Survey: Hurdles remain for services and supply sector�s use of e-commerce

March 2, 2001
After much hype, e-commerce usage�and acceptance�within the oil and gas industry�s service and supply sector has reached a plateau. For e-commerce to further develop and mature, certain restraints will have to be countered.

HOUSTON, Mar. 2�It has taken a while, but the oil and gas industry�s service and supply sector has reached a plateau regarding its use of�and comfort level with�electronic-commerce (e-commerce).

For the electronic buying and selling of goods and services via the internet to continue to develop, certain restraints need to be addressed.

These were some of the findings from a survey conducted by the consultant Spears & Associates Inc. (S&A), Tulsa. S&A partner Kurt Minnich told a Mar. 1 Society of Petroleum Engineers� luncheon that in the service and supply sector, e-commerce is emerging from a period of disillusionment, where both buyer and seller held misconceptions about each another�s role within the e-commerce model.

Survey components
S&A�s survey was prompted about a year ago, Minnich explained, when the firm started receiving calls from its clientele�almost exclusively service-suppliers�anxious about what was happening with e-commerce. �When they have anxiety, we have anxiety,� Minnich said.

Realizing that a large sample would be required to gauge such a newly developing technology, S&A conducted 100 interviews with buyers and sellers of oil field services and equipment, asking each about their overall perceptions of e-commerce.

�Oil and gas typically leads a lot of areas of technology, but this is one area where oil and gas is not out there on the bleeding edge,� Minnich noted.

E-commerce hit the market with a lot of hype, he explained. But presently, the hype level, or visibility, of e-commerce is starting to noticeably taper off. �If you look at statistics like IPOs [individual public offerings]�in fourth quarter 1998, there were 30 IPOs. By the first quarter of 1999, there were 90,� Minnich said. �And they continued to climb and now, in the fourth quarter of 2000, there were just 10.�

When this line of visibility is graphed over time against the applicability of e-commerce�or how the technology is used�there is a shaded crossover region, which Minnich termed an area of disillusionment.

�By disillusionment, I mean: the oil companies have a certain expectation that they can find any product, they can get it right at their fingertips, and have it delivered, and it�s what they wanted.� Meanwhile, he added, the seller has an expectation that they can get a share of every transaction. Neither of these expectations are fulfilled in reality, he explained. But industry is now making its way through this disillusionment area.

Plateau reached
Minnich said that e-commerce is now at a plateau, with forces both helping it along and holding it back. Among the components aiding e-commerce�s development, he explained, were: time savings, improved management of business relationships, amount of information available, unit cost price, increased selection of items, and transaction costs.

Survey respondents voiced concerns about using e-commerce, which were identified as the forces holding the technology�s development back. These were found to be: lack of security, which included not trusting a particular system and not trusting the privacy of data; the creation of too many�and therefore unmanageable�customer relationships; mismatched orders; lack of proof of cost savings; possible requirements to change corporate policy, utilization levels, both equipment and staff; legal issues; and cost of implementation, such as adding staff and equipment.

Minnich likened the future evolution of e-commerce to a �weather front� that is trying to move over an area of land. By graphing unit cost vs. ordering frequency, he explained that the �topography� of the upstream industry�s use of e-commerce can be viewed.

E-commerce begins with the ordering of an item with a low unit cost at a high frequency, and then moves to the less frequent ordering of more expensive goods and services, he said. As for the prediction of this particular weather front�s movement, Minnich said, �A good forecaster never tells you what and when.�