Guest Blog by Marcel Cappetti, Managing Director, Oil and Gas, Global Enterprise Theater
I’ve just returned from CERAWeek in Houston—an international event that could be described as “Davos for the energy industry.” It’s a gathering of the power elite, including industry, finance, technology, and government leaders from around the globe. For me, it was the perfect sensing post for all the angst and opportunity that pervades the industry today.
It was my privilege to participate in a panel on “Leveraging Operational Excellence to Drive Margin Expansion”—a key concern of oil and gas (O&G) executives following the crash in oil prices. Too often in previous downturns, companies have relied heavily on deep cost cuts—including massive layoffs and cancelled projects—to keep margins afloat. But this time seems different. There is general agreement in the industry that we will not be returning to $100-a-barrel oil prices any time soon. So it’s time for more than a course correction. It’s time for digital transformation. Digital transformation will drive operational excellence and, yes, margin expansion.
During my talk last week, I shared highlights from a new Cisco study discussing the new reality in O&G and the opportunity for digital transformation through the Internet of Everything (IoE)—the networked connection of people, process, data, and things. Key findings include:
“Operational efficiency of existing projects” and “maintenance of assets and infrastructure” will be the top two areas of increased investment over the next 24 months.
O&G leaders clearly understand data’s potential—they named “data analytics for faster, better decision-making” as the No. 1 driver for IoE investment.
Business transformation—including breaking down organizational silos and converging IT and OT people, processes, and technologies—is essential for digital transformation. According to Cisco’s study, 59 percent of respondents do not believe their IT and OT organizations are aligned.
Companies that transform will have a significant bottom-line impact. Analysis by Cisco Consulting Services shows that by implementing a range of IoE-empowered solutions, oil and gas companies can capture their share of $600 billion of Value at Stake between 2016 and 2025. For a $50 billion firm, this translates into an 11 percent bottom-line (EBIT) improvement.
Cisco can help O&G companies in their journey to digital transformation through the investments we have made in key technologies—such as analytics, data, sensors, wireless, and mesh—and through solutions developed with key partners. For example:
Remote Operations—Developed with GE, our Connected Oilfield solutions increase personnel safety and improve asset integrity with predictive maintenance; real-time analytics at the edge and virtual expert support enable faster and better decisions.
Pipeline Automation—In partnership with Schneider Electric, Cisco’s Connected Pipeline solution uses analytics at the edge to improve security and environmental protection with predictive detection of pipeline intrusion, leakage, and deformation.
Wireless Operations—Developed in partnership with Honeywell and Emerson, this Connected Processing Plant solution improves personnel safety and process efficiency with wireless real-time tracking, video analytics, and automated incident response.
Secure Operations—Industrial cybersecurity solutions improve security and risk management to combat new and evolving cyber security threats, specifically in the process control domain. A good example is a project for Royal Dutch Shell that provides remote proactive monitoring and SLA-driven management of security, applications, and infrastructure. We are working with industrial control system delivery partners such as Yokogawa Electric and Rockwell Automation to support this solution, which Shell plans to deploy at all upstream, downstream, and lubricant sites.
When the price of oil stood at more than $100 per barrel, the need for oil and gas companies to improve operational efficiencies was primarily driven by the competitive marketplace—and many firms took no action at all. Read More »
Digital disruption is transforming virtually every role in every industry. Every day I see how the proliferation of online, mobile, and social interactions has created the need for completely new marketing strategies—and completely new skillsets for marketing professionals. We can see this same disruption across industries, as the Internet of Everything (IoE) creates fundamental transformation through the networked connection of people, process, data, and things.
For example, we recently published a new report that shows a global oil and gas (O&G) industry awash with disruption, and primed for digital transformation. Low oil prices have upended the sector, spurring an urgent rethinking of strategy by oil and gas executives—and accelerating the adoption of IoE.
This disruption is one of many factors impacting the oil and gas workforce today—from field workers all the way to the executive suite. Not only will new skills be required in an industry transformed by IoE, but new digital processes will also be needed to transfer knowledge, collaborate to solve problems in real time, and capture insights from a torrent of digital data.
To become agile enough to compete in the IoE Era, the oil and gas workforce must possess a mix of technical skills, industry knowledge, and business acumen. With talent shortages due to massive numbers of professionals retiring over the next few years—and a lack of necessary digital skills among those who remain— O&G firms need to make bold moves to transform their workforce strategy.
Extend the reach of existing expertise –Video-based collaboration can help bridge the expected talent gap by making the most of professional expertise that is spread too thin, as well as providing ongoing training throughout the organization. Video and web collaboration can effectively bring remote experts to any location, without the need for travel. For example, Saipem, an Italian oilfield services company, has employed high-definition video conferencing to cut travel costs, boost productivity, and provide subject-matter expertise throughout the company and with partners.
Real-time collaboration tools are increasingly important for far-flung oil and gas organizations.
The key to retail today is customer understanding —where each customer stands on his or her personal shopping journey, whether in-store or out. Retailers must “know” each shopper as never before. And they must offer the kinds of contextual, personally relevant experiences that will optimize their merchandise mix, create faster inventory turns, and drive greater customer engagement.
After all, the typical customer today is mobile, connected, and has heightened expectations. Many are accustomed to a deeper level of real-time interaction from innovative online retailers than from traditional brick-and-mortar stores.
Yet, as a recent Cisco study revealed, offline retailers – or retailers that combine on and offline capabilities – have their own unique advantages – if they step up to the opportunities of the Internet of Everything (IoE) economy. By blending the benefits of the physical store — such as the ability to touch, compare, and try on products — with the benefits of the virtual world, retailers can create a new value proposition that can’t be matched by their online-only competitors. In the process, they not only drive their own industry’s disruption but challenge for market leadership.
I’ve heard it said that CIO’s like their ERP systems the same way they like their cars: big, fast and German. Setting nationalities aside, IT pros craving more horsepower for something like SAP HANA need look no further than our UCS B460 M4 and C460 M4 servers, which now supports Intel’s new Xeon E7v3 processor family.
You may wonder why news like this is this important in an age where hardware is so often taken for granted. The answer is speed, in two flavors:
Organizations across the spectrum are working to become intelligence-driven throughout their operations, in real time, in order to create a perpetual and renewable competitive edge. Taking a long-term view in choosing the right infrastructure accomplish this important. Here are two reasons why:
You never hear about an analytic environment getting smaller. Massive increases in data volume mean these environments inevitably grow. For many, this will mean continuously expanding clusters of hundreds or thousands of servers for scale-out big data apps and bringing in ever-larger systems for the scale-up, in-memory analytics.
Data is the lifeblood of the digital enterprise. As the use of big data becomes pervasive and critical to day-to-day decision-making, the performance and predictability of these computing platforms will become increasingly paramount to success. So too will be the speed at which they can be deployed and expanded. You want to choose partners and technology you can trust.
There is no question that we’re on the cusp of rapid IT evolution. Ten years ago, a small subset of IT managers and system administrators defined and drove infrastructure and services with a finite set of management tools for everyone’s use. In the emerging cloud world, the control of the data center has become segregated into individual hardware components (compute, network, storage) and become more available to the masses.
Today developers are building and running cloud services and next generation applications. As users, we are also composing our own cloud services to get our job done and combining all the various things we can consume in the cloud. That means the number of users and developers that touch IT systems and services has grown exponentially, which is why automation, programmability, and light weight development environments have become critical in the IT landscape. By definition, the consumption of these varying services have also driven the requirements for fast, hybrid IT and given the opportunity to companies like Amazon Web Services to capitalize on the users.
You Ain’t Seen Nothing Yet!
But we are anticipating a much bigger wave in IT – one that we all have to be prepared for – which is digitization. With all things of value connecting to the network, we are walking around with super computers in our pockets and in our cars and homes. These “things” (e.g. FitBit, Nest, and the Telsa smart traffic mapping application) are the new “users” that are consuming services and data from our surroundings and using these services to get their jobs done. This is another order of magnitude greater than the system administrators who drove the IT revolution and the users like us who drove the initial cloud revolution. We need to find a way to push the intelligence and services all the way out to the edge and tie this uber-distributed compute fabric together to support the “things” while giving the developers and users the automated, secure platform, intelligence, and analytics that they need.
Hyper-distributed Application Environment
This means in the current cloud economy, enterprises will need a bimodal IT model to take advantage of this uber-distributed compute fabric – one that supports their existing legacy applications AND one that supports hyperscale applications (those cloud-native applications built for mobile, gaming, ecommerce, etc.). We need to allow enterprise to deploy those new applications in hundreds of clouds and not just on their own private cloud. Enabling this kind of distributed application environment will require an agile, FAST IT development strategy combined with the right cloud platform to manage it. In addition, this cloud platform needs to be hybrid as well to allow full workload mobility across any cloud, from any vendor in a way that guarantees visibility, security, compliance and full open standards.
We believe that Intercloud, the global network of connected clouds that we’re building with our partners, is the right hybrid cloud platform to help users take advantage of digitization and IoE in the near future. Our partners are going to play a major role in making this a reality for their customers.
Oh là là
Earlier today on main stage during Cisco Partner Summit in Montreal, I gave more than 7,000 partners a preview of this Intercloud-enabled journey to Fast IT and digitization, and the role they’ll be able to play with customers. Within this journey there are a few different Cisco solutions that partners can sell to their customers and monetize today or in the near future:
Discover True Cloud Usage Before enterprises race to embrace the world of many clouds and eventually digitization, it is critical that they understand their own cloud usage and what services are within their control. Most CIOs think they know how many cloud services they are using within their enterprise, but they’re usually way off base. In many organizations, line of business (LOB) managers lease and use multiple IT and cloud services without the IT department’s knowledge. After analysis, CIOs usually discover they are using 5 to 10 times more cloud services than they were aware of, called “Shadow IT” or “Shadow Cloud.” This creates exponentially more hidden costs than are visible to the IT department, and a host of other security risks. Our new Cisco Cloud Consumption as a Service not only helps customers find out how many Shadow IT services they’re actually using, but which applications are in use, whether the data stored on those applications is encrypted, and how much it is costing them.
Build a Hybrid Cloud Platform Once CIOs realize the extent of the cloud fragmentation, they need a hybrid cloud model that gives them control over this hyperscale distribution of applications and data. Cisco ONE Enterprise Cloud Suite helps customers build their own hybrid private cloud and functions like an internal cloud store while still guaranteeing visibility, control, security, policy management, and compliance. Since it already contains a combination of Cisco Prime Service Catalog, Cisco Intercloud Fabric, and UCS Director, Cisco ONE Enterprise Cloud Suite is the one-stop shop for Cloud Builders who want to help enterprises build their own private hybrid cloud and manage the IaaS, Paas, and SaaS services applications inside it, whether those applications are their own or purchased from a partner marketplace or a public cloud.
Link IT to OT 50 billion new things will be connected to the Internet and all of these “things” will create data that will be stored in clouds and will need to be managed by the IT department. This is the world of hybrid IT – not just hybrid cloud. Cisco Energy Management Suite is an example of an Intercloud application that links IT to OT to solve this problem. It helps identify the customer’s energy use and provides benchmarks for their cloud, IT, and OT assets. Partners will wrap their own professional services around this offer to perform an assessment of the customer’s environment and automatically create and deploy policies to better manage their customers’ energy consumption all through the cloud.
Sell a Private OpenStack Cloud Managed Service As I mentioned earlier, a new IT approach is needed for enterprises to deploy cloud-native applications. Centralized computing models won’t work for many of the IoE solutions today. The time-sensitive nature of these solutions requires localized analysis and processing, which requires a distributed intelligence that only the network can deliver. This distributed applications approach leverages the intelligence network as a platform to deploy many IoE applications closer to the decision point and the data so it can enable people and processes to take near real-time informed action. Partners can help enterprises build their own distributed application cloud environment and deploy cloud-native applications using Cisco OpenStack Private Cloud Bundle based on Cisco’s Metacloud acquisition. This OpenStack-based private cloud development application is designed to radically simplify the private cloud start up process for enterprises, deliver a public cloud experience for developers, and provide a reoccurring subscription revenue opportunity for partners. Not only that, but it allows enterprises to create, deploy, and modify these cloud-native applications built for mobile, gaming, or ecommerce (such as the Angry Birds game) that can become a new source of revenue and customer analytics for enterprises.
In conclusion, CIOs need to solve the problem of hybrid IT – not just hybrid cloud. Their new remit is to manage everything from data centers to the cloud, to edges, to mobile devices. Cisco Intercloud is the only solution that has been designed from the ground up to solve this problem while leveraging the power of the network.