Trends are circular—and that’s no different for midstream. Everything old is new again, and after a downswing in merger and acquisition-related activity, there appears to be a recent uptick in announcements related to corporate transformations.
That doesn’t mean we’re entering the next great rush of companies joining forces, gobbling up competitors or spinning off business units. However, it does indicate that midstream organizations are once again warming up to the idea that they can effectively manage growth through the strategic transformation.
For many, the age of “big data” is still in its relative infancy. Everyone knows the promise, and a few early leaders have jumped out to a head start to gain a competitive edge. For the vast majority, the goal is simply to get a viable long-term plan in place. While much of the focus is on analytical applications, many find it surprising to hear that information technology organizations are still struggling with big data basics. This includes unsustainable database growth, explosive increases in total cost of ownership, and for some, crippling lags in processing speeds and unplanned system downtime.
These issues are difficult enough to overcome on a daily basis—but many midstream organizations that underwent a merger, acquisition or divestiture during the modern big data boom actually found these headaches multiplied.
What’s a chief information officer to do? Here are three missteps to avoid when considering a corporate transformation.
Misstep 1—Not laying the proper foundation: One undeniable outcome that stems from one, or several, rounds of corporate transformations is that the prior period of rapid growth made them sloppy. The rapid pace makes it difficult to lay a solid foundation and nail down a perfect process. This left them with an excessive amount of data, and often duplicate data, across a collection of disparate and legacy systems. Maintaining this unmanaged approach is as cost-effective as throwing crates of cash off the side of a tanker at sea or as risk-free as putting duct tape on a leaky pipeline.
Every organization should implement a data management strategy that includes a strong archiving initiative. This includes both those that are undergoing a transformation and even those that are not.
A data archiving plan will help separate high-value and low-value data, allowing for a more cost-effective storage architecture that includes both online and near-line storage. Data retained strictly for compliance purposes can be moved offline altogether to increase savings. This will reign in total cost of ownership, reduce system downtime and accelerate processing speeds.
Misstep 2—Expecting all systems to play nice: For mergers and acquisitions in particular, consolidating systems can be a particular pain point. Data archiving will help to ensure that all of the systems across both entities operate lean and effectively. However often-times, this is not enough. Companies will still find themselves struggling to cobble together the infrastructure to link every system and ensure data is getting where it is needed.
Consider this an opportunity to update core systems and modernize processes to support the corporate transformation. The opportunity to update the enterprise resource planning
(ERP) system to support strategic business goals cannot be missed, as it allows companies to introduce process changes and new technology that will allow the company to be flexible enough to adapt and scale with the company one, five or even 10 years in the future as it adds new business units and extends into new product markets.
Misstep 3—Holding onto old business processes: One of the most common challenges that emerges for midstream organizations is a clash in business processes. Midstream is not only about getting the product from Point A to Point B, there’s also a seemingly endless paper trail of invoices that requires processing—and it’s no secret that every finance department has its own strategy to get the job done.
Unfortunately, these strategies are riddled with inefficiencies. Many organizations still rely on paper-driven, manual processes that can take weeks or longer. Early-pay discounts are lost and risk to the organization for noncompliance is elevated.
Similar to creating an opportunity to implement an entirely new ERP architecture, the same opportunity exists to reimagine the finance department. Adding technologies to capture invoices and go paperless is just the tip of the iceberg—in fact, some organizations are implementing touchless processing that requires no finance department involvement.
Improving these near-cash processes reduces cycle times from weeks to days, allowing companies to capture of potentially millions of dollars in annual early pay discounts.
Cash, cost and risk
The midstream market is capital intensive. Not only is it expensive to operate in, but it requires organizations to keep piles of cash on hand to act quickly and flexibly as the market dictates. The problem is few, if any, organizations can afford to set aside the appropriate resources.
Historically, this problem has been amplified following corporate transformations—with companies occasionally becoming even more rigid. That has brought about a period of focus on improving operations, as opposed to catalyzing inorganic growth. However, as more organizations dip their toes into this water again, they should keep in mind these missteps others have made in the past in order to emerge on the other end of a corporate transformation with lower costs, better cash flow and reduced risk.

Comments