Oil and Gas Exploration Company saved $5M by cutting costs on software maintenance

The Benefits and Applications of Software Usage Metering:

With the current rise in oil prices, along with the growing costs associated with oil and gas exploration and production, E&P companies are depending more than ever before on advanced computer simulations and computer modeling to make better predictions and get more oil out every well drilled. Countless IT resources are consumed in order for businesses to remain competitive. However, a significant number of oil companies have still neglected the importance of metering; managing and optimizing software usage. This neglect leads to unnecessary expenditures and therefore a waste of IT resources. Moreover, neglecting close monitoring of IT resources affects a company’s overall business performance. This paper presents the benefits and applications of software usage metering. The business case covered in this paper is taken from Burlington Resources’ experience by looking at the progress they made from 2002 through 2005, where effective software metering and careful implementation yielded astonishing results.

Background
Software metering has several major functions. Its most critical role is to keep track of how software is used throughout a business. Which group, processes or location are using which software, how much of the time? Combining such information with business results, such as which groups or locations generate most value, enables companies to equip their IT users with the best tools so as to optimize their workflow.
Open iT is a software and consulting company that specializes in helping companies to gain control over their IT resource use, enabling them to cut costs and waste, and improve their business processes.
The methodology applied is very similar for all clients. First, meter IT resource usage, including all software usage. Next, categorize or group and analyze the results by combining the metering information with other IT and business information, such as purchased licenses, support costs, available contract options, hardware costs, human resources, and local business information. The author has witnessed major improvements in most companies where this methodology has been applied. With appropriate metering and analysis, it is possible to optimize the IT environment.
The Case Company: Burlington Resources
Prior to being acquired by ConocoPhillips in March 2006, Burlington Resources (BR) was one of the largest independent oil and gas exploration companies in the USA. By that time, they had completed a multi-year evolution that resulted in, among other benefits, greatly reduced software and exploration costs, with an increase in software usage and geosciences analysis. After just two years of measuring software usage and proactively managing software assets, BR was able to harvest annual IT savings of five million dollars. Additional benefits included the creation of a more disciplined, value-oriented culture and annual business savings of twenty times the initial IT savings.
In 2002, BR management made a number of strategic IT-related demands on its IT organization: reduce software costs, increase software usage, and improve the quality and quantity of geosciences analysis. Early meetings with geoscientists revealed that no one was willing to give up what applications they had; each was considered mission-critical. BR had to find a solution that everyone could live with, without affecting productivity.
As the team charged with lowering IT costs while increasing IT usage got to work, they realized they needed answers to some key questions such as: Why were software costs so high? What software did they actually have and how many licenses were they paying for? Was the software being used? Was it the right software? Was the right software installed in the locations where it was most needed? Should new releases be purchased and installed? Should they outsource IT?
A number of specific actions were identified to assist BR in reaching its targets, including the following:
• Identify all application functionality.
• Identify where they fit into Shared Earth Modeling (SEM).
– Shared Earth Modeling is a digital 3D representation of the Earth made through multi-disciplinary collaboration that includes all available geologic, geophysical, and engineering data.
– Conduct a Global Technology Review (GTR) of their exploration teams.
– Add needed software to fill gaps in workflow.
• Classify each application according to its Standardization Category.
– Core, Extended Core, Data, Specialty (seldom used, or for working with partners).
– Turn off maintenance on most Specialty Software (put money aside and lease as needed).
• Install software usage monitoring (Open iT).
– Rebalance LAN and WAN licenses.
– Determine acceptable levels of denials.
BR used Open IT’s metering software to accurately measure software usage and rebalance their portfolio of local and WAN licenses. BR was now in a position to identify exactly how applications were being used, how they should be used, and which applications were only for special circumstances. Defining an acceptable level of license denials was critical to reducing their software costs.
From 2002 to 2003 these actions resulted in software maintenance savings of 36%.
The quest for IT savings was, however, not complete. Meeting cost reduction targets was made more difficult by the significant growth in software usage.


A joint Technology Enhancement Team (TET) was formed with IT and Operations working together. Reporting to the Vice President of Exploration and the Chief Geologist, the team accomplished a number of things that, alone, neither group would have been able to achieve: they determined an optimal balance between software and training, they worked to maximize the value created by using particular software, while IT negotiated better global contracts and monitored the license usage in each location, they moved licenses to where they were needed and dropped maintenance where licenses were not needed. Individual geologists and geophysicists were trained to understand what additional analysis they should be doing, to be more efficient in their work, and to release licenses they weren’t currently using. Governance was added to the IT approval process to ensure that the impact of adding and supporting new applications was fully understood. These further actions garnered an additional savings of 22% in annual software maintenance costs from 2003 to 2005.
By 2005, it was evident that some important lessons had been learned, providing significant payback for the company. It was then determined that some of the learnings could be applied to operations to add reserves, increase the productivity from each well drilled, reduce finding costs, and to reduce the number of dry holes. A new goal of saving ten times the amount saved in software costs was then set. To meet this goal, a number of things needed to happen, such as: improving team synergies and global sharing of information; shortening project cycle time; working from a 3-D representation of the Earth; drilling fewer dry holes; finding more reserves per well drilled and finding more total reserves; preserving analysis results; and continuing to reduce annual software costs! In summary, this meant improving the quality of the work being done. Armed with information, cross-functional teams were better equipped to identify where operations needed to spend their budget dollars to get more value.

“It was surprising how little needed to be spent to achieve a significant improvement. Although there were challenges, the teams and individual geoscientists took advantage of the opportunities they now had to get training and mentoring, get project assistance, share analysis techniques, and improve their workflows, allowing the quality and quantity of geosciences work to greatly increase. Support for the applications also improved as the support teams were able to focus on the CORE applications and spend less time supporting one-off applications. A key step in this process was the metering of the teams where each was measured (in eleven categories) relative to the industry: BR’s “average” team, BR’s expectations for the team, and the team’s perception of where and how much it could improve. This enabled BR to determine where each team should focus their efforts. During 2003 and 2004 there was a snowball effect throughout the organization where enthusiasm and dedication to excellence was rampant.”1 BR’s efforts resulted in annual savings of twenty times the IT software savings by including:
• Added reserves
• Increased productivity
• Reduced Finding costs
• Percentage decrease in dry holes
in addition to the software savings.
Though the processes and methodologies started in IT, far more value was realized by the company when these spread throughout the exploration teams.
Summary
After only two years of measuring software usage and proactively managing software assets, Burlington Resources achieved annual IT savings of five million dollars. However, the overall business impact of creating a more disciplined, value-oriented culture resulted in annual business savings of twenty times the IT savings.