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Cloud Computing

The Billion-Dollar Startup

An innovative mix of hosted and cloud solutions helps Shelf Drilling succeed in new waters.

by Alan Joch

November 2014

Some executives dream of launching a successful company the way some athletes dream of competing in the Olympics or soccer’s World Cup. So in 2012, when Ian Clark heard that his previous company was looking to sell off part of the business, he immediately wanted in. “David Mullen [now Shelf Drilling’s CEO] and our private equity sponsors were looking to create a company from a blank sheet of paper, but in this case, it was a startup with a billion dollars in existing business,” says Clark, now executive vice president at Shelf Drilling. “That’s a unique opportunity.”

Snapshot

Shelf Drilling Holdings

Location: Dubai, United Arab Emirates

Industry: Oil and gas

Employees: Approximately 4,000

Oracle products: JD Edwards EnterpriseOne solutions, Oracle Hyperion Financial Management, Oracle Hyperion Planning, Oracle Planning and Budgeting Cloud Service, Oracle Data Integrator

Oracle partner: Tata Consultancy Services

Ian Clark

Executive Vice President

Length of tenure: 19 months

Education: BS in electrical and electronic engineering, Heriot-Watt University

Personal quote/mantra: “Successfully launching a fully integrated ERP system within six months was key to establishing Shelf Drilling as a standalone company. Picking the right system and implementation team were fundamental to achieving this goal.”

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But opportunity doesn’t necessarily translate into business success in the specialized jackup drilling market, where top players like Shelf Drilling lease offshore rigs designed for relatively shallow ocean waters. It’s a world where downtime is deadly. To stay competitive, the leaders of the new company had to quickly launch a core enterprise resource planning (ERP) system to handle everything from financial management and forecasting to asset maintenance, supply chain, and procurement administration. And from offices in Dubai, United Arab Emirates, executives needed to monitor the status of rigs operating as far away as West Africa and Southeast Asia.

Shelf Drilling

Launch the Slideshow

“As a provider of offshore drilling services, we go wherever our customers need our rigs,” says Bryan Teo, director of ERP at Shelf Drilling. “So we needed a global ERP system that provides near-real-time results as data flows from all over the world to our Dubai headquarters.”

Without a reliable ERP system, executives at the billion-dollar startup wouldn’t meet the tough service demands of their core customers—a Who’s Who of the largest companies in the oil and gas industry. Nor would they achieve the rig uptime rates and cost controls required to be profitable in the highly competitive jackup drilling business. But the managers found an answer to both challenges in the cloud, thanks to a hybrid architecture they believe is unique in the energy market.

Off the Ground

Jackup rigs are typically used by oil and gas companies for drilling in depths of 400 feet or less. They get their name from the way they raise and lower their legs to position the drilling platform to achieve proper platform heights. Shelf Drilling’s birth in 2012 was led by David Mullen and a team of other seasoned managers backed by private equity investors. The global jackup rig market in 2013 achieved the highest volume of orders since the sector’s rise in the 1950s as offshore drilling operations expanded throughout the world, and according to a report by Koncept Analytics, the jackup market will continue to grow for years to come.

But jackup drilling is a high-stakes business, with millions of dollars on the line if problems occur. “Customers expect the rigs to operate 24/7, which means downtime is the number one killer,” says Charles Karren, senior director of oil and gas industry strategy at Oracle. “If your rig goes down, your reputation will be harmed. And people who contract for this type of equipment have a long memory.”

Immediately upon closing the deal, Shelf Drilling owned the 38 rigs in its fleet and had direct operational responsibility for eight jackup rigs in Egypt and Indonesia. While transition arrangements had been agreed upon with the seller, an independent financial reporting system was a top priority for the new company. Management selected Oracle’s JD Edwards EnterpriseOne on the strength of the solution’s financial management and reporting capabilities.

An added benefit: the close integration with Oracle’s PeopleSoft solutions, which were already running financials for the seller, meant that the Shelf Drilling team could quickly open the flow of existing data into the new system, ensuring that the financial staff could successfully produce month-end financial reports immediately after the company was created.

ERP in a Hurry

With this financial reporting package in place, Shelf Drilling leaders teamed up with Tata Consultancy Services (TCS) to closely evaluate options for a full ERP platform that would help run the new company. The team considered a number of criteria, but the ability to mitigate equipment downtime through an integrated maintenance, procurement, and inventory process ranked among the most important—because customers are charged by the day, idle minutes may translate to losses in the thousands of dollars.

In addition, executives sought IT operations that could complement the long-term growth and evolution of the new company. “We didn’t want to build a big server room and hire a large IT staff to run it,” says Clark. “We wanted to have everything either live in the cloud or hosted by a third party.”

We needed a global ERP system that provides near-real-time results as data flows from all over the world.”–Bryan Teo, Director of ERP, Shelf Drilling

The full JD Edwards EnterpriseOne suite delivered in an environment hosted by Oracle not only satisfied these requirements, but it could do so within the tight deadlines required. To ensure a rapid transition to a standalone company, Shelf Drilling’s executive team wanted a new system ready to be deployed in less than six months. Fortunately, the accounting, financial reporting, maintenance, and supply chain modules in JD Edwards EnterpriseOne are designed with close integration in mind. As an added benefit, they easily integrate with PeopleSoft solutions, simplifying the transition process. “This saved us a lot of time and meant we could see results very quickly,” Teo says.

Time Is Money

Picking a core business system was an important milestone, but the staff now faced a new challenge.

The first rigs to use the ERP system experienced unacceptable satellite transmission delays when they tried to exchange data with the central hosted environment. One option was to upgrade the satellite links for faster connections, but the high costs of installing and operating this for each rig would have been financially unacceptable. In addition—and more importantly—lost connections to satellites routinely occurred when rigs were being moved to new locations. This was a particular burden for the maintenance staff, who needed access to the ERP system during scheduled downtime so they could work without disrupting production hours.

With the help of TCS consultants, the Shelf Drilling team implemented an innovative cloud enhancement. “We suggested that we build a hybrid solution where there is a standalone instance of JD Edwards on each of the rigs that interfaces with the central, hosted instance where all the financial and major ERP activities occur,” says Mohammad Tauseef, global head, Oracle JD Edwards, at TCS.

With a local version of the JD Edwards EnterpriseOne ERP platform on each rig, local managers and crew members see high-speed interactions with the various modules. Then, at multiple times during the day and night, local data flows via satellite to the central hosted system to update critical supply chain and maintenance processes and give management in the Dubai headquarters timely updates on key performance measures. “Having near-real-time results from all these countries is very important to us because we steer the business from our Dubai headquarters,” Teo says.

But on the rigs, the efficiency of operations could not be affected by the executives’ need for insight. Fortunately, the unique architecture served both users and management well. “The speed of the ERP system is great for local users, transactions flow reliably, and data replication is taking place, so this approach solved a very big problem,” says Ahmed Hamdy, manager of supply chain ERP at Shelf Drilling.

Keeping Finances On Track

Even with the time needed to develop the offline mode, Shelf Drilling launched the system on the first rigs as planned five months after the initial ERP launch. Since the second half of 2013, the number of rigs running JD Edwards EnterpriseOne in the offline mode has grown to 33.

“This was a rapid implementation, and thanks to Oracle’s predefined processes and our close interaction with the client, this turned into a very successful project even with a stringent go-live timeline,” says Tauseef.

In the months since go-live, Shelf Drilling’s executives from a number of departments are already seeing clear benefits from the new system. For example, JD Edwards EnterpriseOne One View Reporting—a real-time operational reporting tool—makes it easy to analyze transactional data by creating intuitive charts, graphs, and tables. This allows managers to create financial reports organized by relevant data about customers, suppliers, financial reporting period, country of operation, and more. Timely information like this gives executives a clear picture of the company’s revenues and financial obligations to help them allocate resources for new investments. “Without this key information on a daily basis, it would be difficult to run the business efficiently,” says Teo.

But managers at Shelf Drilling need more than daily ad hoc reports. More than 90 end users across Shelf Drilling’s worldwide operations have just started using the recently deployed Oracle Hyperion Financial Management and Oracle Planning and Budgeting Cloud Service for more-robust and efficient planning and reporting; the system will play a critical role in the creation of the 2015 budget and multiyear financial forecasts.

We need to be able to easily update our financial models, whether it’s on a monthly, quarterly, or annual basis.”–Ian Clark, Executive Vice President, Shelf Drilling

Clark believes that this combination of short-term insight and long-term analysis will be essential to help Shelf Drilling navigate the volatile waters of the global oil industry. By combining data that is contained in the core ERP system with capabilities of Oracle Hyperion Planning and Oracle Planning and Budgeting Cloud Service, the Shelf Drilling leadership will see an accurate view of all key rig and business parameters. For example, they can use data about the work and maintenance schedules of each rig to predict the revenue and margin impact of any downtime. “We need to be able to easily update our financial models, whether it’s on a monthly, quarterly, or annual basis,” says Clark. “These new tools will give us a much more effective way of adjusting to business changes.”

Supply Chain Demands

Because rigs must be meticulously maintained to avoid unexpected downtime, the Shelf Drilling staff must closely manage its supply chain to ensure that spare parts are stocked on each rig without incurring unnecessary costs for excess inventory or urgent air freight. But stocking optimum levels is challenging because the procurement staff issues more than 50,000 purchase orders for spare parts each year from a wide network of global original equipment manufacturers and distributors.

Procurement professionals use the system to control stock levels for each item, particularly those essential to maintaining operations. “We’re able to quickly see what we’ve identified as critical parts, whether they’re onboard a rig, are held at a central warehouse, or have already been ordered,” says Hamdy. “This helps us make sure that the most-important spare parts are where they need to be or can be located quickly from somewhere else in the fleet.”

The new ERP system with its integrated capital asset management and supply chain processes automatically triggers a purchase requisition for any inventory that dips below a prescribed minimum level. In addition, it gives the maintenance staff inventory visibility across all the rigs, so if a needed spare part isn’t available on one rig, maintenance people can request it from another to ensure faster delivery than having to procure it from an outside supplier.

The capital asset management module of JD Edwards EnterpriseOne also produces reports each morning to show rig managers the status of maintenance on their individual rig. The staff also creates detailed reports to predict how long it takes a rig to receive an item once it has been ordered. “By measuring performance this way, we know what areas are working well and focus on those that we need to improve,” Hamdy adds. “Without the system, it would be difficult to prioritize our efforts, particularly in expediting overdue orders.”

These tools help the staff achieve high levels of operational performance. In 2013, even though the maintenance system was transitioning to Shelf Drilling’s new JD Edwards implementation, uptime performance was 98.9 percent, according to Clark.

That success provides a springboard for the future. “Clearly this industry offers opportunities for us to grow,” Clark says. “The key is having hosted and cloud solutions that can easily scale up as we evolve and give us the flexibility we need.”

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