Companies, markets and consumers are generating more data than ever before. However this potentially useful information typically resides in disparate, incompatible, internal and external information systems. Companies which can gather, analyze and interpret their data gain a competitive advantage. Those who can't interpret or who completely outsource this function lose long-term competitive capability which will eventually manifest itself in the marketplace. As an example of how better strategic data analysis could yield significant benefits, consider the oil and gas industry.

Some in the oil and gas industry are currently on the verge of turning their data over to the titans of technology, including companies like Google, Amazon and Microsoft, because they aren't able to manage all of it on their own. Today, oil and gas companies receive and analyze data from a variety of sources. Some of these sources include:

• Data sensors on equipment and assets used during oil and gas exploration, drilling, production, transportation, refining, and distribution
• Traditional enterprise data from ERP systems
• Infrastructure design and maintenance systems
• Historical oil and gas exploration, production, delivery, and pricing data
• Geographic information systems
• New technologies (smartphones and web data)

Oracle, in Improving Oil & Gas Performance with Big Data, suggests, "The rate that this data is generated is rapidly increasing leading to higher rates of consumption by the business analysts who crave such information. This increase in data velocity and sources naturally drives an increase in aggregate data volumes. Business analysts want more data to be ingested at higher rates, stored longer and want to analyze it faster."

The technology titans (Google, Amazon, and Microsoft) plan to use cloud computing, big data, artificial intelligence and machine learning solutions to enable oil and gas companies to extract needed information and insights from their vast volumes of data.

"Darryl Willis, part of a new group Google has created to court the oil and gas industry, said energy companies have reams of data but only use 5% of it, a serious problem in the digital economy. Signing a cloud deal with Google, part of Alphabet Inc., could solve that, he argued. 'Companies in the oil and gas industry will either be a catalyst for change or they will be a casualty of change,'" WSJ, July 24th, 2018 - Silicon Valley to Big Oil: We Can Manage Your Data Better Than You  His claim seems to be that of an aspiring data monopolist rather than support from a trusted systems supplier.

As we discussed in our previous post on Amazon Prime Day, tech titans are monopolists with a track record of exploiting and extracting value from their business partners. And while their efforts and expertise can sometimes seem to help in the immediate time frame, often the long-term impact leads them to become powerful economic adversaries. "... The relationship between Silicon Valley and the energy industry is complicated. While oil and gas companies need Silicon Valley’s expertise, some energy executives worry they could be competing with technology companies in years to come, especially as both sides explore renewable energy. In learning the ways of the industry, tech companies could also develop analytical expertise of value for energy production and oil-field services." WSJ, July 24th, 2018 - Silicon Valley to Big Oil: We Can Manage Your Data Better Than You

Oil and gas companies should not be handing over their proprietary data to the titans of technology.

We think there is a better way.

The oil and gas industry is asset intensive with many costly consumables. Managing these expensive resources has traditionally been done by professionals (e.g., engineers, geologists, lawyers, etc.) with the support of various functional information systems that are often incompatible. In addition, highly trained professionals manage the systems which monitor and track assets, as well as provide the bridge between disparate systems. The economic cost of human oversight and systems integration is substantial, while the resulting information provided remains fragmented.

Oil and gas companies should make each individual asset, (e.g., yard stock, drill-pipe, pumps, vehicles, etc.) and costly consumables, a node on the Internet of Things or IoT. This new network allows the company to have a standard data structure and language to monitor, manage and control all of its assets in aggregate. This IoT network becomes the fabric which links together existing functional systems. Exceptions—assets needing attention or those which could be deployed more effectively—can be easily identified and then managed in detail. This allows an executive to have a real-time on-line view of the performance and status of all operations for which they are responsible. The executive can better deploy responses to address operational and maintenance requirements. The executive also can respond immediately to remote exceptions.

Oil and gas companies need to understand how Internet of Things (IoT) and Blockchain technologies can simplify their business. They need to build business cases to justify making needed changes. They need advisors who can help them navigate this path effectively.

—Mike Romei contributed to this post.

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