The Petrotech Outsourcing Project (April 1998)

The client side of the outsourcing story was presented by Paul Blair of BG E&P. The decision to outsource was made as part of the de-merger of British Gas which resulted in the creation of BG E&P.

Prior to the Petrotech project, British Gas’s E&P effort was organized into "resource intensive" asset based teams. A modern enough business paradigm you might think, but there are no sacred cows in the cultural revolution of BPR. At de-merger, E&P was to downsize by 45% in a move to a functionally-based organization-designed for better utilization of resources. The lead role in the "Petrotech" outsourcing project was awarded to SAIC. This arrangement came about from BG’s desire to have "centralized control through a single point of contact with the primary partner".

Working under SAIC are GeoQuest, Landmark and other contractors. Petrotech is described as a partnership and based around a core of service level agreements. A risk/reward cost model is used and cost savings are shared between BG and the providers. Performance is metered regularly by a "Balanced Business Scorecard". Petrotech has been up and running for one year now. Blair described outsourcing as a "major, non-trivial task". The first three months were a transition phase, with BG staff retained to assist with the process. Subsequent to this transition BG has experienced an (unplanned) 100% staff turnover – with many taking the voluntary retirement package which was on offer. Blair suggested that a retention bonus might have been a better ploy than paying people to quit!

Major findings after the first year

Expectation levels were unrealistic

There was confusion over the respective roles of the legacy corporate IT services and Petrotech. The latter was blamed for some of the failings of the former.

Recruiting and retaining high quality staff proved tough

Keeping members of the "old guard" in key positions was considered a mistake

Friction was generated between the different "cultures"

New technology was introduced "too slowly" – a new approach is slotted for 1998

On the positive side, the new professional approach – notably in cartography – overcame some skepticism on the part of the user community. Additionally, substantial cost savings have been reported – as much as 40%, although the situation before the change was such that the baseline has been hard to establish. Outsourcing is a sensitive issue to E&P personnel and Blair was probed by questions from the floor as to the overall efficiency and gains accruing from the outsourcing effort. Blair opened up and stated that the outsourcing decision was taken at "a high level" in the organization and that not all the results have been positive. "We have lost expertise – outsourcing is a balancing act. In some areas the service is not as good as it was before the outsourcing initiative." The main positive point to date has been the cost saving.