The oil and gas industry is incredibly cautious and slow-to-evolve — especially compared to customer-facing industries. It makes sense. Vying for a position in the energy supply chain requires careful planning and a solid, well-rounded infrastructure. So, caution has been bred into leading providers. But, as oil and gas grapple with digitization and digital transformation, 40% of oil and gas companies are worried they’re getting left behind. The average energy company is deeply entrenched in legacy systems. To be fair, 70% of apps used by Fortune 500 companies over the last decade have been legacy apps. So energy isn’t entirely alone in their lag.
However, as we round the corner into a clearly digital future, many oil and gas providers are quickly finding value in the cloud. It’s an enabler of digital transformation. In fact, Accenture predicts the cloud will be “the industry’s largest investment over the next five to six years.” But why move to the cloud? There are certainly arguments against long-term cloud adoption. Many companies have difficulty with stakeholder buy-in, change management, and customization, while others have the natural security concerns that come with moving precious data to off-site servers.
However, there’s one thing that’s clear: moving to the cloud is a prerequisite for virtually all technologies that are changing the oil and gas industry. So, let’s talk about it. Here’s why your company should embrace the cloud. And this is why those closely-held concerns aren’t as viable as you think.
The Cloud Provides Scalability and Elasticity
Energy companies are dealing with an unprecedented amount of data. The convergence of shrinking customer demands, rising energy prices, and shifts in the energy mix (e.g., renewables, smart grids, etc.) have put an enormous amount of value in data. So, how do you factor in scalability? To be clear, it’s impossible to predict just how fast data needs are growing. Trying to handle your data and analytics (particularly on the server-side) in-house is a recipe for disaster.
The CAGR for the global energy demand is expected to shrink to 0.5 percent between 2030 and 2050. Yet, the CAGR for big data and analytics in energy has a CAGR of 22%. In other words, energy players are quickly investing in data to stay agile in a hyper-competitive environment. But with legacy systems, you have to completely retool every time you need more data.
Cloud servers don’t share this issue. Instead of buying new servers, rebuilding processes, and putting aside abstract funds to deal with future scale needs, cloud servers allow you to instantly scale data needs. Since cloud servers operate on a Software-as-a-Service-like model, you simply pay a single monthly fee. If you need more space, you pay a higher fee. That’s it! You don’t have to retool your entire tech infrastructure.
Better yet, the cloud provides elasticity. This is the ability to scale-at-speed. So, let’s imagine that you find a new supply chain partner, and you have to deal with a massive influx of data happening all at once. Best-in-class cloud servers can instantly scale up to those needs to meet temporary demands. The server will then scale back down to regular levels immediately after the burst of data. Obviously, long-term scale requires more conscious scale decisions, but elasticity exists to deal with those random spikes of demand.
R&D for Pennies
A mere decade ago, larger companies had a stranglehold on R&D. If you wanted to build a hyper-scalable, agile, and resilient global infrastructure, you needed to pump millions (if not billions) into R&D. Today, things have changed. Services account for over 40% of the value in trade flows, despite accounting for a mere 23% of global trade. Companies, regardless of origin or capital, have access to billions of dollars in R&D for pennies. This isn’t just powerful in terms of cloud-based solutions; this spread of wealth is literally redefining the global economy into a new era of globalization.
Cloud servers give you access to a wealth of benefits at an incredibly low cost. Think about how much it would cost your organization to:
- Hire hundreds of security professionals
- Hire server architects
- Create scalable servers with world-class infrastructures
- Build compliance into every server
- Create encryption models and security features
- Create and maintain complicated data schemas
- Deal with expensive administrative tasks
- Develop and implement policies and controls for all of your data
Now, imagine you could have all of this (which likely would cost millions of dollars and years of work) for one small monthly payment. That’s a game-changer. Cloud-based solutions are more cost-effective than on-premise. It’s not even comparable.
Security and Data Protection
Some companies are concerned that cloud solutions open up security concerns. It’s not an unusual worry. The average cost of a data breach is around $4 million. Worse yet, it takes almost a year to identify one. So, having data stored off-site can produce sweat. But the opposite is true. Having data on-site should be your primary concern. 37% of organizations move to the cloud solely to improve their security posture.
This ties back into R&D. Cloud infrastructure offers unparalleled security. Encryption, load balancing, disaster recovery, physical security, and 24/7 monitoring are all bundled into your cloud offering. Since most energy players use data to manage wellheads, network, provide real-time insights and analytics, monitor end-user consumption, and handle financials, it’s obviously an area of concern when it comes to cybersecurity.
The cloud increases your security posture and reduces your threat landscape. To get the same level of security on your internal servers, you would need to invest in a variety of solutions, which would also require management and administration. That’s costly and requires significant short-term investments for (potential) mid-horizon returns.
Cloud servers provide 24/7 access from any device. Even if we ignore the rise of remote work, oil and gas is shifting towards mobile. The growth of IoT and the explosion of big data makes operability across devices and regions incredibly important. Technically, on-site servers can provide a level of mobile accessibility. But those servers are tied to internal networks. They don’t have the security and elasticity to support broad mobile usage. Cloud servers are mobile-friendly.
Yes. Cost, modernization, and security are the primary reasons energy players invest in the cloud. But don’t sleep on accessibility. It’s a must-have feature that can be hard to achieve in-house.
The Cloud is the Future of Energy
The future of energy is in the cloud. From IoT to AI and machine learning, digitally-driven technology requires cloud buy-in. Are you looking for an industry-leading cloud solution to help you run your business smarter? Trellis delivers all of your digital supply chain needs on a single platform. Contact us to learn more.