Digital Boom and Bust
Once done with the initial budget slashing from the BP-Amoco merger, Leggate set out to invest heavily in Internet technology. With Browne's backing, he spent $340 million in 2000 on initiatives to get BP employees onto a common operating environment. He bought Internet-linked laptops for more than half of the company's employees, including top management and oil rig workers. Now, 80 percent of the company's 100,000 employees have computers, 2000 of which are "living beyond the firewall" in an experiment with broadband wireless connections that puts them ahead of competitors Shell and Exxon Mobil. "One of my main jobs is to allow people here to be connected wherever you may touch down. If you're in Jakarta, Singapore or Houston, you're always in touch with your colleagues," Leggate says.
Leggate and Browne's early enthusiasm for all things Internet-related reflects the first-mover company ethos also evident in BP's acquisition and outsourcing strategies. Sometimes, they admit, they have gone too far.
Both Leggate and Browne bet aggressively (and some would say unwisely) on online procurement, predicting large and quick gains in the business-to-business area. In 1999, Browne predicted with fanfare that BP would move 95 percent of its $34 billion in procurement to the Web by the beginning of 2001. When the company was able to achieve only 4 percent of purchasing online by that year, Browne said in a speech delivered at Oxford University (and co-written by Leggate): "To have reached that sort of level would have required not just closely linked internal systems but also well-developed portals and a network of suppliers linked into a single process. Revolutions don't come easily."
In retrospect, Leggate says now that while the expectations were overblown, the vision remains. "Clearly, digitizing the supply chain in all its facets will be a long journey, but the dream - in a business context - has the touch and feel of an Amazon.com," he says. He adds that BP will remain a first-mover where they see a clear payback. "Technological breakthroughs like Web services and RFID tagging, all of these will accelerate the drive toward digitization of the supply chain," he says.
Cross, himself afloat in the dotcom bubble at the time, says that BP's enthusiasm may have cost them. "They did play with tangential things, especially in B2B, and they surely lost a lot of money on that, as did everyone else," he says. Leggate, who embraced the Internet more enthusiastically and publicly than other oil industry CIOs, still proclaims that BP's goal is to "live on the Web". It sounds a bit dated as a motto, but Leggate (echoing Browne) stresses the Internet never changed the laws of economics or the nitty-gritty nature of finding oil and gas. Leggate says: "Are we getting more for less now? That answer is yes. We can genuinely show about a 5 percent per annum trendline over five years in savings from technology."
A Business-IT Pipeline
According to Jill Feblowitz, an analyst at AMR Research, all of the oil giants are "on the same page" wrestling with ERP consolidation and pouring dollars into "digital oilfield" initiatives that promise increased oil production through 3-D imaging and real-time, automated drilling techniques. "Everyone is focused on creating more flexibility with these initiatives because of the heightened uncertainties in the Middle East and other regions," Feblowitz says. The challenge for CIOs at the oil giants, says Dick Cooper, director of Deloitte Consulting's global oil and gas practice, "is to marry these new technologies with cost and budget information".
Analysts characterize BP's technology strategy as aggressive, but they also agree that when it comes to aligning IT and business strategy, BP seems to be further along than its rivals. That task has been made easier by Browne's interest in IT and Leggate's business experience. "What was unusual about John Browne was that here's a CEO that not only thought IT mattered but made it clear by his actions," says Michael Earl, dean of Templeton College at Oxford University and an expert on the CIO role and on CEOs who have pushed an IT agenda. Earl adds that Cross set the stage for Leggate by working closely with Browne and getting top-level approval for his bold decision to outsource much of IT in the 90s.
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