May 03, 2023
The oil and gas industry is cautious and slow-to-evolve.
This makes sense. Messing with the energy supply chain requires careful planning and solid, reliable infrastructure.
But as the sector grapples with digitization and structural transformation, many companies worry they are getting left behind.
The average oil and gas company is deeply entrenched in legacy systems. To be fair, the same is true of many Fortune 500 companies.
However, as we round the corner into an undeniably digital future, oil and gas players are rapidly turning to the cloud in search of value.
The cloud is synonymous with digital transformation, and Accenture predicts it will represent “the [energy] industry’s largest investment over the next five to six years.”
So, should you move your operations to the cloud?
Many companies have difficulty with stakeholder buy-in, change management, and customization. Others balk at the security concerns that accompany moving critical data to off-site servers.
However, one thing is clear: technology providers aren’t waiting for you to decide.
Moving to the cloud has become a prerequisite for virtually any new technology aimed at changing the energy industry.
In this post we explore why your company should embrace the cloud and why many of those causes for concern aren’t as scary as you might think.
Energy companies have always handled an enormous amount of data.
Now, changing customer demands, volatile energy prices, and shifts in the energy mix (think: renewables, smart grids, carbon footprint) have made those data streams even larger and more valuable.
How do you factor scalability into your planning?
It’s impossible to predict just how fast data usage will grow but trying to handle your data and analytics needs in-house—particularly on the server-side—is a recipe for disaster.
While annual growth in global energy demand is expected to slow to 0.5% between 2030 and 2050, the growth rate for big data and analytics in the energy sector is forecast to exceed 22% per year.
In other words, energy players are leaning heavily on data to remain agile in a hyper-competitive environment.
Legacy systems must be regularly retooled to handle increased volumes of data. Cloud solutions face no such challenges.
Instead of buying new servers, rebuilding processes, and arbitrarily putting aside funds to cover future needs, moving to the cloud allows you to instantly scale as your data needs change.
Cloud services operate similarly to Software-as-a-Service, meaning you pay a straightforward monthly fee. The more space you need, the more you pay.
Better yet, the cloud provides elasticity. That is, the ability to scale both up and down, at speed.
Imagine that you engage a new supply chain partner and must deal with a massive influx of data overnight.
Best-in-class cloud solutions scale up instantly to satisfy such needs, then scale back down once the temporary burst of data has been handled.
This eliminates the legacy dilemma of either over-building to handle spikes or running into bottlenecks.
A mere decade ago, larger companies had a stranglehold on R&D.
If you wanted to build a scalable, agile, resilient global business, you had to pump millions (if not billions) into discovering and commercializing new products.
Today, things have changed. Cloud solutions afford access to a wealth of benefits at incredibly low cost.
Companies, regardless of their domicile or capital assets, can access the results of billions of dollars in R&D investment for pennies.
How much would it cost your organization to independently:
Now, imagine the cost to develop all of this.
What has likely cost billions of dollars—and years of work—can be yours in return for one small monthly payment.
That’s a game-changer.
Cloud-based solutions are orders of magnitude more cost-effective than developing and maintaining on premise systems. It’s not even comparable.
You might be concerned that shifting to cloud-based solutions creates a security risk—and rightly so: the average cost of a data breach is around $4 million.
Since energy players use data to manage wells, network facilities at a large scale, glean real-time insights and analytics, monitor end-user consumption, and handle financials, cybersecurity is a legitimate concern.
But in practice, the opposite is true. Cloud infrastructure offers unparalleled security.
Among organizations that have already moved to the cloud, 37% say they did so primarily to improve data security.
Encryption, load balancing, disaster recovery, physical security, and 24/7 monitoring are all bundled into a typical cloud offering.
The cloud increases your security posture and reduces your threat landscape.
To achieve the same level of security on internal servers, you would need to invest in and manage a host of solutions, requiring significant short-term investment for (potential) longer-term benefits.
The bottom line is that keeping your data on site should be of greater concern than moving it into the cloud.
Cost, modernization, and security might be the primary reasons energy players are investing in cloud-based solutions, but don’t overlook accessibility.
It’s a must-have feature that can be hard to achieve in-house.
Even if we ignore the surge in remote work triggered by the COVID-19 pandemic, oil and gas operations have been shifting inexorably towards mobile.
The growth of IoT and the explosion of big data makes operability across devices and regions incredibly important.
While on-site servers can technically provide a level of mobile accessibility, those servers are tied to internal networks. They struggle to deliver the security and elasticity needed to support broad mobile usage.
Cloud servers are mobile-friendly, enabling secure 24/7 access from any device.
The future of energy management lies in the cloud.
From IoT to AI and machine learning, digital first technology requires cloud buy-in.
So, the question isn’t whether you should move your operations to the cloud but when and how to do so most efficiently.
Image Credit: Adobe Stock
Tags: Natural Gas , Cloud , Transaction Management
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