24 Jul Next Gen SAP is Coming But is Oil and Gas Ready?
One of the bigger digital shifts that will take place in the next decade will be the mass migration of oil and gas companies to the next generation SAP. What’s in store?
An earlier post on DigitalOilGas.COM outlined the history of ERP technologies, how they have evolved over time, their current state capabilities, their readiness to enable a more digital world and their makers’ motivations to change.
- Large oil and gas companies are now wholly dependent on these big ERP systems to run their businesses.
- These systems were designed for a world that no longer exists – their internals are optimised for scarce processing power and storage, two computing resources now in ridiculous abundance because of cloud computing.
- ERP technology generally predated many of the things we take for granted in today’s technology landscape – the internet, mobile devices, cloud computing, app stores, big data and analytics.
- They are costly and difficult to maintain because of the huge range of databases and server technologies on which they have to operate.
- Limitations in ERP capabilities compelled oil and gas companies to write their own code directly into the ERP software, restricting the ability to upgrade the ERP systems.
- ERP publishers are acquisitive, but integrating those acquisitions into the fabric of the ERP system is costly, and has not always been a priority.
- Despite the enormous range of capability in ERP systems, oil and gas companies have consistently felt the need to acquire and install countless numbers of other systems, leading to a huge portfolio of incompatible technologies all jostling for funds and attention.
What SAP does matters to the oil and gas industry because so many companies run on SAP. Through their next generation solution, SAP aims to reset their technology for the world of the future. This has important implications for oil and gas customers, support staff and technology providers.
What’s in SAP’s future?
SAP has announced heaps of improvements to the solution, but there are a number of highlights that warrant mentioning:
In memory design
With compute horsepower so cheap and abundant, thanks to chip costs that have fallen to basically zero, the new design calls for the entire system to run in computer memory chips, rather than on disk drives. Disk drives have moving parts, fail occasionally, but most importantly, are slow. By eliminating the need to move data to and from disk drives, SAP will speed up the system quite dramatically.
This new design also means a streamlining of the data tables too, which will eliminate redundant data whose purpose was to help optimise disk usage. The savings in space also create space for all kinds of new data (from sensors, for example). Some back office costs will disappear because of the pick up in speed and system responsiveness, and some processes will simply be reimagined so that they are daily rather than month end.
When I was studying computer science in the 80’s, database design theory emphasised minimizing redundant and duplicate data in the database. The reasoning at the time was that disk storage was costly, and a good design minimised storage needs. This carried a price of course – data would be stored in tables (like an excel spreadsheet), but frequently key data that was closely related (a well description and its monthly production) was stored in multiple tables.
The solution was to join the tables and create a third table when you needed, thus keeping disk storage low, and using computer processing when you needed it. Sometimes this compute problem can consume hours of computer time trying to marry up the tables to produce the report needed.
But in a world without computer limitations, why not eliminate all the myriad tables and have a simpler, flatter database design? It would be much faster to do reporting – indeed, some previously impossible queries become standard.
Next generation SAP will have a new flat database design. Oil and gas users will be able to replace hundreds of slow and costly reporting procedures with new streamlined reports and queries. Analytics that might normally take place separately will be done in line as the process executes, allowing different better decision making in the moment.
It’s impossible to ignore the rise of cloud computing. It’s much better and cheaper for technology companies to write their code for the cloud and a single database technology, and have everyone access it via web browsers. Only one database to support (not 6), only two or three hardware devices (Apple, Android, Windows), only one technology stack (not 12). They can update the cloud version for everyone the instant a problem appears or a new feature becomes available. No more lengthy wait for an upgrade to happen. All the latest software solutions we have grown to love (amazon, Lyft, AirBnB, Netflix) have this design.
And most important, cloud software is easier to connect up with other cloud software. Integration doesn’t fall to the customer to sort out. You can see this play out in the way that (cloud) Facebook accesses your (cloud) address book.
Integration costs should fall, data centres can be shrunk and the risk of having stranded technology will disappear.
Modern user interface
The user interface for legacy SAP is hard to learn for the casual and infrequent user. Unlike Uber or Google, oil and gas companies have to invest in training their employees to use the technology. Next generation will have a much lower learning curve and a modern clean user interface.
This will help oil and gas both cut training costs and leverage the kinds of nifty features now commonplace, like alerts, like buttons, suggestions and auto completed fields.
More and more computing is via mobile. Indeed, the next great wave of digital innovation in oil and gas will come from better enablement of a mobile workforce. Mobile computing has its own challenges, including what happens when you’re out of range from the network. Legacy ERP design did not contemplate the possibility that the end user would at one moment be on line and the next off line. This changes with the new version.
Oil and gas has lots of mobile workers and their equipment who are now off line. This innovation should open up lots of clever new business models.
Internet of things
What about all the smart devices with built in compute capability that are appearing? Next generation SAP will be able to support the existence of these devices and incorporate them into work processes. The data these devices collect will finally be pulled into SAP to enable much better analytics. I would not be surprised to learn that my car of the future talks to SAP directly. Support for blockchain, a technology that will work well with the internet of things, will be embedded in the system.
How about an App Store?
That would be sensible. Sometimes there are some capabilities that are just so specialised you have to have your own. How about an App Store concept, where that secret sauce compute algorithm might find a home, where it can be tested and assured of compatibility? This is the GE model for the Predix platform.
So Why Migrate?
I would summarise the business case in pretty simple terms:
- Work will speed up
- Data quality will improve
- Costs of ownership (support costs for SAP) will decline
- Today’s risk of ending up with a stranded but critical business system will disappear
- Many modernizations that have been elusive (mobility, internet of things) are suddenly in reach
- The power of in the moment analytics is finally achievable
- Business will be more “nimble”, or able to embrace new innovations faster with less friction
- Next generation business models for oil and gas will be possible
Most importantly, though, is the power that comes from the ability to reconfigure business on the fly to address opportunities and disruptions. A shipment is delayed? What is the impact on the supply chain and what can we do right now to address it? A competitor has a problem? What can we do to quickly ramp up production to capture temporary volume?
For some, the worry about the future of SAP support looms. SAP will no longer support all the existing technology versions past the middle of the next decade, which might, for some, trigger the move.
Other companies, who suddenly find themselves in a merger and needing a new system quickly, will decide that now is the time to move.
And still others will find the pent up demand of users wanting access to new technology, or customers complaining about service shortcomings, a sufficiently compelling reason to migrate.
The risks are real but manageable
Engineering a big shift from one generation ERP solution to the next is a fraught endeavor. There’s a lot of complexity in the change, it takes time and commitment, and alters every company agenda until it’s done.
As with any technology there is the challenge of being the first to adopt. Your organisation will be the one to deal with unexpected bugs and system issues. Fortunately, there are a number of early adopters who are already in flight.
All the other risks from earlier similar transitions reappear – executive commitment, available resources, change readiness, support planning, threat of budget overruns, etc.
An important new risk is timing – there will not be enough skilled technologists able to undertake the mass migration if the oil and gas industry waits until the last minute. Judging when to move (costs are low, risks are manageable, resources are available) will be tricky.
What does all this mean for the industry?
- If you’re on SAP now, get started with the migration. The middle of next decade is distressingly close. Think 3-4 years to transition a big business, another year of planning, a year to sort out budgets, and the time for a decision is 2019!
- If your business has many assets, or business units, figure out an approach that makes sense. Do you start with an asset, or do you change up the customer-facing elements of your system? Do you modernize the SAP internals or do you deploy some high impact modules?
- If your company publishes some technology solution that has found a home in oil and gas working alongside SAP, you probably should be giving serious thought to re-designing your solution to an in-memory design or a cloud solution. Otherwise, you’re going to be on the radar as so last decade.
- If your company sells some hardware to the sector, you might want to figure out how your asset data now fits into the customer’s new SAP platform. Fit in and play along.
- If your oil and gas job involves taking data from one part of SAP, fiddling around with it in Excel for reporting, or feeding back into SAP, time to rethink your job choice.
- If you’re in IT and you provide SAP support, time to get retrained on the new technology. S/4HANA skills look like they will be in very high demand.