Why do Oil and Gas Cost Engineers hate SAP?

30 September 2014

Tristan Colgate

Tristan Colgate

Former Managing Director

We’ve all heard the joke: “SAP = Systems Against People”.  There’s no getting away from the fact that some users do not love their SAP solutions. 

Working in the upstream Oil and Gas sector, I’ve found that there’s one group of people in particular that feel they aren’t being served by SAP – project managers and cost engineers on large capital or maintenance projects.

What is it that particular irks them about SAP?

The answer is usually that the system wasn’t implemented with their needs in mind. 

Typically, SAP implementations in upstream oil and gas are focused on the needs of Finance and Procurement, with an emphasis on capturing spend on capital projects (via procurement of goods and services, time-writing, draw down of stock in inventory, etc.) to support statutory, management and joint venture financial reporting needs. Understanding historical spend on a capital/maintenance project is only one part of what a project manager needs to manage their projects.

The following components are essential when taking an Earned Value approach to project management, and are all rarely well served by SAP implements in upstream oil and gas companies:

  • Creating and storing project baselines
  • Capturing and documenting accrued spend on goods and services received but not yet invoiced in order to determine the value of work done
  • Capturing and phasing the estimate to complete project work packages
  • Managing project contingency
  • Managing the creation of AFE budgets and reporting actual, and forecasted spend against them
  • Managing change on the project and accounting for the impact on spend
  • Capturing project schedule and modelling its impact on forecasted phased spend and cash flow
  • Managing multiple versions of the project plan/ performing what-if scenario planning
  • Understanding the impact of currency exchange on cash flow and project performance
  • Reporting on project performance using traditional KPIs such as CPI and SPI, and presenting project baseline and forecast spend in traditional S-Curve graphs.

What are the consequences of poor SAP implementations?

Not being able to manage costs in SAP leads to a typical scenario whereby this is performed in spreadsheets. These are often complex, rigid and time consuming to maintain. They rarely give project managers the insight they need to manage their projects, thus causing significant pain. 

At this point, we often find project managers looking to third party Project Portfolio Management (PPM) tools to meet their needs – they rarely even investigate an SAP based approach. This results in a raft of different problems – the challenge of integrating these to the backend procurement, time-writing and finance systems (usually SAP) and the scheduling system (usually Primavera) is almost always underestimated and the end result is often disappointing, with users distrusting the numbers in the tool and reverting to their spreadsheets.

This all leads to the perception that SAP is unable to meet their needs in the first place, and SAP also unfairly gets the blame for the integration issues when implementing a third party PPM solution.

Does SAP have an answer?

SAP is admirably capable of meeting the needs of managing capital and maintenance projects, obviating the need for third party PPM solutions. The benefits of a SAP solution are numerous and include:

  • Tight integration to the SAP Controlling, Plant Maintenance and Purchasing Modules means that data is accurate and timely
  • Use of SAP’s Business Planning and Consolidation (BPC) provides an Excel-based planning and reporting interface that is easy to use and familiar to cost engineers and project managers
  • Use of the SAP BusinessObjects toolset gives a sophisticated end-user reporting experience

For existing SAP customers, the TCO of a SAP-based Cost Management solution is low – often the required hardware, licenses and support organisation are already in place.

To my pleasure, the most common response when demonstrating a SAP solution to a cost engineer or project manager is “Wow, is that SAP?”

Yes, it certainly is!

Bluefin and SAP S/4HANA - welcome to the one horse race

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