IT Value BP, Like All

IT Value

BP, like all other modern companies, has incorporated IT for a variety of purposes, the most important of which was to enhance its operations and efficiency. However, also as in many other companies, this strategy has proved to fall short of its initial goals in the current, continually changing business environment. The problem has been identified as one of an outdated system with outdated purposes. The initial goals of IT were for example compatible with a more traditional business model; autocracies where a top-down structure was at the order of the day. Business environments tended to be more stable and established. Currently, technological advances have changed this. Expansion has become instant, leaving little time for planning or creating new, applicable systems to handle new environments. Instead, IT would have to be adjusted to be compatible with the new paradigm of change rather than using a traditional system where this is no longer applicable. BP is among the pioneers in business who accomplished this. In addition, operations have become so efficient that significant cuts in cost have resulted. To accomplish this, BP has implemented specific strategies for the transformation of their IT facilities. At the bottom of the new IT strategy was creating value.

The first step towards any transformation process is the recognition and assessment of a problem. The initially identified problem was plummeting oil prices and what this meant for BP's profit margin. A concomitant problem was accurately identified as a non-optimal IT department. Once the problem has been identified, specific strategies could be put in place by which to solve the identified problems. These strategies lie at the root of BP's success and are also widely applied in general.

John Browne, the CEO of BP, specifically assessed the company's IT problems in three main points. Briefly, these include: 1) an architectural complexity of different IT platforms for interfacing the different components of BP; 2) Spiraling IT costs concomitantly with demands for new technology and the involvement of local computing power; and 3) constraints on free-flowing information as a result of architecture complexity. These problems resulted in a basic lack of efficiency, which harmed rather than helped the company. By identifying the problem in a precisely structured way, a platform could be created by which true value could be created while transforming the IT strategy.

The same cognitive strategy was applied to finding solutions. After creating a specified list of goals and mission statement for the IT system strategy, specific changes could be projected for accomplishing these. An IT transformation agenda was drawn up in the form of a table, specifying exactly the areas of change needed, where the areas were located, and where they needed to move. Firstly, this included the IT system moving from systems provider to infrastructure planner. Merely being a systems provider stagnates the IT department to acquire increasingly new systems rather than planning for how these systems are to integrate most efficiently. Secondly, the monopoly supplier would be replaced by a varied list of mixed sourcing. Outsourcing in this way would guarantee the best prices for the highest quality and efficiency of technology. Thirdly, narrow business standards in IT would need to change to wider industry standards. Other transformations include decentralized bias to the more efficient centralized topsight, replacing systems analysts with business consultants - systems are already in place; the next step is to learn how they need to be used to optimize business. The final two include the change of IT personnel from craftsmen to project managers, and finally to create a lean team of IT specialists rather than the large functioning department that has been involved with IT to date.

These above strategies are all aimed at the desperately needed focus within BP's IT department. While several challenges lay in implementing the seven transformation strategies, BP succeeded in improving both their profit margin and an efficiency that would ensure the maintenance of this profit margin.

In short, value was created by focusing on transformation in BP's processes, personnel and skills basis. There are five specific essential elements that the company implemented to ensure the success of their IT transformation. Firstly, the process in the IT was not seen in isolation from the rest of the company. It was part of an overall company strategy. An integrated effort was therefore made to encourage the transformation process.

Secondly, the above-mentioned goals of the company were set before the beginning of the process itself. As such, the target of reducing costs by 40% set a demanding goal that set in motion the need for a new, global architecture that would simplify the IT process and hence reduce its concomitant costs.