Wither your IT bucks?

PDM’s editor Neil McNaughton reflects on the current enthusiasm for e-commerce. He concludes that the push for paring transaction costs is out of kilter with the soaring oil price, and that we might be better diverting our resources towards knowledge management.

Last year, at the height of the Microsoft trial, investigators were surprised that much of the company’s financial records were stored not on a ‘digital nervous system,’ but on paper notes. The rather large numbers on these ‘post-its’ were presumably then copied into a dusty ledger and dispatched by diligence. Discussing this affair with an accountant friend, he was not at all surprised.


If you are making as much money as Microsoft, it is really quite immaterial whether your gains are recorded in some fancy real-time system, or whether they are scrawled down by hand. So if the tales are true, Microsoft’s push into the digital economy has a large component of ‘do what I say, not what I do.’ As long as a company’s activity is on a roll, it is much better to spend resources on marketing and development than to optimize a process like accounting which does not generate any revenue.

live or die

There are of course areas where e-commerce has already has a major impact. These are organizations like supermarkets and chain stores where a) their process is highly amenable to automation and b) they live and die by reducing margin . The companies in these categories are watching the e-commerce ‘revolution’ with some amusement. What they see is the rest of the world playing catch-up with their own EDI-based solutions, in use for a decade or so (the first EDI standard dates from 1987). Now exactly what e-commerce has to offer above and beyond EDI has never been very clear. The main differentiator maybe that it is sold by a new lot of consultants.

a commodity?

Which brings me to my point. When the consultants blithely map the lessons learned in commodity-based e-commerce to oil and gas, how applicable is it really? Are we a commodity, and into pinching every penny than can be pinched? Or are we making so much money that our margins are secondary? The answer depends on when you ask the question. The determining factor is of course the oil price - which is sometimes forgotten by those trying to make a ‘business logic’ point. Fluctuating oil prices and the concomitant investor sentiment mean that the upstream is sometimes a Microsoft-like business with ‘money no object’ and other times a desperate poor boy, stuck in loss making projects worse than the old coal mines or steel mills.

silk suits

We go from the silk suits of the investment banker to the overalls often the coal face (or the jeans of the dole queue?) as the industry cycles in and out. Now I am not saying that the cost cutting in the industry has not had its benefits. But today, the issue for the vendors and users of IT software is under investment. The G2R study reported on page 12 suggests that investment in upstream IT is of the order of $ 8 billion. Contrast this with an estimated 1 $ billion spend on upstream (non accounting) software and you can see that a lot of the spend is going into ERA/ERP solutions. These systems are all at the low margin end of the business.

Office Automation

As the oil price nudges up to $30 there is a case to be made for, if not big spending, at least a review of where the IT bucks are going. Areas at least as worthy of investment in e-commerce include knowledge management (see our report on the SMi Data Management conference on the opposite page) and even support staff training in office automation. Or again, making sure that everyone knows how to get the most out of your company intranet.


Now the latter may involve little more investment than a free web browser, which if I was cynical, I would suggest is why we do not hear much from E&P vendors about horizontal knowledge management tools. There is more money to be made in purveying a portal based e-commerce ‘solution’ than in showing users how to get more mileage out of Microsoft Access or Netscape Navigator!

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