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As energy prices drop, cloud adoption rises

Oil and gas companies have typically lagged behind in the adoption of new technologies, says an industry analyst. But many are coping with the drop in oil prices by turning to the cloud.

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Though the oil and gas industry has traditionally been slow to adopt new technologies, the recent drop in the price of crude has created a push toward increasing efficiency through the use of cloud technology.

“Oil companies have typically been laggards to adopt new technology. That’s just how they are, especially with $100 per barrel oil,” said Chris Niven, the research director of oil and gas for IDC Energy Insights. “These days, with oil hovering around $30 a barrel, oil companies realize they have to get more efficient and reduce costs.”

In surveys with industry leaders on how they’re coping with the drop in oil prices, IDC found that many are turning to technology to fill the gap, no matter what part of the industry they operate in.

For the upstream sector, which focuses on exploration and production, Niven said their top IT priorities right now are reducing costs while increasing efficiencies.

“What’s more important to midstream is increasing productivity, optimizing processes and meeting compliance requirements,” he said. “Content management was the No. 1 IT initiative, which goes hand-in-hand with meeting compliance.”

The top IT driver for the downstream sector, said Niven, is application and IT modernization, followed by cloud adoption.

“They want to increase productivity and agility and optimize processes,” he said. “It’s interesting that these drivers … jive very nicely with cloud when you think about what cloud promises.”

As the industry addresses its technology needs, it’s discovering that SaaS products are the best option, said Niven. But when it comes to converting to the cloud, the greatest concern for most oil and gas companies is security. As a result, a majority is starting the transition on private or hybrid cloud with non-core applications.

“You can imagine that if your No. 1 IT initiative is security, you’re going to be very careful with what you put on the cloud,” he said. “However, with lower oil prices, companies are starting to realize that cloud has a lot of promises to reduce costs and be more agile, and have functionality rapidly deployed.”

Niven adds that oil and gas companies have even begun approaching large professional service providers asking for tailored solutions they can purchase as a service.

“The three big things that major oil companies are outsourcing are infrastructure — things like support of your environment, help desk, that sort of thing — and also application development and application support and maintenance,” he said. “The way they are approaching it is they want bigger ideas from their vendors: Where does cloud apply? And what can you take over from me and help me save me money?”

Though the oil and gas sector is struggling through a significant drop in the price of energy, it may ultimately allow it to emerge a more streamlined, efficient and technologically advanced industry.

“It’s a matter of still going through an acceptance curb, but I see lower oil prices acting as a catalyst to push the oil companies to act faster,” said Niven. “These service companies are becoming more strategic. They know how to implement their platform better than the oil companies, so I think you’re going to see professional service companies get much more active in helping with cloud adoption.”

Image courtesy of Free Digital Photos

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