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Competitive Agility

The cloud imperative for the energy industry

October 08, 2020

RESEARCH REPORT

In brief

  • Energy companies are well-positioned to take advantage of cloud. With the perpetual volatility and disruption, energy companies must act now.
  • Cloud transforms the energy industry and can help make companies become more agile, resilient, competitive and sustainable.
  • Upstream, midstream and downstream value chain elements can be run more efficiently, with higher margins.
  • Accenture shares four critical steps companies can take to launch cloud-enabled transformation to reap maximum benefits.

With the energy industry priorities shifting and the volume of data steadily rising, the need for cloud has never been greater. At the same time, the cloud value proposition for energy companies has never been stronger, therefore truly embracing the potential now has become a business imperative.

The energy industry has never been more ready to embrace the cloud potential. The energy cloud market is growing significantly each year, and many operators have started experimenting with cloud technologies. Oilfield services companies are leading the charge, with many planning to completely retire their on-premise IT in the next five years. But even the supermajors are embarking on their journeys to cloud.

The energy industry needs to pursue three reinvention imperatives:

  • Enhancing agility and resilience
  • Boosting competitiveness
  • Enabling sustainability

Why cloud?

seamless and instant connectivity and computing powerEnergy companies’ structural and technological limitations have created barriers to connectivity, scalability and effective data management—three things that are essential to achieving the industry’s imperatives and its reinvention. Cloud helps to dismantle these barriers by providing that is scalable and comes at a lower cost. It also transforms an organization’s ability to use data in fundamentally new ways.

Data in the energy industry is typically housed in many disconnected on-premise systems and databases. Reinvention calls for bringing all that data together to enable an enterprise-wide view, generate insights through the application of analytics and applied intelligence tools such as machine learning, and facilitate better and faster decision-making. Current IT environments are simply not up to the task. The issue will become even more daunting as the amount of data at energy companies’ disposal continues to proliferate.

Why now?

Cloud is a powerful foundation on which to build the data capabilities that are needed now. Companies that employ cloud (and cloud-only analytics tools with computing requirements that can only be addressed with cloud) to harness the power of data will enjoy a clear competitive advantage.

Cloud platforms enable near real-time connectivity between what have traditionally been siloed functional areas. This connectivity makes it possible for companies to build and leverage advanced analytics to analyze, explore and establish causal relationships between various functions. An understanding of these functional relationships, in turn, enables companies to take an integrated business view to decision-making.

Ultimately, it is a collaborative environment that enables the energy to become sustainable.In an industry that is inherently volatile and cyclical, this integrated view is critical for developing resilience, as well as the flexibility that is needed to scale up or down with fluctuating cycles. Energy companies that fail to take advantage of cloud’s connectivity, flexibility and security will find it exceedingly difficult to achieve the business resilience, variable cost models and value-optimization capabilities that enable competitiveness.

Across the energy value chain and current industry applications

Cloud can transform every element of the energy value chain. Connectivity, scalability, analytics and automation can drive cost savings and profitability in virtually countless ways.

Upstream

Connect financial and operational data with real-time sensing technology to optimize decision-making on spending, well productivity and cycle time.

Midstream

Deliver impact in two key areas: pipeline network management and commercial optimization while enabling more effective predictive operations.

Downstream

Expand visibility and integration, thereby enabling self-optimizing planning, predictive operations, risk calibration and better cost management.

B2C retail and B2B marketing

Enable the integration of point of sales and external data to allow advanced scenario modeling.

Capital projects

Integrate project, cost and time data into complex 5D models for real-time visibility, design standardization or optimizations, and collaboration.

Not all cloud solutions are created equal. The farther companies advance on their cloud journeys, the greater the benefits.

At its most basic level, cloud is used to optimize technology. Accenture’s analyses indicate this use of cloud typically reduces total IT spend by 25%-30%, which translates to ~0.5 percentage point (pp) increase in ROCE.

In the next level of maturity, cloud can be used to accelerate a company’s digital journey through the adoption of cloud-first automated processes. Accenture estimates the benefits at this stage to be in the order of 4 to 6 pp of ROCE.

Moving to action

There are four ways companies can move to the cloud. Each option—or cloud state—addresses specific needs and migrates different aspects of on-premise IT architecture to the cloud over different timeframes.

1. Infrastructure

Move current workloads from data center to a cloud infrastructure hosted by a third-party provider.

2. Enterprise systems

Move enterprise business process applications such as ERP or CRM to versions that are offered natively on the cloud platform.

3. Core business systems

Shift core business processes and systems such as asset performance management to applications and platforms offered natively on the cloud.

4. Value propositions

Create new business solutions from scratch—such as an application that measures decision impacts across the end-to-end organization.

No time to wait

Amid the industry’s current state of disruption and the critical energy transition looming ahead, energy companies need to redefine resilience, boost competitiveness and prepare for the sustainable energy future. Cloud is a critical enabler of each of these imperatives—and, by extension, the industry’s reinvention.

What steps can energy companies start taking today to launch cloud-enabled transformation?

Business objectives

Start by defining clear business objectives across each of the cloud value horizons.

Sourcing strategy

Design a sourcing strategy for cloud, deciding which processes to keep running on-premise and which to migrate.

Current applications

Access your current applications for cloud readiness and decide which to re-platform, discard or migrate as-is.

Operating model

Develop an operating model that encourages the use of analytics and new ways of working.

Muqsit Ashraf

Lead – Strategy

Jan van den Bremen

Senior Managing Director – Technology Lead EMEA

Bringing technology, functional and industry expertise across key platforms to help European companies achieve enterprise-wide transformation.

Manas Satapathy

Managing Director – Strategy & Consulting, Energy

Helping unconventional oil and gas operators with strategy, lifecycle management, market analysis and transformation efforts.

Rami ElDebs

Managing Director – Strategy & Consulting, Energy

Focusing on digital strategy, market entry, intelligent enterprises and global operating models.

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