Oil CIOs confirm that there will be IT spending cut this year

Several oil companies are going to cut their IT spending this year – primarily due to the drop in oil prices globally, said IDC.

Oil prices fell under $50 / barrel and 60 percent of oil and gas companies expect reductions in their 2015 IT budget.

“The impact of lower oil prices on oil and gas IT budgets is not as much as expected, and cuts are not across the board as companies are more strategic and disciplined about reductions. The challenge for CIOs is to understand the company’s plans going forward and present the role of IT to implement these plans” said Chris Niven, research director, IDC Energy Insights.

Though there will be decrease in IT budgets in 2015, these will not be across the board at oil firms. Cuts in IT spending are more selective, said IDC. An IDC study says there will be 75 percent reduction in internal staffing, also a positive net projection for external data services, external services, and telecommunications.

Oil and gas companies are evaluating the costs and value of their IT departments to make decisions about what budgets to cut and how much, said IDC Energy Insights — based on a flash poll of CIOs from 20 non-OPEC (Organization of the Petroleum Exporting Countries) oil and gas companies.

Oil and Gas sector

Line of business areas with the largest IT budget cuts are the knock-on effects of reduced investment in exploration activities such as finding oil and drilling oil; line of business areas with the largest potential IT budget increases are production and midstream.

While drilling activities are slowing down, some oil and gas companies continue drilling to take advantage of lower drilling costs, and also for adhering to lease agreement requirements.

The biggest IT budget cuts will be in internal staff.

External data services, telecommunications, and software ranked high in importance for potential budget increases.

Oil and gas companies plan to invest strategically in automation and analytics, Big Data, and cloud to mitigate the impact of lower crude prices.

25 percent indicated that IT budgets will remain the same in 2016 as the IT budget plans for 2015. 5 percent reported that budgets would increase 5 percent in 2016 compared to 2015 and 5 percent of respondents reported that budgets would decrease 5 percent compared to 2015.

Even though the budget amount may stay the same in 2016, IDC Energy Insights believes that the focus will shift to applying a more disciplined approach for evaluating and selecting IT products and services that improve business performance and help to reduce costs.

Rajani Baburajan
[email protected]

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