Oil & Gas

Leveling the Field for Oil & Gas

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	Changing the Price Equation
	Benefits of Data Integration
	The Expanding Market for Oil
	About the Analysts

If you're a midsize company struggling to thrive and grow in the oil and gas industry, you need to use every available technological tool to increase your odds of success. That's why an increasing number of such companies are turning to Microsoft BizTalk Server. They are using it as an enterprise-class integration and business process automation tool to streamline their supply chains, according to Colin Masson, research director for chemical and process manufacturing, at AMR Research Inc., a Boston market research firm.

Midsize companies that supply the major oil and gas producers are grappling with the same issues as their large counterparts, including figuring out how best to serve new global markets (including China) and coping with information requirements brought on by regulations such as Sarbanes-Oxley. These market realities drive the need for easier information exchange among trading partners, says Masson.

Adds Jean-Yves Martineau, founder and CTO of Cactus Commerce, a systems integrator and Microsoft Certified Gold Partner in Ottawa, Ontario, Canada: "There is a growing opportunity in China, which is consuming orders of magnitude more gas than before" as its huge populace begins to buy cars for the first time. As the large, integrated oil and gas producers ramp up to serve this market, the smaller companies that make up their supply chains must follow suit.

For the first time, smaller players in the oil and gas field have access to a data-integration solution that can help them reduce supply chain complexity at low cost. BizTalk Server serves as a translation engine for disparate data—a major benefit for these smaller companies, which do not have a lot of IT resources to devote to building integration points with each individual customer.

Changing the Price Equation

With BizTalk Server, Microsoft has reduced the cost and complexity of industrial-strength data integration considerably. "Microsoft has put in most of the functionality that used to be found only in very expensive EAI (enterprise application integration) tools. BizTalk Server changes the price that companies have to pay to be able to receive that functionality," says Masson. The classic EAI tools typically cost in the six figures, well out of reach for a midsize company. "You've got the choice of using the older EAI solutions but they often cost many times more and you don't want to pay for that," says Masson.

He notes midsize oil and gas companies use Microsoft BizTalk Server both for application-to-application integration within the four walls of the company as well as exchanging different data types with customers and suppliers. "BizTalk Server does both," he says. "It can handle very large problems at large companies but it can also be deployed in a very small and inexpensive way at smaller sites to do local data integration." Midsize companies have just as pressing a need as large enterprises for benefits ranging from reduced costs and faster cycle times to optimized business processes.

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Benefits of Data Integration

Source: Cactus Commerce, Inc.

Smaller service providers often work for many different large producers of oil and gas. These service providers are in no position to dictate the format of data they receive from these larger partners. Microsoft BizTalk Server provides a platform for transparent data exchange between the partners. "The transactions could be sent much more cheaply and easily using BizTalk Server as opposed to trying to integrate each point of connection," says Masson. BizTalk Server allows midsize oil and gas companies to send transactions (such as purchase orders or advance shipment notices) in standard XML format directly into the larger partner's ERP system or supply chain portal, without the need to reprogram the connection to each large customer.

The benefits of data integration quickly flow to the bottom line. Bob Tretiak is executive chairman of BRIDGEWERX, a Microsoft Gold Certified Partner in Calgary, Alberta, Canada. BRIDGEWERX sells an "integration appliance" based on Microsoft technology, including the Microsoft .NET platform, Microsoft BizTalk Server, and the Microsoft SQL Server database. For oil and gas equipment suppliers and services providers, says Tretiak, "traditional EAI tools are too expensive. These companies are looking for more cost-effective solutions."

For example, BRIDGEWERX is implementing its integration appliance at a midsize drilling company that was taking an average of 23 days to send invoices to its customers. This customer was gathering paperwork at each of the rig sites and faxing it back to corporate headquarters, where clerks entered the data by hand into the billing system. From there (and after weeks of lag time) the system would spit out paper-based invoices that could then be sent or faxed to the customer. "They were doing it all by brute force. They were not able to put together all the information to create invoices in a timely fashion," says Tretiak.

This delay was costing the company serious money. Once fully implemented, the Microsoft BizTalk–based solution will give the drilling company a standard information platform on which to collect its in-house information and then exchange it automatically with the external customer's accounts payable system. The customer expects new invoices will now take just a few days to process, not weeks.

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The Expanding Market for Oil

Although BizTalk Server undeniably drives cost reductions, it is equally powerful when used as an engine for innovation, according to Martineau of Cactus. All manufacturers strive to squeeze out waste, but focusing exclusively on that without paying attention to product differentiation is dangerous, he adds.

Playing Catch-Up

IT budget as percentage of revenue in midsize companies (those with less than $1 billion in revenue) in the oil, gas, and chemical industries:

Source: AMR Research Inc., 2005

"The real opportunity for businesses is not necessarily in operational efficiency. It's really around innovation," says Martineau. "What can I do today that I wasn't able to do yesterday because I have this coordination of data throughout my supply chain? That's where there is a huge opportunity for differentiation and sustainable growth for companies of this size." Employees who currently focus on processing paperwork such as accounts payable or receivable can now concentrate on more value-added activities, setting the stage for innovation.

Sustaining new product innovation is indeed a common challenge for many small and midsize companies, as notes a recent AMR study. More than one-quarter of new product and service introductions by small and midsize oil and gas companies were failures, according to the AMR Research. Perhaps BizTalk can help change that. Says Martineau: "Innovation can help a small company grow bigger."

There aren't enough qualified people to hire in the oil and gas space, adds Tretiak. "BizTalk can allow them to scale their business without adding more people, that's where the innovation comes in. They can use data integration to pull data together to make decisions faster, without needing to hire more people and drill more wells."

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About the Analysts

BRIDGEWERX

BRIDGEWERX is a software development company providing solutions and products that help corporations of all sizes establish successful communications among companies, people, applications, and data. Customers include TELUS, ENMAX, Southern Alberta Institute of Technology, BOWEN Workforce Solutions, Petro Canada, and Anadarko. The company's BRIDGEWERX product helps reduce the need for complex programming and expensive developer resources while leveraging the power and flexibility of Microsoft BizTalk Server and Microsoft .NET.

Cactus Commerce

Cactus Commerce Inc. is a software and services provider dedicated to helping organizations of all sizes bring more efficiency to their complex business processes. A Microsoft Gold Certified Partner, Cactus works closely with Microsoft to develop and deliver rapidly deployed, cost-effective and extensible trading partner integration solutions that address the three critical components of e-commerce: to connect, to trade and to settle. Cactus complements its packaged software offerings with an array of professional services and unique industry expertise.

Lauren Gibbons Paul is a senior writer for Triangle Publishing Services Co. Inc. and has more than 15 years of experience as a writer and editor for leading business and technology publications, including eWEEK, CIO, Managing Automation, and Network World. She has also done research assignments for a number of well-known analyst firms.

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