Oil and gas sector generates big business for systems integrators

The oil and gas vertical is a fertile field for systems integrators specializing in custom ERP applications.

It may not be a vertical commonly associated with IT service providers, but energy has become a dynamic market of late.

In particular, IT integrators that specialize in energy are seeing more opportunities in what's termed the "upstream" segment of the oil and gas sector. Upstream includes oil and gas exploration and the drilling and operation of wells. Outsourcing, consulting and software implementation are among the solutions on offer to customers in this field.

For example, Axon Global, a business transformation consulting firm specializing in SAP technologies, operates an oil and gas practice. Darrell Heath, vice president of oil and gas SAP alliances at Axon, said he sees considerable activity at the moment.

"The upstream portion is driving demand," Heath said, noting interest among oil field services and, in particular, drilling companies. "Everyone wants to own a drilling rig right now."

It's no wonder -- high fuel costs have put drilling in the national spotlight.
Oil prices soared to nearly $150 per barrel earlier this year and continue to run above the $90 mark. Against that backdrop, a number of integrators and consultancies target the oil and gas sector. These include Accenture, CGI Group, Deloitte and EDS, now an HP company.

For its part, Axon's oil and gas practice focuses on providing enterprise resource planning (ERP) deployments based on SAP. The company offers its Rapid Deployment Toolkit for O&G, an SAP solution that Heath said is tailored to the needs of that sector.

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Drilling companies deal with large assets and work crews that move about the country or different ocean sites. Such companies use ERP to make sure their resources are deployed effectively, Health explained. ERP solutions also help companies track equipment maintenance and keep tabs on employee certification and training. Drilling personnel may need certification to operate certain types of equipment.

As its name suggests, Axon's Rapid Deployment Toolkit places an emphasis on speed.

"One of the things we focus on is helping [customers] bring up a solution like SAP very quickly and implement best practices around it," Heath said.

Over the years, ERP deployments have acquired a reputation as time-consuming exercises, with 18-month or longer installations fairly typical. The Axon solution, however, can be fielded in 14 weeks to six months, depending on the breadth and scale of the customer's environment, according to Heath.

Axon's approach is to quickly provide a base set of ERP functionality and then layer on extended functionality over time as the customer becomes more accustomed to the solution.

M&A activity fuels oppportunities

Mergers and acquisitions are common in the upstream space, and integrators such as Axon find opportunity in consolidation. The trend got underway a few years ago and continues apace.

"We are still seeing a lot of players in the market being bought up," Heath said.

He pointed to the merger agreement between Grey Wolf Inc. and Precision Drilling Trust as one example. The two drilling companies inked a definitive agreement in August, but the deal had yet to close at press time. The combined company would have a fleet of 371 drilling rigs, according to a joint statement. Private equity groups are also buying upstream companies. Expro International Group, a field services company and Axon client, was purchased earlier this year by a private equity consortium dubbed Umbrellastream.

Consolidation begets complexity and generates interest in ERP.
As oil and gas sector companies absorb others, operations may span several countries, each with its own statutory reporting requirements, Heath said. Companies crossing international boundaries also need to deal with multiple currencies. Overall, combined organizations face rationalizing financial and accounting systems.

"As they become more and more consolidated, their problems become bigger and broader," he said. "That begins to drive the decision to move to a more robust package."

Expanded capability

Axon has also been involved in acquisition activity. The company earlier this year purchased EnterSys Group, a Texas company that provides SAP solutions in the oil and gas sector. Heath, who joined Axon via the EnterSys acquisition, said EnterSys Group's oil and gas practice experienced 20% to 25% year-over-year revenue growth during the past three years. He said he believes the practice can leverage the scale and cross-functional capabilities of Axon to achieve 30% to 35% annual revenue growth.

Human capital management is one such cross-functional capability. Axon now offers an oil and gas sector solution for managing human capital resources, Heath pointed out. In addition, Heath said he expects to be able to leverage Axon's SAP-based Business Planning and Consolidation tool.

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