Oil and gas companies consider themselves least digitally mature but believe digital transformation can drive vital process efficiencies, according to global study
IFS commissioned the IFS Digital Change Survey to assess maturity of digital transformation in 16 countries across companies in the oil and gas, commercial aviation, construction and contracting, manufacturing, and service industries. This specific study focuses on the oil and gas sector and you can find the full version of the oil and gas report here. Key findings were that the global oil and gas sector lags behind other industries in terms of digital maturity and is hamstrung by major skills gaps. The report concludes that many companies believe that disruptive technologies like big data/analytics, IoT and ERP can help drive crucial operational efficiencies to accelerate digital transformation (DT) and business success.
Oil and gas industry still in early digital transformation phase
Just 19 percent of surveyed oil and gas firms regarded themselves as advanced in leveraging DT, significantly behind aviation (44 percent), construction and contracting (39 percent), manufacturing (29 percent), and service industry respondents (23 percent). In fact, a third (33 percent) of oil and gas firms rated themselves as still in the early “nascent” or “exploratory” stages of their DT programs, with that figure rising to 73 percent of firms with less than 5,000 employees.
“The oil and gas industry has been facing turbulent times of late, with low oil prices leading to major job losses in some areas. But this only makes the need for digital transformation even more urgent. While this research highlights that many oil and gas companies are still in the early stages of digital transformation and battling recruitment challenges, there is also recognition of the value of digitization and data-driven insight,” said Colin Beaney, Global Industry Director for Energy and Utilities at IFS.
Process efficiencies key driver for digital transformation
Given the financial pressures that have been facing the industry, it’s perhaps not surprising that by far the most popular driver for digital transformation was “internal process efficiencies” (48 percent). It scored significantly higher than “increased competitive pressure” (31 percent), “accelerating innovation” (29 percent), and “productivity gains” (29 percent). There’s evidence to suggest that improving process efficiency is a vital first step on the digital transformation journey, providing a foundation on which to build larger-scale, more ambitious projects to accelerate innovation and make productivity gains. However, aversion to change and security threats/concerns remain the biggest barriers to successful digital transformation in the sector, the report found, mirroring feeling across all industries.
Big data/analytics , IoT and ERP prioritized investment areas
When asked about the adequacy of investments in digital transformation the oil & gas companies were the least optimistic of the industries surveyed, with 11 percent rating their organization’s investment level as inadequate, compared to the cross-industry average of 6 percent. The technologies highlighted as most prioritized to invest in for digital transformation were: big data/analytics (41 percent), Internet of Things (38 percent) and Enterprise Resource Planning (ERP) (33 percent).
“There is a great need to invest in transformative technologies in the oil and gas sector, both to drive efficiencies today and to enable rapid growth when the industry regains its strength,” said Colin Beaney. “Some companies do invest successfully already. One example is IFS’s customer Songa Offshore that invested in IFS’s IoT solution to integrate their IoT data into their ERP system. By utilising IoT data to plan predictive maintenance they have increased automation of workflows, improved asset reliability and saved costs.”
With digital transformation comes the need to populate the workforce with new talent possessing the requisite smart technology skills. However, almost a third (32 percent) of oil and gas firms feel unprepared to deal with this skills deficit, rising to 43 percent in mid-sized companies, while over half feel they have “the appetite to implement smart technology but are lacking the skills and resources”.
Business intelligence and cybersecurity are the areas where oil and gas firms are seeing the biggest shortfall in talent, although IoT skills are particularly sought-after in firms of over 10,000 employees while the cloud computing talent deficit is large in mid-sized companies.
A missed opportunity
Oil and gas firms are also behind the curve in harnessing the power of data. The use of data is often handicapped because it sits with a group of engineers in a specific area, rather than being enterprise-wide. While 81 percent have ‘access to the right data to make successful business decisions today and plan effectively for the future’, the industry is lagging behind peers in the utilization of data for innovation and competitive advantage. Only 7 percent are ‘successfully harnessing data-driven insight to deliver faster time-to-innovation, which is a distinct competitive advantage for my company’, and this is by far the lowest of any industry surveyed. Furthermore, in North America, not one company considered themselves to be operating at this level. Overall in the oil and gas sector just 16 percent of companies with more than 10,000 employees said they are “successfully harnessing data-driven insight”, versus over 25 percent in manufacturing and commercial aviation sectors. For small and medium-sized oil and gas companies, the figure was just 2 percent and 3 percent respectively. However, big data and analytics was considered the most disruptive technology by oil and gas firms, with the largest plurality (44 percent) believing advanced, integrated data visualization will have the most positive impact on crucial operational efficiency. Respondents also claimed the technology would positively impact operational risk (31 percent) and operational safety (11 percent).
The report also reveals certain differences across global regions. For example, 76 percent of North American and 70 percent of APAC respondents claimed they have the appetite to harness smart technologies but lack the skills and resources. This is in sharp contrast to less than half (42 percent) of those in EMEA who said the same. What’s more, barriers to digital change also varied greatly from region to region. In North America the “lack of a clear ROI for untried technologies” (40 percent) and “funding” (40 percent) came top, but in EMEA it was “aversion to change” (46 percent) and “security threats” (45 percent), and in APAC “legislation and compliance” (49 percent) and “lack of standard processes and training” (46 percent) were the top barriers.
About the IFS Digital Change Survey
This survey was commissioned by IFS to assess maturity of digital transformation across industries on a global scale. The cross-industry report can be found here. It was conducted as in-depth interviews by the research company Raconteur, who took in the views of decision makers in 16 countries in the oil and gas, aviation, construction and contracting, manufacturing, and service industries. Within oil and gas, 150 respondents participated in the survey. Countries surveyed were USA, Canada, the UK, Sweden, Germany, France, China, Japan, Australia, Norway, Denmark, the Netherlands, Spain, Poland, the Middle East, and India.