Global oil and gas markets are poised between two competing drivers — rising pressure to decarbonize energy provision and increasing demand for energy in developing economies. Oil and gas executives must find new ways to maintain competitiveness and growth.
“Digitalization is today well-established among oil and gas organizations,” says Simon Cushing, Senior Director Analyst, Gartner. “By adopting artificial intelligence (AI), cloud and the Internet of Things (IoT), some have experienced exceptional performance gains.”
20% to 30% of oil and gas companies have begun developing more aggressive ambitions based on disruptive business models
Gartner has identified 10 trends that will affect the oil and gas industry in 2019 and fuel growth. CIOs who understand these trends can take advantage of them to enable breakout performance that will differentiate them and their organizations in the year ahead.
Trend No. 1: AI comes of age
AI will soon become a commonplace tool used to achieve operational and business performance. Pattern recognition, natural language processing, and image analysis and recognition will be among the most common use cases. CIOs should explore how to maximize the performance of, and extract value from, AI solutions.
Trend No 2: Transparency and automation enable minimal human intervention
Operational transparency is only now beginning to become an industry reality. It offers organizations more visibility into operational performance and the ability to make effective decisions far more rapidly. Field work will move to less hazardous and less expensive locations. CIOs can expect to see large-scale assets (such as offshore oil rigs) operate autonomously without humans in the next few years.
Trend No. 3: Next-generation workplaces boost workforce capabilities
Oil and gas organizations are aggressively moving to programs that redesign the future of work. Use of smart and immersive technologies — such as AI, real-time data analytics, augmented reality (AR), mixed reality and chatbots — will foster multidisciplinary working and worker productivity. CIOs will have to closely work with chief human resource officers to define the future of work at their companies and use immersive and computer-human interaction technologies to foster improved productivity.
Trend No. 4: Rise of cyberphysical assets accelerate the evolution of work
As routine tasks become automated, the ways oil and gas companies are managing their physical assets are rapidly evolving. Technology such as the IoT and digital twins will enhance companies’ ability to monitor asset conditions and predict problems and future behavior. A change in business models can also be expected, as companies will inevitably need to develop new ecosystems, operating models, skill sets and culture to support the evolution.
Trend No. 5: Digital improves business resilience in uncertain and volatile markets
CIOs will have to find the right balance between leveraging digital resources to improve business resilience and supporting on-demand resources and scalable technologies to make business cost structures more elastic. Oil and gas CIOs who want to enhance business resilience in uncertain and volatile markets must find new ways to make their IT operating models more agile and responsive.
Trend No. 6: Emergence of disruptive business models
As traditional IT services become less critical, CIOs should prepare themselves to provide change leadership when the shift in ambition begins. Gartner estimates that 20% to 30% of oil and gas companies have begun developing more aggressive ambitions based on disruptive business models, making the move from optimization to transformation.
Trend No. 7: Linking legacy systems to new digital business platforms
The dependence on capabilities that fuel agility, innovation and ultra-low-friction transactions is increasing as organizations aim for higher business performance. Siloed legacy systems that underpin traditional operating models are incapable of enabling essential digital capabilities.
Oil and gas company CIOs have not yet realized the importance of acting as change agents
As a result, CIOs are creating low-friction business platforms that combine two technical environments — a restructured legacy environment that provides direct access to functions embedded within vendor systems and an API layer that enables easy creation of digitally enhanced products, services and assets. CIOs must clarify the role of platforms in enabling business agility.
Trend No. 8: CIOs become change agents
CIOs are facing many barriers to bringing digital transformation to full scale, such as fragmented data management, lack of relevant team skills or weak coordination across silos. Embracing change is paramount for success; however, oil and gas company CIOs have not yet realized the importance of acting as change agents. They should partner with heads of HR to build their change leadership competencies.
Read more: A CIO’s Roadmap for Cultural Change
Trend No. 9: Digitalization compels IT operating model modernization
Digitalization compels IT operating model modernization. CIOs are called on to revise older, more rigid service models or replace them with new approaches — from agile methods and multidisciplinary teams to design thinking and user-centricity. CIOs who fail to do so risk relegating IT to a diminishing, nonstrategic role.
Trend No. 10: Product-centric delivery facilitates IT evolution
Many oil and gas CIOs have recognized the potential benefits of product-centric approaches in modernizing IT delivery. Although its implementation rate is low, it is rising. And, according to the Gartner 2019 CIO Survey, if current plans are realized, 62% of oil and gas companies will successfully implement product-centric delivery by 2020.