February 17, 2014 Issue
The Most Powerful Name In Corporate News and Information
Operational Business Planning Solutions for the Oil and Gas Industry
3esi is a
software development and professional services company that provides
integrated business planning solutions for upstream oil and gas companies
around the world. Our solutions allow customers to combine the best of
software and professional services to enable value-based
Canada T2N 3M2
Interview conducted by: Lynn Fosse, Senior Editor, CEOCFO Magazine, Published – February 17, 2014
CEOCFO: Mr. Sim, what does 3esi offer?
Mr. Sim: We provide operational business planning solutions to the oil and gas industry; primarily focused on improving business workflows. We provide software solutions as well as professional consultancy offerings around those workflows.
CEOCFO: What are some of the challenges unique to the oil and gas industry that you are able to handle?
Mr. Sim: The main challenge is the amount of data involved and complexities of the problems we are solving. Both in terms of the number of elements that go into a business plan as well as the complexity of the organizations themselves and the fact that our product can be used from single assets teams to business units around the globe to corporate headquarters. These are large organizations. They have a great deal of data and with that come in consistent drivers between various parts of the organization and misaligned metrics. It creates some challenges in terms of getting everyone on the same page.
CEOCFO: Are most companies in the industry using some type of service to handle the complexities or are some people still using things like Excel and BrainPower?
Mr. Sim: A significant majority of the industry still uses Excel.
CEOCFO: How do you reach potential customers and how do you get them to understand the need and the advantages?
Mr. Sim: We do standard marketing activities, more through networking events and trade show events versus cold calling. Cold calling in this industry does not work very well. Much of our networking is direct reference. It is going to our existing customer base, finding out whom they know that would benefit from our solutions. It is relationship-driven contact. Warm introductions from other companies who have had success are the best way to reach out to potential customers.
CEOCFO: Your website indicates you have planning and optimization for heavy oil and oil sands, as well as shale gas. What are some of the differences between the oil and gas industry and how do you need to account for the differences on the back end?
Mr. Sim: Oil and Gas assets are first split into conventional and unconventional where conventional is oriented to finding/discovery while unconventional is more oriented to manufacturing. Heavy Oil and Shale Gas are both considered unconventional which translates to workflows focused on repeatability and execution efficiency. Manufacturing processes, whether you are making cars or petrochemicals have common attributes, capital intensive, long asset life, margins tend to be a strong function of not only the asset but execution efficiency. Below the surface the manufacturing processes for oil sands and shale gas are very different but the operational philosophy is similar. For our solutions this translates to unique models for the operations but common models for the business.
CEOCFO: When a company is using your service, what level of contact do they have with you? Are you holding their hand? Do you provide customer support? Are you helping along the way? What’s the level of involvement?
Mr. Sim: We are heavily involved with all of our customers from Discovery to complete Deployment. We typically go in and do an as-is discovery session in terms of understanding what the current workflows are, what the organizational structure is, how the data flows within the organization, what the current state is. We then sit with the stakeholders in the various groups and design a to be process with them. We then configure the software, data flow and integration against that to be process. We usually get involved in the data loading and data quality step as well. We will train the users. In addition, we will typically stay with them through a full cycle or cycle-and-a-half, being a year to a year-and-a-half until they are completely comfortable doing it on their own. Once they are comfortable, we will try to continue to visit them on a quarterly basis and of course, we provide telephone support and on-site support as well.
CEOCFO: When a company starts to work with your system, what surprises, what delights them the most?
Mr. Sim: I think probably the single biggest thing is the understanding of what is really happening in their business. It gives our customer visibility of the entire asset opportunity. We will typically take the subsurface plan, the technical plan, and the activity plan, bring it all together, and provide transparency to all three groups. Much of this happens in spreadsheets and memos, so this is really an opportunity for them to understand what it looks like from the perspective of the other groups. For many of them, it is the first time that they have had visibility in terms of what are some of the things that are challenging the other groups. The second thing is probably the efficiency of execution. We have seen customers with teams that were 50 to 60 people that turned out plans in 6 weeks to12 weeks, right size to a team of 3 people doing the same amount of work, but turning around a plan in a 1 or 2 days. We get many accolades because of efficiency and accuracy improvements.
CEOCFO: The oil and gas industry properties are traded a great deal and people move around. Do customers that you have now tend to want the system if they are going somewhere new? Is that fairly typical for you?
Mr. Sim: Yes, that is a key driver for us. Because it is a volatile labor market in oil and gas, we do end up with a lot of people moving from company to company. Whether they are decision makers or not, they will generally introduce us into their new company.
CEOCFO: I would imagine that once you are used to something so efficient it would be very hard to go back.
Mr. Sim: Surprisingly, it is harder to go back as a group. It is easier to go back as an individual because, again, people run into a problem somewhere where they cannot quite figure something out, and it is very easy to take a step back into that familiar spreadsheet and then use the system as a repository rather than a working tool.
CEOCFO: Do you find, in general that most companies do make full use of the tool or of your system?
Mr. Sim: It is dependent on the company culture and whether they have embraced what the software represents or not. The most successful rollouts have been when our clients have really changed the way they do their entire planning process, from opportunity identification through to the execution and tracking. In this case they have embraced it and it has been built into their workflows.
Where we find that there is not as broad use as we would like is when we focus on a small set of workflows. For instance, we just focused on business unit long-term planning and budgeting. They are not the original authors of the data, and they are not the final consumers of the data. They are an intermediate step so we find we are not as sticky as we would like. It is where we can directly support the workflows from beginning to end where we are more successful.
CEOCFO: What has changed most in how you offer your product, what is available and how you position the product since you have 3esi?
Mr. Sim: A thing that has changed is that there is a deeper technical capability in the product than companies out there can easily use. Oil and gas companies, as a whole, need to improve their system integration, and I say system integration, as it is not just technical integration. It is about agreeing to common taxonomies in terms of naming conventions, calling things the same thing throughout an organization and throughout the industry. There has been a significant improvement of mapping tools and integration tools to support the transport and movement of data around the organization. Being able to take in and model the whole resource side of the organization in terms of human resources, rigs, or whatever, and understand not only the financial feasibility of the plan, but the executability of the plan is what is needed in the future. This can only be reached if we can have data integration between teams, divisions, field offices and head offices so we can run general analytics, and be able to take in, understand your business from top to bottom.
CEOCFO: Is there much competition for you?
Mr. Sim: There is competition for sure. There are three players in this space and they are what I would call niche providers in certain workflows. That being said, I think all the companies that are in this space are growing as fast as they want to, so our growth is not being limited based on competition. It is a good thing, because all of us are educating the marketplace to a better way of doing things. We do compete in certain areas for opportunities but overall I think everybody has about as much business as they want to manage now.
CEOCFO: What is the market opportunity overall?
Mr. Sim: I think in terms of the addressable market, there is between 800 and 900 companies around the globe that could take in and make broad use of this solution. I think it is a sustainable $400 million to $500 million a year marketplace (in terms of the front office processes) If you include back office processes like accounting in oil and gas, it is over a billion dollars a year that is spent every year.
CEOCFO: Why pay attention to 3esi?
Mr. Sim: Why pay attention to 3esi? 3esi has a good understanding of the WHY. We obviously want a profitable company, but that is a byproduct of what we are trying to accomplish. Fundamentally, we want to help change the way an industry works. We have done it before in different vertical industries and now we would like to do it in this industry. Our key is the WHY I mentioned before. There is a lot of white space in this industry where we can add value to our customers. We think we can change the way the industry runs its business and there would be many beneficiaries of that change. There is a lot of money that is spent that does not produce value in oil and gas. We can help companies make decisions that are more effective and thus increase their capital efficiency. There is an opportunity to show oil and gas how to can embrace IT and IT solutions to be business differentiators rather than sunk costs.
I am a strong believer that there is a lot of misspent capital in oil and gas today that could be put to better use, but the whole landscape in terms of who the key oil and gas suppliers are now is changing. If you look at what is happening in the US and Russia, you can see that the demographic is changing and we know that capital efficiency is going to be a key differentiator that will define who the successful companies will be going forward and 3esi really wants to be part of that process.
CEOCFO: You have been recognized on the PROFIT 500 and on the Branham list, so clearly business is good.
Business is good. We are just coming out the other side of the “chasm” as a
company right now. We are experiencing market pull out there in various
regions around the world. For us, that is important. Client satisfaction is
also important to us. We are on a controlled growth path right now. We know
how quickly we want to grow and we have been hitting that growth every year.
We are not trying to overreach, and we find the marketplace is responding
very well. Overall, we and our stakeholders are very happy with where we
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