce your drilling risk at a fraction of the price of our competition. You can go to our website and do comparisons with our competition and it will give you an estimated dollar figure that you could save by using our product. It’s usually in the range of 80%. We also reduce the time it takes to complete geoscience workflows because our product is easy to use.
OGFJ: You have offices in Canada, the UK, Russia, and other places. How much of your business today is international?
MATIN: It’s more than 50%, and this part of the business is growing faster than the domestic side. We are very active in Africa, Asia, and South America.
OGFJ: Will SMT consider going public?
MATIN: We have no plans to do so right now. We are focused on growing the business and expanding overseas. We have no need to go public to raise money, and this would not be the best time to do an IPO anyway. However, ultimately, you define success by the value you create for your shareholders, and you do that by going public.