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• Cognizant 20-20 InsightsOil and Gas IT Game PlanHow to survive and thrive mergers and acquisitions,divestitures and sepa...
MAD&S Challenges                                                               Impact on business process as part of dives...
•	 Dependency    management: Proactive mitiga-                    •	 Communication        and stakeholder manage-  tion of...
Business vs. IT                           Business Point of View                                                   IT Poin...
Separation/Integration Testing                             Success Factors and Best PracticesMAD&S requirements introduce ...
Core-Flex Resourcing Model       Core-Flex Staffing Model                                                       Lower cost...
A Pragmatic Approach to Change                                   Plan for Change                                          ...
Separation into Two Companies           Current Production        Downstream               Upstream Company       Downstre...
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Oil and Gas IT Game Plan

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How the oil and gas industry can thrive in a time of industry tumult, full of mergers and acquisitions, divestitures and separation.

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Oil and Gas IT Game Plan

  1. 1. • Cognizant 20-20 InsightsOil and Gas IT Game PlanHow to survive and thrive mergers and acquisitions,divestitures and separation. Introduction This paper discusses our view of the typical challenges faced by IT groups during merger, The challenges and opportunities arising in the oil acquisition, divestiture and separation (MAD&S) and gas industry – including elasticity in the cost scenarios and the best practices to overcome of crude, increased competition, new and uncon- those challenges. ventional shale gas discoveries and a stringent regulatory environment — are forcing companies Challenges Faced in the to merge, invest, divest and swap assets. By MAD&S Landscape realizing that exploration/production and refining/marketing are different businesses that For the oil and gas industry, the IT issues arising need specific skills and shareholder alignment, from mergers, acquisitions, divestitures and sep- companies are now able to chart a course to arations can be immensely complex. Companies become stand-alone entities with clear, separate within the sector are more vertically integrated operations. and have longer value chains than companies in other industries. Moreover, the recent discoveries of unconven- tional shale oil plays and their transformation Based on our experience working on large-scale to major crude oil production centers have led programs with O&G clients, some of the key major O&G corporations to acquire assets and challenges for the IT organization in the MAD&S merge smaller players to exploit these reserves. space are: These market dynamics have encouraged leading • Program management integrated O&G companies to follow a two-fold strategy: • Application and data management • More closely align operations to the market • Testing and validation and free up shareholder value via a split in • TSA and vendor contracts their upstream and downstream operations. • Organization and change management • Acquire the assets of or merge with smaller • Infrastructure players that have interests in unconventional sources and upstream assets. cognizant 20-20 insights | april 2012
  2. 2. MAD&S Challenges Impact on business process as part of divestiture and identification of process hand-offs. Incomplete understanding of data requirements and data transformation needs. Segmenting and management of “as-is” Poor senior executive applications vs. applications that require engagement and/or alignment modifications. through the separation phase. Meeting short-term application Lack of rigorous separation and execution needs while transforming Lack of TSA and SLA rigor and formality due to false plans considering Day 1 through Day 3. applications for future state. comfort in “same parent” relationship between parties. Absence of a dedicated transition/ Application Underestimation of time and effort required to review and program team to drive delivery. & Data renegotiate new contracts. TS Co n Significant distraction from BAU activities As tra Absence of strong project management overseeing the ent nag am and resulting lack of focus on customer. and cts contract separation process critical for Day 1. em Ma Progr Weak governance and controls to ensure Ve Poor approach to categorization and visibility and accountability across the program. ndo MAD&S prioritization of vendor contracts. r CHALLENGES ing Insufficient focus on business readiness as Lack of people bandwidth and knowledge management. n T or Org Chan est atio ion initiatives near completion and transition to BAU. ani ge Weakly managed communication, underutilization of assets egr rat zat Unclear future-state design for the separated and disruption of existing processes. Int Sepa ion companies, including decisions regarding shared services. Absence of end-to-end test data management and unpreparedness & Absence of clear indicators to determine the Infrastructure for the specific data requirements pertaining to MAD&S. success of the change management process. Issues with testing infrastructure planning, Lack of a thorough change management Maintaining data and management and deployment. plan and approach. system security. Absence of a central governance model overlooking Weakly managed or poorly orchestrated Complicated application and the testing for MAD&S activity. communication strategy. infrastructure environment, with poor understanding of critical Ineffective tool management and utilization dependencies. aiding in the MAD&S activity. High Complexity New company data center set-up Medium Complexity (sizing, capacity, contracts). Indecision regarding business and application changes and subsequent delays to hardware and software orders.Figure 1Program Management • Transparent review and reporting: Tracking the status of the program and providing aThe success of MAD&S depends on proper consolidated view of progress is of greatplanning, an effective program management importance during execution of MAD&S activityoffice (PMO) and clean change management that due to the complexities involved. Maintainingstraddles IT and business needs. In our view, key key management information from the boardchallenges in running a successful PMO are: level down and reporting on key actions and• Lack of senior executive engagement decisions enable an open and consistent infor- throughout the separation/merger phase. mation flow within the organization and hence• Absence of a dedicated transition/integration are imperative for successful operation of the team to drive delivery. program management function.• Lack of rigorous separation and execution • Budget tracking: The scale of the MAD&S activ- planning, coupled with diminished focus. ity and the intricacies of the transactions make it necessary to ensure proper management,• Following the deal announcement, a lack of tracking and reporting of program finances and focus on keeping the current business running. making certain that all projects remain within• Weakly managed/orchestrated communication. budget and that remedial actions are taken when budgets are under threat.Success Factors and Best Practices• Governance & organization: First and • Planning and tracking: A consistent approach foremost to IT program management success to program planning and tracking provides a is a pragmatic and structured framework consolidated view of the program roadmap and for driving decisions and providing strategic enables full control over outcomes. direction. Project/workstream owners need to • Proactive risk and issue management: For be brought together to ensure that projects any MAD&S activity, a speedy and robust are properly set up and benefits are clearly mechanism for dealing with program-wide risk articulated. and issue planning is highly recommended for successful execution of the initiative. cognizant 20-20 insights 2
  3. 3. • Dependency management: Proactive mitiga- • Communication and stakeholder manage- tion of the risks arising due to project delays ment: With multiple stakeholders and more can be achieved by identifying, tracking and than one organizational entity involved in the managing cross-project and cross-workstream MAD&S activity, consistent flow of information dependencies. not only guarantees faster decision-making but also removes ambiguity of actions and out-• Change control: A robust change control comes. Implementation of a proper communica- mechanism for tracking changes to project tion plan disciplines the engagement and man- plans, estimating the impact and taking action agement of stakeholder inputs to the program. not only minimizes delays to the program but also provides consistency in information and • Resource management: Availability of the decision flow within the organization. right people at the right place and the right time is vital to a successful PMO. This is why• Project assurance: Key issues of individual an overall resource plan is needed that aligns projects and common concern across the the supply of resources and skills with the program can critically affect the progress of demands of the program. the program; hence, an independent challenge and assurance function that helps identify • Vendor management: The involvement of and resolve these issues is of paramount multiple parties in the program with hand-offs importance. at different milestones makes vendor management an integral facet. This is to ensure• Project standards: Ensuring adherence to a rigor in the procurement and management standard approaches, tools and techniques of subcontracted third-party products and to support project delivery not only provides services and streamlined communication and great economies of scale in the long run but engagement. also provides certainty of quality outcomes at every step of the program. • Delivery: Iterative development ensures rapid delivery and risk minimization, as well as factor• Benefits management: Value-to-business is learning and improved re-usability. the key driver behind any program. Hence, planning and tracking the delivery of benefits Application and Data Management and results arising from the program and ensuring that the investment delivers the MAD&S introduces many challenges with respect required return to the business is critical to the to migration of applications, data and function- evaluation of such initiatives. ality changes to incorporate the organization’s goals (see Figure 2).Data Management Challenges Knowledge of the System Short Turn-around Time Understanding the data and the Typically, there is a need to freeze the data entry in underlying business rules are proving the production system while separation is being to be the primary reasons for delays performed; as a result, there is a need to minimize and the resulting escalating costs. downtime as much as possible. Data Separation Multiplicity of Interfaces Managing Sensitive Data Challenges This is the main challenge of an integrated Data separation activities may require separation effort. If “n” application systems movement of sensitive data. Security must be directly interconnected, it will and legal requirements may prevent sharing of sensitive data with an Ensuring produce n*(n-1) connections, or interfaces. oshore IT partner. Data Integrity There is a need to ensure data integrity, as the database schemas will change; business entities will change to portray different functional meaning; and the format and usage of data captured in the new system can be totally different.Figure 2 cognizant 20-20 insights 3
  4. 4. Business vs. IT Business Point of View IT Point of View Degree of business process shared between Shared infrastructure upstream and downstream companies Functional dependencies between the two Shared applications entities Common roles (business and IT staffs Number of interfaces between applications performing job functions for both companies) Common customers Shared data between upstream and downstream business entities (i.e., enterprise BI)Figure 3Based on our experience with O&G clients, key Success Factors and Best Practiceschallenges for application and data management There are four key steps to successful datainclude: management in a typical MAD&S scenario (see• Impact on business process as part of a split or Figure 4): merger and identification of process hand-offs. • Analysis and strategy for data separation• Segmenting and management of “as-is” appli- • Preparation cations vs. applications that require modifica- tions (projects). • Execution • Stabilization• Impact of data requirements and data transfor- mation. Key considerations for data management include:• Meeting short-term application needs while • Source application availability and criticality transforming applications for future state. • Target application• Establishment of standards through a homo- • Process complexity involved geneous representation of data across various data sources. • Volume of data • Data qualityBusiness and IT groups have different points ofview for data separation complexity (see Figure 3).Data Migration Framework Assess & Profile Cleanse Transform Load & Verify • Assessment study • Identify and plug data • ‘As-is‘ and ‘to-be’ mappings • Initial bulk load Steps Involved • Source and target study inconsistencies and templates • Validation of the and gap analysis • Data quality checks • Usage of migration tool migrated data • Extensive data profiling • Fill data gaps to enable • Delta-load the spilled • Sensitive data masking and data split or missed data split • Early detection and removal • Minimal data volumes • Faster template-driven design • Assured load of redundancies completeness Benefits • Assured data quality • Rapid script development • Assured data quality • Evolution of standards • Faster execution of one-time if none exist data migration tasks • Data profiler • Data profiler • Code generator • Data comparator Creators • Data generator • Code reviewer • Data reconciler Value • Metadata managerFigure 4 cognizant 20-20 insights 4
  5. 5. Separation/Integration Testing Success Factors and Best PracticesMAD&S requirements introduce the need for con- The key to address the above challenges lies insiderable changes in applications (multiple small the following best practices:projects) and thus the requirement for testingvarious components/applications of the entire IT • Building a scalable testing model to cater to the needs of separation or integration testing builtportfolio. The different types of testing involved on goals, KPIs and metrics to determine thein typical MAD&S scenarios include: progress and health of the program.• Business scenario/process end-to-end testing, • Implementation of consistent and repeatable including integration with non-SAP applica- testing processes. tions. • Identifyingstructured methods to determine• Functional testing of core ERP transactions. the amount of testing.• Testing of interfaces between ERP and other • Adoption of solution accelerators and applications. techniques to streamline and enhance the• Security/role-based testing. testing process.• Break-point testing. • Implementation of tools and infrastructure to provide greater business value while signifi-• Supporting user/business acceptance testing. cantly reducing the time and effort involved, as• Automation assessment, recommendation, well as the amount of manual errors. development and execution. Figure 6 illustrates a core-flex resourcing model,• Performance testing. along with the various critical elements to address• Data conversion testing. the separation/integration testing scenario.In our view, the typical challenges in separation/ TSA and Vendor Contractsintegration testing are around the six components The IT organization faces multiple challenges inof people, process, governance model, infrastruc- building Transition Service Agreements (TSA) andture, data and tools (see Figure 5).Testing Challenges • Availability of SMEs and over-allocation of business users. People • Flight of knowledge risk. • Scales of economy not exploited. • Possibility of disruption of existing processes due to organizational/BU reprioritization. • Variation in test coverage and risk prioritizations. Process • Unidentified and unutilized accelerators and best practices. • Weakly managed /orchestrated communication. • Absence of a centralized testing body. Governance Model • Lack of single ownership and accountability due to BA’s and developers’ focus on separation-related activities. • Downtime of test environments. • Constant struggle to get infrastructure team’s attention on a priority basis Infrastructure for non-production environments. • Capacity planning issues when it comes to multiple test environments. • Lack of planning separation-specific test requirements around infrastructure. • Unavailability of test data. Data • Absence of data migration/validation tools. • Unpreparedness for separation-specific test requirements (data migration). • Lack of interactive and effective medium for sharing and collaboration. • Absence of an integrated 24x7 testing delivery dashboard/analytics. Tools • Absence of regression/risk-based testing tools that can accelerate rate of testing. • Lack of on-demand ad hoc automation tools/utilities to expedite testing process. • Unavailability of updated test scripts for less frequently used applications.Figure 5 cognizant 20-20 insights 5
  6. 6. Core-Flex Resourcing Model Core-Flex Staffing Model Lower costs and faster time-to-market Test analysts Automation/ through optimized utilization performance of offshore resources. Ramp-up (with an Package experts Dedicated team builds expertise induction program) Integration, over time. Test manager automation and and functional functional consultant testing teams Cognizant Flex Team Cognizant Resource Pool Ramp-down Inputs PApplication Outputs P Test process models PProduct PIntegrating systems > > P Benchmarks P End-of-test reports PRequirements specifications Cognizant Core Team P Metrics reports PHardware/software needs P Causal Analysis & Report PEnvironment set-up details Knowledge Repository P Learning (CARL) Central Repository Common Tools & Infrastructure Standard Processes • Build and retain knowledge • Reduced effort through reuse • Higher system quality leveraging the central repository of common frameworks, templates • Better planning and estimation • Institutionalize knowledge and data repositories • Rigorous metrics collection • Better regression test coverage • Maximize test automation • Continuous process improvement • Efficient knowledge transfer • Optimize tool licensing requirementsFigure 6contracts during MAD&S scenarios. Based on our • Determine criticality of the contract andexperience, the key challenges faced include: estimate time to complete necessary actions.• A poor approach to categorization and prioriti- • Identify appropriate negotiations structure zation of vendor contracts. (owner rep, user rep, etc.) and decision-makers for each contract.• Underestimation of time and effort required to review and negotiate new contracts. • Determine roles and responsibilities (legal• Absence of strong project management over- review, structuring and negotiation, business seeing the contract separation/merger process. review, etc.).• Lack of TSA and SLA rigor and formality in a • Establish timeline for required actions. separation scenario due to false comfort in • Execute contract split/merger. “same parent” relationship between parties. • Track progress of all applications/projects withSuccess Factors and Best Practices respect to the agreed-upon TSAs.We follow a structured approach to managing Organization and Change Managementthe TSA and contracts, which is critical to thesuccessful delivery of any MAD&S program. Organizations have to adapt to multiple changesIdeally, a project manager with significant during the MAD&S initiatives. Based on oursourcing experience should lead the overall experience, the IT department faces the followingcontract separation/merger effort, focusing on challenges:the following key activities: • Unclear future-state design for the separated/ merged companies, including discussions• Develop an inventory of contracts/TSAs. regarding shared services.• Review terms and conditions and categorize contracts into logical groups (i.e., unneces- • Weekly managed or poorly orchestrated com- sary, covered under affiliate agreement, new munication strategy. contract required, etc.). • Lack of a thorough change management plan and approach. cognizant 20-20 insights 6
  7. 7. A Pragmatic Approach to Change Plan for Change Analyze/Syndicate Organization Stakeholder Identification Key Outcomes: Communication Analysis, Planning Key Outcomes: Management Management and Analysis and Content Development Change Change • Stakeholder assessment • Communication plan Business Change and matrix Business Change • Business change impact Readiness Assessment • Change readiness survey Impact Assessment assessment results • HR policies and procedures • To-be organization • Summary Matrix structure Organization Design Organization Design As-Is Organization Review Organization Model/ Structure Asessment • To-be governance model To-Be Organization Design and Governance Implement Organization/Change Sustain and Monitor Key Outcomes: Key Outcomes: Management Management Ongoing Communication and Change Change Launch & Execute • Communication materials • Support plan Communications Communication Evaluation • Organization transition • Communication materials (organization evaluation report transition plan and • Deployment organization transition evaluation report tracking) Organization Design Organization Design • Performance support Deploy New Organization materials Monitor, Support and EvaluateFigure 7• Absence of clear indicators to determine the • Downstream data center setup (sizing, capacity, success of the change management process. contracts).• Insufficient focus on business readiness as ini- • Disaster recovery and business continuity tiatives near completion and transition. services (to prevent potential loss of important assets such as data, hardware and software).Success Factors and Best Practices/ApproachA pragmatic approach to planning, analyzing, Figure 8 displays the scenario in terms ofimplementing and sustaining/monitoring of the separating the legacy environment into twoorganization and change management process separate companies.is necessary for the successful delivery of the Success Factors and Best Practices/Approachesprograms (see Figure 7). • Assess infrastructure dependencies.Implementing the Infrastructure >> Start with TOGAF-based reference frame-The backbone for a successful MAD&S planning work.is implementing a robust infrastructure. Thereare multiple challenges in infrastructure planning >> Develop infrastructure dependency list.during a MAD&S scenario: >> Eliminate redundant hardware and software.• Business and application changes/indecision. • Consider migration alternatives.• Safeguarding information security by aligning >> Single greenfield. security policies. >> Dual greenfield.• Complicated application and infrastructure • Develop phased migration plan. environment. >> Technology dependencies.• Consolidation of technical architectures to >> Regulatory constraints. reduce cost and complexity of IT environment.• Delayed hardware/software orders (due to late placement or late delivery). cognizant 20-20 insights 7
  8. 8. Separation into Two Companies Current Production Downstream Upstream Company Downstream Company Environment Company • Retire Legacy Servers • Develop New Environment SAN • End-State Goal • Establish Core Services > Separate Infrastructure • Migrate Dedicated Servers • Migrate Virtualization CandidatesFigure 8• Implement transition plan. and licenses to ensure compliance. >> People. • Management of the creation, execution and extrication of TSAs between the upstream and >> Process. downstream companies. >> Technology. • Provision of resources (consulting andConclusion technical) across different skill sets required toMAD&S poses multiple IT challenges for O&G deliver projects or manage the overall program.companies; however, taking a structured • Management of critical dependencies/impactapproach and engaging the right partners to on in-flight projects and smooth executionbring in learning and best practices can guide without interruption.organizations through those challenges and helpin successful delivery of the initiatives. • Provision of expertise in defining and executing data separation strategies, testing factoriesThe key areas of action when embarking on an and other core technical concepts.MAD&S endeavor are: • Empowerment of the CIO to proactively support and communicate with the C-suite• Definition of scope, identification of projects regarding critical MAD&S issues related to IT. and development of plans for the MAD&S program. It is vital for organizations engaging in MAD&S activities to work with trusted partners with• Enablement of the IT PMO in orchestrating industry knowledge/expertise and experience split/MAD&S in a challenging environment from previous IT MAD&S projects to ensure and integration with enterprise goals while greater transparency, increased reliability and minimizing risk. efficient execution of the programs.• Guidance,prioritization and management of the separation/integration of all IT contracts cognizant 20-20 insights 8
  9. 9. About CognizantCognizant (NASDAQ: CTSH) is a leading provider of information technology, consulting, and business process out-sourcing services, dedicated to helping the world’s leading companies build stronger businesses. Headquartered inTeaneck, New Jersey (U.S.), Cognizant combines a passion for client satisfaction, technology innovation, deep industryand business process expertise, and a global, collaborative workforce that embodies the future of work. With over 50delivery centers worldwide and approximately 137,700 employees as of December 31, 2011, Cognizant is a member ofthe NASDAQ-100, the S&P 500, the Forbes Global 2000, and the Fortune 500 and is ranked among the top performingand fastest growing companies in the world. Visit us online at www.cognizant.com or follow us on Twitter: Cognizant. World Headquarters European Headquarters India Operations Headquarters 500 Frank W. Burr Blvd. 1 Kingdom Street #5/535, Old Mahabalipuram Road Teaneck, NJ 07666 USA Paddington Central Okkiyam Pettai, Thoraipakkam Phone: +1 201 801 0233 London W2 6BD Chennai, 600 096 India Fax: +1 201 801 0243 Phone: +44 (0) 20 7297 7600 Phone: +91 (0) 44 4209 6000 Toll Free: +1 888 937 3277 Fax: +44 (0) 20 7121 0102 Fax: +91 (0) 44 4209 6060 Email: inquiry@cognizant.com Email: infouk@cognizant.com Email: inquiryindia@cognizant.com©­­ Copyright 2012, Cognizant. All rights reserved. No part of this document may be reproduced, stored in a retrieval system, transmitted in any form or by anymeans, electronic, mechanical, photocopying, recording, or otherwise, without the express written permission from Cognizant. The information contained herein issubject to change without notice. All other trademarks mentioned herein are the property of their respective owners.

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