Blog #4 International Business
Do players in your industry manufacture overseas? What aspects of their operations to the outsource?
Almost every company in the energy industry uses outsourcing strategy to save the cost during production in order to make more profit. The energy companies use a lot of technologies in the production processes. For example, “Multifaceted ERP software from SAP and Oracle power a range of business processes by oil and gas firms, including Royal Dutch Shell, Chevron, BP and ExxonMobil” (Cbersola). Because of the global recession and volatile prices, energy companies usually outsource ERP systems to some IT companies.
ExxonMobil outsourced 70% of the whole work before 2009. In 2009, ExxonMobil was going to put $1 billion more in outsourcing, which increased the percentage of outsourcing to 90%. Although an official said this is just a thought that has not been put into calendar, some big IT companies already prepared to race for the contract.
Also in 2009, BP outsourced the management of the enterprise application and integrated service desk operations to IBM (Dubie). "We see a significant opportunity to simplify and standardize BP's work processes while leveraging IBM's world class expertise in this area and their strong knowledge of the Oil and Gas industry," said Dana Deasy, BP Group CIO, in a statement. "This contract will enable BP to reduce complexity, whilst lowering our overall cost base." The contract not only helped BP simplify work processes and save money in the production, it also helped IBM to earn more during the global recession. “The order is the ‘largest among multiple awards BP is making as part of a major program to simultaneously simplify business processes,’ IBM said in its statement” (Arakali).
References:
Arakali, Harichandan. (2009) “IBM, Tata, Infosys Win Outsourcing Contracts From BP (Update1)” The Bloomberg. Retrieved from http://www.bloomberg.com/apps/news?pid=newsarchive&sid=a68StadloJjQ on 16th Oct 2011
Cbersola. (2009) “ExxonMobil to Consolidate $1b in Outsourcing Contracts” Sourcingline. Retrieved from http://www.sourcingline.com/resources/exxonmobil-to-consolidate-1b-in-outsourcing-contracts on 16th Oct 2011
Dubie, Denise. (2009) “IBM nabs British Petroleum outsourcing contract” Networkworld. Retrieved from http://www.networkworld.com/news/2009/082609-ibm-outsourcing.html on 16th Oct 2011
Do companies outsource due to the resources they need to produce that energy being in certain concentrations of the world? It seems like most companies would resort to places such as the middle east to obtain their oil from and send it back to the United States for consumption. How does outsourcing happen when it comes to machinery and equipment used in the energy industry for things such as oil extraction in American energy companies? I would guess that many companies resort to the emerging technologies in Europe for their green energy, and maybe to companies with cheaper labor force for oil extracting machinery.
ReplyDeleteEnergy Companies don't necessarily outsource for extraction operations and the production of resources. Running a major corporation that transports natural resources requires heavy tech & computer work. By outsourcing, they can allow a company like IBM to do a majority of their computer operations. This might mean managing financial statements online or providing technology for engineering technology. Especially with an emerging demand for clean and renewable energy, companies need high end technology to run research and store their information. This is where IBM comes in; this is where IT companies can give energy giants their needed assistance. Keep in mind, a smaller company may not have to profit margin or capabilities to outsource. This can give a competitive advantage to the firms that are already on top of the energy market.
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