WHITE PAPER THE LEGACY SOFTWARE STRANGLEHOLD: WHY E&PS MUST INNOVATE Page 2 CONTENTS The 7 Warning Signs of Legacy Software and the Cost of Standing Still ................................................................................. 3 The Effects of Legacy Software - Innovate or Perish ........................................................................................................................ 3 The Real Cost of Legacy Software ............................................................................................................................................................... 5 Eliminating Data Silos and Bringing E&P Workflows Together in the Cloud ........................................................................ 6 Action Plan: Select the Right Software Platform ................................................................................................................................. 7 Promoting the Value of Data and Building a Data-Driven Culture ............................................................................................ 7 Action Plan: Build Sustainable Data Management Governance .................................................................................................. 8 Successfully Starting and Sustaining Digital Transformation ......................................................................................................9 Execution Is Everything ................................................................................................................................................................................... 9 Action Plan: Center Digital Transformation Around Change Management ..........................................................................9 Future Proof Your Oil & Gas Software and Data Management ..................................................................................................... 10 In today’s complex market - where success is a function Resisting breaking free of legacy systems is like hand- of commodity price and operating costs, digital cuffing the organization to the past. It only compounds innovation should be the guiding light to profitability the crippling effects of legacy technology on your and sustainability. Yet lack of innovationorganization. Organizations must have a digital in the energy back office, and legacy technology are transformation strategy to survive. But what is the right holding upstream companies back, just as much, as an time to make the switch and begin the digital entrenched mindset and culture of doing things the waytransformation journey? Read on to learn and identify they have always been done. Oil & gas organizations the critical warning signs of legacy software, and how large and small are afraid of making the change that will your organization can overcome the resistance ultimately allow them to operate more efficiently, build to change. business resilience, and unleash the potential of their workforce, by eliminating the data and “cultural silos”. The following sections provide a complete roadmap - Instead, many E&Ps are choosing to maintain the statusincluding action plan checklists - to help you navigate quo and kick the can down the road exposing them to and close the widening capability chasm caused by the risk of market fluctuations, and of being out-legacy systems that have stranded your organization performed by their peers who have modernized theirwith under-powered technology while enabling your accounting, land management, production operations, competitors to outperform and shrink costs. For and tax and regulatory systems. companies who successfully execute and sustain digital transformation, the payoff is big, including increased business performance, agility, and millions in annual cost savings. © 2023 W Energy | WEnergySoftware.com Page 3THE 7 WARNING SIGNS OF LEGACY SOFTWARE AND THE COST OF STANDING STILL The oil & gas industry continues to come to terms with an unprecedented super cycle characterized by historic commodity fluctuations, capital restructuring, and consolidation. How your team chooses to move forward now, will determine the long-term viability ofalways has as supply and demand rebalance. The world your organization.has changed and the old models of doing business are no longer adequate. Going forward, the energy industry As the industry resets, ask your team the is unlikely to resemble patterns of the past and old ways following questions: of resetting will no longer suffice. 1) What processes and technology no longer make THE EFFECTS OF LEGACY SOFTWAREsense? - INNOVATE OR PERISH2) What processes and technology should we keepin place? Leaders must recognize that digital technology is not3) What processes and technology should our just about supporting the current business model butorganization now embrace? also shaping the business model for future scenarios. While many leaders in the energy sector have already The answers to these questions will clearly signaltaken decisive steps to reduce costs, this is a short-term whether or not your team wants to seize the momenttactic. It must be accompanied by strategic planning and innovate. But there’s a trap here in assuming thatwith digital technologies to reinvent the business the oil & gas business will continue to function as itfor the future. “ COMPANIES FAIL DURING DISCONTINUITIES AND DISRUPTIONS BECAUSE THEY OVERINVEST IN WHAT THEY HAVE BEEN GOOD AT IN THE PAST AND UNDERINVEST IN WHAT THEY NEED TO BE GOOD AT TOMORROW.“ - Source; AWS, The New Energy Playbook Innovation & Transformation in The Back-Office Page 4 The oil & gas industry has entered the digital age where continuous innovation is the only winning strategy, and those who rely on 20- to 30-year-old ERP software will not be able to survive rapidly changing market environments. There is a large gap between what many operators can achieve with their current legacy ERP systems, and what is now possible through the cloud – automation, AI, analytics, and a technology capability chasm that is only widening with time. To cross that chasm requires a leap forward - not just small, incremental steps. Leaders need to pay close attention to the “sacred cows” - ideas or ways of doing things that have been protected in the past - that no longer make sense. These must be replaced with a new paradigm that prioritizes innovation, data value, collaboration, and cost efficiency. Upstream companies must not only upgrade their software, but the way they think about data and integrate corporate knowledge across departments, breaking down data silos, and siloed thinking. Attaining the prize of a modern technology stack and benefits of a highly collaborative, data-driven, low-cost operation takes more than digital transformation, it takes business transformation. However, even when the C Suite is presented with a playbook that will save millions while accelerating business performance, the response is all too often to indefinitely defer digital transformation exactly because it takes decisive action, cross-organizational buy in, and a long-term commitment to making sure the organization is well-equipped to cope and even thrive in a down-turn. RESISTING CHANGE ONLY COMPOUNDS THE CRIPPLING EFFECTS OF LEGACY TECHNOLOGY ON YOUR ORGANIZATION The ‘sacred cow’ of irreplaceable legacy ERP software has been sustained internally by apathy, and externally by legacy software vendors. The business driver for purveyors of outdated technology is the inverse of innovation. The goal is to ‘milk the cow’ for as long as possible even if that means providing temporary licensing discounts at the first sign their clients want to modernize and move on. Year after year, many oil & gas teams choose to kick the digital transformation can down the road, and renew their legacy software licenses, trading short-term licensing cuts for long term opportunity and building business resilience.Page 5 While choice of technology can compartmentalize and practices that can increase the free flow of validated, limit the flow of business-critical information, there are decision-ready data. Creating even more resistance is also entrenched cultural data silos in some organizations. an oil & gas workforce nearing retirement who has been Because data is not promoted as an internal asset for thehit, time and again, with industry busts. At this point in entire organization to consume, there is pervasive their careers, many energy professionals see upgrading resistance not only to moving away from legacy software, as injecting unwanted uncertainty or requiring them to but to also establishing robust data management do even more when their bandwidth is already constrained. Start by assessing where you are in the spectrum of technology adoption. If any of these technology warning signs are true about your oil & gas business, you are ready for business transformation: 1. YOUR SUPPORT COSTS FLUCTUATE. 5. YOU HAVE A HIGHLY SKILLED SERVICES ARE MORE COSTLY & WORKFORCE, BUT THEY ARE MAXED HARDER TO FIND OUT You have to leverage a managed services They simply cannot take on more work. This is provider due to the lack of skillsets in-house, &even harder when acquiring or divesting an asset. in the market. 6. YOUR TEAMS ARE ENTERING WELLS, 2. YOU GET DINGED ON AN EXTERNALVENDORS & COST CENTERS IN 3 ORAUDIT FOR SOFTWARE-RELATED MORE APPLICATIONSITEMS This leads to mismatched data, inability to pull information together across the enterprise, & work 3. YOUR ENGINEERS, ACCOUNTANTSeffort wasted on duplicated processes.& LAND ADMINS CONSTANTLY ASKFOR MORE DATA 7. YOUR SOFTWARE VENDOR PROVIDES As a result, your team is building databases VERY LITTLE SUPPORT outside core systems.Despite poor support, you incur increasing integration development costs for core functions. 4. THE TECHNOLOGY LOOKS DATED & Your team still has to spend time in spreadsheetsIS NOT USER-FRIENDLY combining data together. The system is difficult to use, & your team battles issues such as accounting processes taking several hours to complete.THE REAL COST OF LEGACY SOFTWARE There are very tangible costs associated with continuing to run oil & gas operations on legacy software. Adding to the total cost of owning accounting, land, production operations, and the other software systems your organization relies on, it’s the decisions made on bad, incomplete, or multiple versions of data that accrue staggering hidden and opportunity costs. For mid-sized E&Ps (operating 1,500 to 2,500 wells) the financial impact includes $1M in unnecessary legacy software costs, more than 600 hours of duplicated effort, and the G&A costs of 10 full time employees to manage the moving parts and provide workarounds to capability gaps.Page 6ELIMINATING DATA SILOS AND BRINGING E&P WORK- FLOWS TOGETHER IN THE CLOUD Cutting checks to interest owners is a common challenge for every E&P. Right now, how well does your current land management solution handle a drilling-delay rental clause or shut-in? Put a different way, how easy is it for your team to process these types of special payments? Chances are, getting those obligations paid can be a disruptive and time-consuming effort. The #1 reason is poor or no integration between leases and revenue division of interest – providing no immediate way to know who on the DOI (Division Order Interest) is associated with the lease-specific payment. The lack of integration between related workflows – lease administration, division order, and revenue accounting – is just one small example of the fragmented nature of today’s oil & gas information landscape. Disconnected applications are a pervasive problem across the energy enterprise, from land and accounting to production and regulatory. The result are data silos that stand in the way of the free flow of business-critical data, and strategic and tactical decision making. For many organizations, the information landscape evolved this way organically over decades fractured by the belief that niche, best-of-breed solutions are the answer to each department’s challenges, thereby trading the benefits of a unified, comprehensive approach for a highly specialized solution. But the results have been messy and expensive, requiring E&P’s to build and maintain brittle integrations at best, or resort to manual data shuffling and duplicated effort at worst. Whether public cloud (data and apps are stored securely outside your firewall) or private cloud (everything is inside the firewall), cloud computing provides the perfect foundation on which to build solutions for the energy back office. Unlike the traditional on-premise approach to maintaining servers and software, cloud solutions can be built LAND MANAGEMENTPRODUCTION TAX & COMPLIANCEACCOUNTING OPERATIONS W ENERGY SOFTWARE’S CLOUD PLATFORMPage 7 around a common and consistent database, which in •Master data management capabilities for turn eliminates data silos. Combined with a unified cre-ating a single version of the truth, and application architecture, land management, accounting, enforc-ing data standards across functions, and production workflows become inherently e.g., well status. integrated while creating new opportunities to automate, streamline, and accelerate business •Cloud-based applications and a true SaaS performance. experience ensure upstream workflows are running on the latest technologies. The advantage of a unified upstream ERP for the land administration example above include an instantaneous PROMOTING THE VALUE and crystal-clear view of chain-of-title and the assurance that payments are being issued on time, to the correct OF DATA AND BUILDING A and current parties on the lease. A unified application DATA-DRIVEN CULTURE and data architecture can also bring real-time SCADA How do you put a price tag on data? One way is to and measurement data into production accounting, calculate the cost of acquiring it. Take well logs as an informing operational decision-making with up-to-dateexample. Oil & gas companies can spend millions of field data, volumes, and well status. What’s more, with dollars on wireline work to log their wells. This data is production data feeding your accounting systems, yourvery valuable but like so many oil & gas data types, it’s team can avoid problems with revenue disbursement, stuffed in a physical or digital filing cabinet, accessible to including prior period adjustments, reversals, a few and limiting its value to the entire organization. and rebooks. That’s just one of the hundreds of data types drilling, land, production, and accounting teams work with on a daily basis. And the worth of these data assets far ACTION PLAN: SELECT THE RIGHTexceeds the mere cost of acquiring or creating them, SOFTWARE PLATFORMunderscoring the need for robust data management Choosing the right oil & gas software for your team can and methods to maximize data consumption across be complicated, time-consuming, and even confusing teams. as some software vendors offer multiple options of the same type of software, such as land management Creating an open and accessible data culture starts with solutions, a result of acquiring smaller softwareshifting the mindsets of all departments to treat companies (just to grow revenue and satisfy financial backers). However, by ensuring your vendor meets the following 5 criteria, your team will spend less time, money, and frustration evaluating oil & gas software options and more time on putting the technology to work.• Unified application architecture provides a sin- gle database and consistent user interface for core upstream functions, including accounting, land management, and production operations.• Out-of-the-box dashboards and self-service reporting eliminate costs and increase produc- tivity vs. one-off custom reports.• Explicit workflows, approval routing, and audit trails automate processes, including AP, pur- chase order, and revenue disbursement. Page 8 data as an asset whose value extends across the entire ACTION PLAN: BUILD SUSTAINABLE organization. Legacy oil & gas software and a fractured, DATA MANAGEMENT GOVERNANCE poorly connected application ecosystem can also hold your team back. A unified ERP platform or software Rather than taking a reactive approach, oil & gas suite with robust integration across functions provides a companies who embrace digital transformation have foundation for creating a single and centralized version the opportunity to inform strategic decisions with the of the truth (master data), which in turn enables a free best information, leading to a more agile workforce, flow of data across teams. People and processes arelower G&A costs, and a unique competitive advantage. required to ensure data integrity.The following checklist provides proactive strategies to Master data management and continuously cleansing put your organization on the right data multi-disciplinary datasets depend on sustainable data management track. governance with the overarching strategies and policies defined at the enterprise level, and execution at the• Create the right blend of people, processes, departmental level. Governance requires your entireand technology to enable the organization to team to pull together in one direction. Creating and leverage data as an enterprise asset. enforcing asset naming standards, for example, can falter if staff do not perceive the value of normalized data • Centralize enterprise strategy with decentral- and continue to use the well names, they are familiar ized execution, including the development of with. standards, policies, and procedures. Data volumes are rapidly growing within most oil & • Focus on specific data sets at the business unit gas companies, both structured data (e.g., production level and their relationship with volumes and financials) and unstructured data (e.g., enterprise data. PDFs and scanned invoices). Does your team have the right strategies in place to manage this flood and ensure• Enable business stakeholders to take owner- decision-ready data is always at hand? Adding to the ship of data with IT as a partner, to maintain data management complexity are increasing regulations systems and data management tools. and customer expectations for on-demand reporting, while technology and market changes outpace the • Evolve your processes and tools to advance ability of many E&P’s to respond. data consumption as the business takes in-creased ownership for dataintegrity and quality. SUCCESSFULLY STARTING ANDSUSTAINING DIGITALTRANSFORMATIONThe previous sections outlined a proven roadmap witheverything your team needs to start your digitaltransformation journey - specs for a unified cloud-basedapplication that encompasses land management,accounting, production operations, tax & regulatory, plusstrategies for rapidly delivering quality datasets to Page 9 decision-makers. To succeed though, your team must EXECUTION IS EVERYTHING own the digital transformation strategy with executive To grow you need to leverage technology and auto- sponsorship in the journey that does not falter. mation to scale the organization and create turnkeyfuture acquisitions. Your team must embrace data as a The first organizational hurdle your team must strategic asset and be able to access, use, understand overcome is the entrenched mindset at many E&P’s that and trust data across every business function from the the timing for a digital transformation initiative is neverC-suite to the front lines. Ensure accountability/owner- good because of the lack of enthusiasm in the back ship for data assets and eliminate time spent duplicating office and a workforce that prefers to continuously kick data entry so that time is spent on more valuable tasks. the software licensing can down the road even if itFailing to effectively manage your team’s knowledge is means doing things the old, manual, and painful way. just as bad as failing to manage capital allocation. Oil & The last thing that they want is the uncertainty, gas companies have become disciplined with the latter disruption, and additional workload that many believe and as an industry, mindsets must be shifted to under- will result from digital transformation and processscore the importance of intellectual capital and its care- improvement. For oil & gas teams that can overcome ful management. This includes continuously refreshing this resistance to change, the final organizational hurdle digital skillsets and ensuring that every member of your is managing that change and understanding that digital team knows how to get the most out of their software oilfield transformation is not a project, it is a continuous and data. process that must be built into your organization’s operational DNA.ACTION PLAN: CENTER DIGITAL The digital transformation journey starts with an TRANSFORMATION AROUND CHANGE enterprise vision to ensure trustworthy and higher MANAGEMENT quality data to make quicker and more Organizational change management is the top success informed decisions.factor for delivering the business results the energy Csuite expects from digital transformation, i.e., the abilityto grow and outperform peers with lower costs and alean team. However, change management is almostalways the first budget to be slashed when digitaltransformation initiatives fail to show early results. Staythe course. Center your digital oilfield transformationaround change management along with the otherstrategies listed below.•Assemble a dedicated team of people to man-age the roadmap and organizational change.•Ensure that your change management teamand super users have dedicated time to thetransformation.•Provide quick wins along the way to show in-cremental and steady progress against biggerefforts.•Establish KPIs at the enterprise and depart- Page 10ment level and measure progress to link Leaders have an unprecedented opportunity to rally value to specific activities.employees around continuous innovation, galvanizing the entire organization with the digital strategies that • Keep an eye on the ‘prize’ through continuousunlock workforce and business potential. Be proactive innovation, data governance, and and confident in your team’s ability to successfully executive sponsorship. move forward with a modern technology stack and data management best practices. A down market is a good opportunity to invest your time and resources in Recall the 7 warnings signs listed in the beginning that making a transition, ensuring that a solid digital signal whether your organization is ready for digital foundation is in place, and positioning your organization transformation. These included hidden software costs, for growth on the upswing. poor support from your vendors, and waiting on data that is plagued with inconsistency, inaccuracy, and SAVINGS REDUCED COST multiple versions of the truth. Those are the warning YEARS 5 signs, but there are also abrupt transitions that result in4 a “wake up call” and sudden urgency to make a change. Your team might find itself in the midst of a major3 acquisition only to discover that your current oil & gas 2 software, data management, and processes are limiting 1 growth. Or perhaps you have an existing, somewhat OVER $2.7 MILLION outdated ERP and the vendor is forcing you to upgrade to a different version that entails massive capital outlay and long project timelines. There are many ways yourcost avoidance & reduction over 5 year period team can suddenly have an awakening that change is needed. FUTURE PROOF YOUR OIL & GAS Overcome the status quo mindset, apathy, and SOFTWARE AND DATA MANAGEMENT implementation anxiety that has made your legacy ERP a sacred cow. Stop over-investing in the processes andIncreasingly, upstream companies are turning to W technology that have worked for your team in the past Energy to modernize their energy back office with the and begin investing in the future.oil & gas industry’s only fully unified ERP built on the cloud spanning financials (AP, AR, financial statements), land administration, division order, revenue accounting, production accounting, drilling/well work, field data “ capture, and production operations. Our SaaS solutions PAY ATTENTION TO THE ‘SACRED also span the spectrum of State and ONNR reporting. COWS.’ THESE ARE IDEAS OR An all-in-ONE, fully integrated upstream ERP, that WAYS OF DOING THINGS THAT shares a common and consistent user experience that centralizes multidisciplinary information, enabling your HAVE BEEN PROTECTED IN THE team to manage master data and PAST AND THAT NO LONGER enforce standards. MAKE SENSE. “ - Source; AWS, The New Energy Playbook – When it comes to enterprise level digital transformation, W Energy checks all the boxes with Innovation & Transformation in The Back-Office clients seeing an immediate return on their investmentPage 11 typically within 5 years. Plus, all-inclusive upgrades every team with a complete solution for modernizing your year ensure that the W Energy platform is continuously ERP technology stack, along with the expertise to updated with new capabilities and evolves as successfully start and sustain digital transformation. accounting, industry, and regulatory standards change, With rapid implementation timelines and W Energy’s future proofing your business software and giving your reputation for partnering with clients to ensure long- team the confidence that accounting, land, and term business success, your team can close the production operations are always running on the latest technology capability chasm, shrink technology and technology.G&A costs, and reach higher levels of performance witha lean team. In addition, our ecosystem of system integrators and change management experts provide your oil & gas ABOUT W ENERGY Headquartered in Tulsa, Oklahoma, W Energy offers the oil & gas industry’s only unified ERP solution built for the cloud that is relied on by more than 130 upstream and midstream companies to accelerate business performance, improve operational efficiency, and drive costs down. W Energy combines precision-built software in one extendable cloud-based workspace with an intimate understanding of the oil & gas business to deliver solutions that offer flexibility, affordability, and continuous upgrades. Unlike other ERP software that loosely ties together a mix of legacy solutions and f ragmented technologies, W Energy designed a unified upstream and midstream ERP platform to seamlessly track oil, gas, and NGL f rom the wellhead through transportation and marketing, eliminating data silos as well as the burden and costs of maintaining multiple systems. With W Energy, oil & gas companies stay lean and agile with the tools they need to adapt to market changes and meet evolving customer needs head on, all while gaining the confidence that their business is running on the latest technology. For more information, please visit WENERGYSOFTWARE.COM