Industry Impact – The Energy Operations Value Chain

HfS is expanding its industry coverage in 2018 to include detailed IT and business process research on 11 core sectors, powered by extensive buyer research with Global 2000 firms. The transformation and challenges posed by digital disruption and changing competitive environments differ by industry. Subsequently, the solutions and services enterprises in different industries need to cope with change and to shape transformation journeys differ as well. Over the past few years, HfS has created in-depth industry research coverage that focuses on the rapidly changing needs of buyers and the ability of service providers to meet these needs with services built on domain expertise, industry talent, intellectual property, solutions that tackle sticky industry problems, and investments in industry-specific practices, startup ecosystems, and partnerships. We will build on this foundation in 2018, bringing expanded industry coverage, focused on key industry-specific processes and change agents, updated annually.  Our coverage sectors include:

Exhibit 1: HfS Industry Coverage 2018

Source: HfS Research, 2018

In order to give you a taste of what to expect for research in the oil and gas sector, this Point of View report previews our energy-specific value chain and the in-scope processes and change agents we’ll be examining throughout 2018. We will release energy-focused Blueprint Spotlight reports in Q2 on business process services and in Q4 on IT services; these will be supplemented by periodic voice of the customer case studies, point of view analyses on change agents, and buy-side research. For more insight into our master research agenda for 2018, please refer to our report on planned blueprint research.

The Energy Operations Value Chain

HfS developed the industry value chain concept to graphically depict our understanding of the processes and functions that specific industries engage in to operate their businesses. To truly understand the services needs of an industry, you must understand its industry-specific and horizontal processes and the relevant change agents enabling transformation. 

The value chain for operations in the oil and gas industry (see Exhibit 2) provides a comprehensive overview of services focused in upstream (exploration, development, and production), midstream (transportation), and downstream (refining, distribution, marketing, and retail) segments. These sub-sector elements are included in our Global 2000 survey research this year, which will help us gain a more granular understanding of buyer behaviour.

Exhibit 2: The Energy Operations Value Chain

Source: HfS Research, 2018

Energy Industry-Specific Processes

Industry-specific processes are segmented in these five value chain functions:

• Exploration, development, and production—Processes focused on the search for rock formations associated with oil or natural gas deposits, exploratory drilling, designing and building of wells, and the process of extracting the hydrocarbons;
• Transportation—Processes of transporting oil and gas from the field to refining facilities via road, rail, pipelines or water, and the storage of crude oil and natural gas;
• Refining—Process where crude oil is transformed and refined into products such as petroleum, gasoline, diesel fuel, asphalt base, heating oil, kerosene, liquefied petroleum gas, jet fuel, and fuel oils;
• Distribution—Processes of delivery of oil and natural gas products from refineries to the end users;
• Marketing and retail—Processes of trading and retailing oil and gas products.

Our research will evaluate the depth and breadth of service providers offering energy-specific services in these value chain areas and the impact of critical change agents such as Internet of Things (IoT) and intelligent automation.

Horizontal IT and Business Processes

Enterprises in all sectors have a range of consistent business and IT processes that are essential to running their businesses but that are executed similarly regardless of industry. We refer to these as horizontal processes and have segmented them by IT and business functions as outlined in Exhibit 2. Horizontal business processes include elements such as customer engagement and HR. IT processes include functions such as planning, design and implementation, application development and maintenance, and infrastructure management. Our industry-specific coverage of these areas will focus on instances where something unique has been developed for the energy industry, for instance, hydrocarbon accounting focused cloud-based services, IoT-based spare parts management, or cognitive agents supporting B2B technical support. In addition to industry coverage of these horizontal topics, they will also be well covered as part of our functional research dimension.

Enabling Technologies

Lastly, but of vast importance, we have included a value chain section dedicated to enabling technologies, depicted in Exhibit 2. As the price environment in the oil and gas industry continues to be difficult and the industry is looking to find new efficiencies and radically transform operating models, these change agents are critical to optimizing operations and even enabling new revenue streams. They include elements such as RPA and AI, IoT, and smart analytics. We view them as horizontal as they can be used across energy enterprises and leveraged for both horizontal and industry-specific processes. Our research on these topics will focus on how they are being utilized within oil and gas companies, which service providers are bringing them to the table, and what real business impact is being realized.

Bottom Line: Enhanced Energy Research to Help Make an Impact

HfS’ enhanced research coverage of major business operations trends by industry will help identify and articulate business impact in motion. Our coverage of the energy sector will examine core value chain processes across industry-specific and horizontal functions with an emphasis on the impact of critical change agents and partnerships that are focused at solving the complexities and sticky problems the industry faces.