This is the time of year that prognosticators get out their crystal balls and offer up their views of WHAT’S AHEAD. We decided to let I.T. execs in the energy sector take their own look forward at the future of I.T. in this critical market segment. Here’s what they had to say about technology directions, I.T. management issues and the changing role of the CIO.
The energy sector plays such a significant role in the Canadian economy, CIO Canada decided to take the pulse of IT executives in that segment of the market. In December and January we invited a number of energy execs from our reader base to respond to a Web-based survey, focussing on both IT management issues and technology directions.
To get a better idea of where things are heading, we asked these execs to answer identical sets of questions for both the short term (next one to two years) and the longer term (3 to 5 years). We also probed areas such as IT spending intentions, human resources, upcoming challenges, and the changing role of the CIO.
While the figures in this report accurately reflect the views of our respondents, our limited sample size does not allow us to predict how accurately they reflect the industry as a whole.
While many CIOs in other sectors are working with fairly tight budgets, it appears that energy sector companies are ready and willing to get out the cheque book when it comes to IT investment. Only 2 of 21 executives predicted a dip in IT spending for 2007 compared to 2006 – one expecting a 4 to 6% decline and the other a 7 to 10% decline. All the rest predicted increases, and nearly half (48%) expected their budget to increase by over 10%.
Cost reduction was seen as a moderate to low priority by over half of respondents (57%) in both the near and longer term. That’s not to suggest, however, that energy sector IT executives are any less mindful than their peers in other sectors of the need to spend IT investment dollars wisely.
This is underscored by the high level of importance assigned to “measuring IT’s contribution to the business”. In the near term, fully 95% of respondents rated this issue of mid to high importance (30% and 65% respectively), while in the longer term every respondent gave it a mid to high importance rating (29% and 71% respectively) – no one ranked it lower than 5 out of 10.
Paul Moore, Director, IT Growth Planning & Development, Suncor Energy, noted that as we move forward, CIOs will have to “define more quantitative measures for the value-add of technology to the business. And they must evolve better business cases for IT spending and measurement of success post implementation.”
High-priority management issues
Of the 15 IT management issue categories listed on the survey, three were cited by over 80% of respondents as being of very high importance over the next one to two years (7 or higher on a scale of 10). Topping the list was “increasing speed and agility in delivering projects” (90%), followed by “improving IT alignment with the business” (85%), and “attracting, developing and retaining IT staff” (81%).
Interestingly, looking out over the next 3 to 5 years, only 59% of respondents give “improving IT alignment with the business” an importance rating of 7 or higher, suggesting that the IT organization, in the energy sector at least, may finally be gaining some traction on this perennially difficult issue.
Over the longer term, the high-importance rating for “Increasing speed and agility in delivering projects” dropped a little to 80% of respondents, while rising to 85% for “attracting, developing and retaining IT staff”.
New to the high-importance list in the longer term was “reducing complexity”, cited by 80% of respondents, up from 67% in the near term. This underscores the notion that for user organizations, the Holy Grail of a much simplified, standards-based IT environment is still more myth than reality.
In the near term, “IT issues related to globalization” ranked lowest in importance of the 15 IT management categories listed, given only a 1 to 3 importance rating by 39% of respondents. However, it showed the biggest gains of any category when moving to the longer term (3 to 5 years), boosting its high-importance (7 to 10) ratings from 10% of respondents to 30%, suggesting that globalization is a coming force to be reckoned with in the energy sector.
One believer in the increasing importance of globalization is respondent Colin Lawrie, Manager – Upstream Process, for ExxonMobil Business Support Centre Canada. When asked what the most significant change in the role of CIO in the energy sector would be in the next three to five years, he replied, “Globalization of information services and applications – developing, providing and supporting global service offerings.”
CIO Canada’s energy sector survey also looked at the importance placed on various technologies over both the near term (1 to 2 years) and long term (3 to 5 years).
One technology stood out as being of extremely high importance (9 or 10 on a scale of 10) in the near term. This was “Business Intelligence/Data Mining”, with a whopping 38% of respondents, half of whom scored it a full 10. No other technology came close.
Expanding the near-term rankings to include those technologies receiving an importance rating of 7 to 10, “Real Time Information Delivery” ranked highest at 72% of respondents, followed by “Business Intelligence/Data Mining”, “Collaboration Tools” and “Wireless Personal Information Devices”, all with 67%.
At the opposite end of the near-term technology list was “Open Source”, cited by 67% of respondents as having only an importance of 1 to 3 on a scale of 10, followed by “Radio Frequency Identification (RFID)” (53%) and “GRID Computing” (47%). All three of these technologies were expected to gain in importance in the 3 to 5-year time frame, with 67% of respondents rating “GRID Computing” at mid-level or higher importance, followed by “RFID” at 60% and “Open Source” at 52%.
“Real Time Information Delivery” took top spot in the importance rankings for the 3 to 5 year period, with 85% or respondents rating it a 7 or higher out of 10. “Business Intelligence/Data Mining” was a close second, at 81%, followed by “Collaboration Tools” at 75%.
Big gains in importance were also indicated for “Service Oriented Architecture”. Half of respondents (48%) rated it high in importance in the near term, but this figure jumped to two out of three respondents (67%) in the longer term.
We asked respondents what they view as the IT technical or management skills that are hardest to find. Though no clear winner emerged, three areas earned a lot of attention: business analysts, project managers and the more generalized “people with experience in the energy sector”.
Other skills in need are in the areas of data warehousing/business intelligence, IT architecture and security.
ExxonMobil’s Colin Lawrie expressed a broader HR concern. “Aging staff due to baby boomer demographics will result in a high level of retirements,” he said. “Combined with a high level of new project demands, this will result in shortages of experienced staff.”
of the CIO
Respondents weighed in with a wide variety of opinions on the question: What will be the most significant change in the role of CIO in the energy sector in the next 3 to 5 years?
Paul Parzen, Manager IT, Risk & Internal Audit, Compton Petroleum Corp, said, “The focus will shift away from infrastructure delivery to process efficiency.”
Direct Energy CIO, Kumud Kalia, also focussed on process. “CIOs are positioned to become CPOs – Chief Process Officers – having responsibility for developing and operating key transaction management processes, not just the IT that supports them,” he said. “As these processes become embedded within software or the Internet, the distinction between IT and process will be meaningless.”
Clay Radu, Manager, Information Systems, Pengrowth Corp. thought CIOs might be due for an upgrade in status. “Hopefully [CIOs will see] a rise to the Executive level, and have a voice within leadership.”
Wally Curry, CIO of Mississauga-based Enersource Corp, noted, “There is a lack of CIOs in the energy industry, and this needs to be addressed.”
Finally, we asked respondents to tell us what they think will be the most important IT management issue facing IT executives in the energy sector in the next 1 to 3 years.
Some pointed to staffing issues. Noted Rod Rutherford, Manager IS, EOG Resources Canada Inc, “Critical staff shortages in the oil and gas industry will make it difficult to develop and sustain standard business processes.”
For Everett Chubbs, Director of IT at Oakville Hydro, the answer was, “Reducing IT complexity while addressing compliance needs.”
Trekker Armstrong, Director Architecture and Planning, Information Systems, TransCanada Pipelines gave the nod to “Supporting M&A while rationalizing/consolidating and eliminating legacy systems.”
And even though the industry has deep pockets, some saw IT financing as a key issue.
“How to compete for the capital dollars required to upgrade and optimize asset investments” and “Keeping IT costs under control while there is rapid growth in energy businesses” were comments from two respondents who wished their names to be withheld.
CIO Canada would like to thank all those IT executives who took the time to respond to our survey.
David Carey is a veteran journalist specializing in information technology and IT management. Based in Toronto, he is editor of CIO Canada.