Oil and Gas Upstream Technology and Consulting services – Which way to go?

Let’s start with understanding the recent developments in Oil and Gas Upstream Industry and its market in technology and consulting services.

Around the fall of #Satyam, many players rose in the technology and consulting segment of Oil and Gas Upstream service industry. Tier-1 Indian majors such as #Infosys, #Wipro, #TCS etc. got opportunity either to enter, or to penetrate deeper for new opportunities into the huge market segment. Their increasing presence in the segment started becoming a threat to global majors such as #Accenture and #IBM.

In 2011, the segment where Infosys, TCS and few others had significant presence in the race, Wipro took a giant leap by announcing its acquisition of #SAIC’s oil and gas IT services business. The strategy of inorganic growth provided Wipro with broader and deeper capabilities in the upstream business. However, the fight for gaining the market share was pretty much alive and growing at substantial rate. Most of the players were finding new business or taking bits and pieces from others.

At the same time there were technology product companies continued to grow by developing industry wide applications to full fill the operations of upstream industry. These companies set up their own teams and geared up to penetrate the technology and consulting service market as well. The entire strategy for them was to grow on their own, even though it takes time.

The overall idea will be clear with some specific scenario. Let’s analyze the #Hydrocarbon Management services segment.

Hydrocarbon Management business function is one of the major centers of attraction for these market created twists and turns. Being one of the significant and critical activities for Upstream Players, many products have emerged catering to its requirements. To name a few, #Energy Components (EC), #Upstream Operations Management (UOM), #Enterprise Upstream (EU) and many others.

As per IDC MarketScape: Worldwide Hydrocarbon Accounting Software 2013 Vendor Assessment, Energy Components from #TIETO had been considered as one of leaders. The product being proficient in most of the business function areas starting from production to transport, to sales and finally revenue; Industry wide it has one of the highest acceptance and is being utilized by many IOCs and NOCs globally.

Along with technical expertise, immense business knowledge and experience is required for any product deployment. For EC implementation, #Hytracc, one of the primary providers of specialist consulting; satisfies this area. Hytracc consultants play key roles in architecting and implementing the hydrocarbon accounting and management solution in most of the industry wide EC deployment.

It is observed that technology and consulting service majors used to partner with both TIETO and Hytracc to serve the upstream industry and implement EC.

Now things are changing; TIETO being the EC product owner is trying to vertically integrate itself. It is building its service team based on similar offshore model, which Tier-1 majors follow. The move in turn fetches the organization low cost resource base which plays an enabler role to penetrate the service segment.

The strategy of going to the market as a complete package of end to end solution, both product and services, can be fruitful; especially when industry lacks quality and inexpensive recourse to support the oil and gas clients/ businesses.

But the story is not yet over. A complete turnaround has happened in the segment of Hydrocarbon Management Services. Few days back news came from global consulting leader Accenture related to acquisition of Hytracc Consulting. Hytracc which has primarily the best available capability for implementation of EC is going with global technology and consulting major Accenture. This has created a straight threat to all other players, including TIETO. By this move Accenture hopes to get some of its lost ground.

Two different kinds of firms are trying to expand their expertise in totally far distant methods. Accenture trying to go inorganic manner on the other hand TIETO is trying to develop internally in organic manner.

Will it decide the final winner in Hydrocarbon Management services? There are many open questions, answers to which are yet to be unfolded.

Most of the acquisition, particularly of firms where core strength is their human expertise, faces issues with their organization culture and practice getting overshadowed by the acquiring firm. This directly impacts retention of people. Can Accenture effectively handle the challenge? If not what will be the impact on industry structure?

Accenture has always been a high priced service provider, with Hytracc being another costly affair for the end user; will they be able to serve the industry needs at an affordable price? In contrast TIETO which has complete product knowledge, and low priced service segment might certainly miss out Hytracc’s business expertise.

The first thing which comes to my mind is will Accenture and TIETO really compete for EC implementation. Or will they form a cartel and keep others away from the business.

If so, will it be a threat or opportunity, for other existing players in both product and service segment?

Will the substitutes for EC such as UOM or EU try to gain the grip on Hydrocarbon Management Business Process segment by improving their product and at the same time making an alliance with other technology and consulting service majors? Will they go for some strategic pricing which might be vital for their success?

Or is the segment so big and even grow further such that it can accommodate every player whether existing or any new entrants. In future do we expect any conventional partnerships similar to the ones in present or can we think of something new emerging which might be totally un-conventional? Whatsoever; final question will and should be… how this is going to impact the end consumer… huge, cash rich, tech savvy … Oil and Gas Upstream Industry.

Note: Above views are personal and is not affiliated to any individual, group or organization.