American Oil and Gas Reporter - January 2019 - 103

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Cloud computing obviously is playing
a key role, but artificial intelligence and
machine learning also are coming of
age quickly in oil and gas accounting
software tool kits. These technologies
will likely be used to detect anomalies
and fraudulent activity, as well as otherwise imperceptible trends in areas such
as vendor bias, for example. There are
endless opportunities as more machine
learning platforms become accessible
and data scientists continue to explore
new frontiers in AI and analytics.
Cloud solutions allow today's mobile
workforce to securely access data from a
global perspective. Technologically-adept
employees can work from many different
locations in their jobs, from a home office
to corporate headquarters or at a well
site. Modern interfaces are more intuitive,
thus decreasing training time and increasing employee efficiency.
Cloud solutions can be scaled up and
down immediately, allowing users to scale
their costs and IT infrastructures as
demand dictates and avoiding amortization
of large sunken capital costs. Cloudbased software allows remote users the
same granularity of access management
and IT control as on-premises users.
Given their operational scopes and
multilayered expertise, major Internet
services providers such as Amazon, Microsoft and Google can provide a much
more reliable, cheaper and secure IT
backbone than any individual oil and
gas company can achieve internally. In
the cloud, it is fairly easy to achieve
99.95 percent uptime, which is virtually
impossible using a traditional client/server model.
It also is possible to have better cybersecurity, with encryption, automated
maintenance and other tools. Of course,
there is always more risk when systems
are connected to the Internet, but that is
true whether a company's local network

is connected to the Internet or all of its
data exist in the cloud instead of internal
servers. And while there is greater risk
when accessing data from foreign lands,
two-factor authentication and a myriad
of other security defenses help secure
data. I have yet to see a single client that
can achieve the same level of security on
its local network than can be achieved at
lower cost in the cloud.
Shorter Investment Horizons
The industry is experiencing a change
in its investment horizons that have a
direct effect on the allocation of capital
cost versus operating cost for IT and
software infrastructure. In the past, the
company's investment focus was on continuously building reserves and production
for years into the future, with a limited
view to selling properties. Today, with
the private equity market playing a dominant role in upstream and midstream
capitalization, the investment horizon
theme is to buy and sell in short timelines to take advantage of the cyclical
nature of commodity trading.
Given this new private equity-driven
reality, large capital expenditures are
going to be reserved for investments in
oil and gas properties, and not for purchasing accounting and back-office systems. Amortizing large capital investments in back-office solutions can impact a company's short-term investing
horizon negatively, which is making
cloud-based software-as-a-service a preferred solution.
There is a myth that cloud-based backoffice systems cost more in the long run,
but there are many business case studies
that demonstrate otherwise. The cloud
subscription pricing formula greatly offsets
the traditional method of requiring a
major front-end investment in software
and infrastructure upgrades to secure improved performance.

In providing a relatively low initial
capital investment and minimal maintenance costs, companies also are better
positioned to adopt new technologies as
they become available, because there is
no long-term commitment to an internally
deployed software system. Startups, in
particular, can benefit from cloud solutions since they are able to select and
apply advanced software without sacrificing scarce budget dollars needed to
fund their operations.
New technologies have both an allure
and a certain fear factor. It is our nature
to question anything new. Oil and gas
operators should always ask prospective
software and IT service providers questions
about their long-term product roadmap
and overall vision for the future. It can
be very instructive to learn how many
customers actively are using a given technology, how the design architecture is
positioned to accommodate technological
advancements (both known and as-ofyet unknown), and what the true all-in
cost is (no one likes a surprise ending in
the business world).
It also is important for companies to
prioritize their requirements for accounting
and back-office systems, as well as other
business functionalities and objectives.
Many companies are struggling with information pushed around and between
different groups. It is critical for managers
to understand what data and core competencies are most valuable to their organizations, and how technology can be
deployed to consistently deliver this information and understand what IT capabilities are needed to accelerate the answers
that operations teams and management
demand in today's fast-paced business
environment. It is known and acknowledged that business performance is tied
directly to the quality of the information
at hand. Success does not happen because
of random guesses!
r

JODY
VASQUEZ

Jody Vasquez is vice president and a co-founder of Oil & Gas Systems (OGsys) Inc. He has
been involved in computer technology marketing since 1971, and worked at Olivetti Corp., MSI
Data, Sperry Corp. and Honeywell before helping to establish OGsys in 1982. A former
professional golfer and current avid amateur player with many tournament wins, Vasquez has
designed patented golf training devices and authored a book on Ben Hogan. He holds a degree
in business administration from the University of Texas at Arlington.
JANUARY 2019 103

American Oil and Gas Reporter - January 2019

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