The Big Opportunity: Electric Utilities Must Learn To Leverage The Internet Of Things

forbes.com

The surge of connected devices and the Internet of things will bring electricity to every corner of the world. This presents electric utilities a key opportunity to carve out a new identity, if they move quickly. 

We’ve entered a time when energy is needed everywhere – consumers today expect it. From smart phones, thermostats and kitchen appliances to electric vehicles and wireless-charging furniture, we’re consuming more electricity and using more connected devices today than ever before.

Even across the developing world, where in some parts basic energy access is still considered a luxury, mobile phones and smartphones are empowering consumers. About half of Africa’s population owns a mobile phone and people already pay their utility bills using mobile payments, while farmers use them to monitor weather reports and crop market prices.

The Internet of Things (IoT), fueled by the rapid expansion of digital technology, has created a virtual web of smart, wireless and inter-connected devices that are transforming the way we live and work. Additionally, consumers are increasingly interested in generating their own power through, for example, solar panels supported by home-battery storage.

As a result, the utilities industry has never before faced such significant and fast-moving changes to traditional business models.

A technician repairs mobile phones in his shop at the black market of the Koumassi quarter in Abidjan, Nigeria. August 12, 2015.  KAMBOU SIA/AFP/Getty Images

What is a utility to the changing energy consumer? Is it a simple provider of electricity? A financial advisor on energy management? A retailer of smart appliances and other devices? An energy-related data services company? A provider of electric-vehicle charging services or self-generation energy products? Or even a home-security services company? Or is it all of these things?

And how do utilities fit into the quickly evolving energy ecosystem, with its new network of competitors that have entirely different skills and strengths, including retailers, internet service providers, telecommunications and cable companies, and automotive manufacturers?

Expansion of the IoT means that energy is soon going to be everywhere and it will inter-connect all these smart devices and appliances. The good news is that utilities are uniquely positioned to carve out a new identity and a successful business model if they move quickly.

Accenture ’s recent survey The New Energy Consumer: Unleashing Business Value in a Digital World, showed that two-thirds of global energy consumers would be interested in products to help them save electricity – up from 56% last year, while as many as 69% said they would be interested in participating in an energy management program to help them conserve energy. More than three-quarters of consumers also said they have taken energy-efficiency actions in the past year, including installing energy-efficient light bulbs, reducing appliance usage, using appliances in non-peak times, and lowering thermostat settings.

More than half also said they would be interested in becoming power self-sufficient, although this varies dramatically between countries, with a much stronger bias towards the economies with lower electrification rates like South Africa, Indonesia or Brazil. Additionally, 52% said they plan on installing solar panels in their home by 2020.

According to this research, after specialist providers, utilities are consumers’ preferred choice for these types of products and services.

Importantly, utilities are generally also seen as trusted custodians of customers’ private data and information about their energy usage. As energy and everyday devices become increasingly connected, an unprecedented amount of personal information about consumers’ habits and their households is becoming available, magnifying the importance of this digital trust. Our research found that 65% of consumers showed confidence in their energy provider to secure and protect their personal data and information about their energy usage. This rose to 76% amongst regular users of digital channels, such as mobile, online or social.

Utilities need to take advantage of this before new competitors move in on them.

With President Obama’s Clean Power Plan and the upcoming global climate change conference, COP21, to be held in Paris at the end of this year, clean energy and energy conservation is fast becoming a favorite topic of debate between politicians, business leaders, and the public.

I firmly believe that cleaner energy sources are only part of the larger answer. A much more important and effective solution is greater energy efficiency and utilities could play a critical role in educating, advising and creating new products and services to help monitor, manage and reduce energy consumption. Their customers are clearly interested.

For utilities, this shift will require strategic investments in digital technologies, collaboration with regulators, and cross-industry alliances and partnerships. Utilities have an opportunity to move quickly and lead the charge for industry change. After all, this is their turf – it’s just evolving with greater competition.

Why brands are using Marketo to leverage digital transformation

cmo.com.au

The automated platform’s product vice president Cheryl Chavez discusses the latest in what’s driving marketing efficiencies for brands

Understanding the principles of engagement marketing to build sustainable relationships with customers requires a truly robust personalised and automated strategy.

Speaking at Marketo’s Marketing Nation Roadshow 2015 in Sydney, Marketo’s vice president of product, Cheryl Chavez, said the days of mass marketing is long gone, where there is one message for everybody.

“We’ve moved into a time where it’s all about relevant and personalised messages for individuals,” she said. “We call this shift engagement marketing, which is all about building those life-long relationships with your customers.”

Using Amazon as an example, Chavez said the key is to engage the customer at every touch point.

“This means listening to your customer across every channel,” she said. “That’s the web channel, mobile, email, social, it’s about being able to respond dynamically, wherever your customers are.

This is not about us and the journeys we want to define, it’s about your customer and where they are. And it’s about being able to be there dynamically with a message that’s personalised and relevant.”

According to Chavez, marketers can do this is through Marketo’s Mobile engagement platform, which allows marketers to listen to customer behaviour on mobile devices like opening up an app, or going to a certain page within the app. Marketers will then be able to respond with the right messages.

Marketo’s Ad Bridge also allows rich behavioral data with Facebook, Google, LinkedIn and other advertising platforms, so marketers can target the right potential customers with meaningful, relevant ads, she claimed.

“As we target out key audiences with relevant ads and personalise them, we want to make sure the right people are seeing the right message at the right time,” she said. “So we don’t just want to stop there, we want to optimise that conversion as well.”

When it comes to personalisation, understanding your audience and really be able to drill in and segment, Chavez said you first need to understand who your buyer is and who your customer is.

“Then it’s really about that conversation,” she said. “Your messaging has to be to the point and not over-complicated. You need to deliver a very targeted, personalised message that resonates with your customers - and that really goes back to that precise segmentation, or ‘miscro-segmentation.’

“I see a lot of folk try to make a message that is very elegant and maybe a little too wordy and too much. Not getting to the point. And I think that’s what people want today. I think when we look at the types of buyers who are looking at Marketo and who are users, it’s really important that we can get to the point quickly.”

One of the brands that has implemented Marketo as part of its digital transformation strategy has been Optus.

Optus associate director of digital strategy, Taminda Polle, who has been running the telecom ginat's marketing transformation program for the past 24 months, explained why a core part of Optus’ strategy is Marketo.

“Repositioning Optus from a telco provider into the ICT space, meant we needed to work hard to re-educate our market and use digital transformation and marketing automation as a key component of that strategy,” she said. “We’re always trying to bridge the gap between the customer website, ecommerce platforms and mobile engagement.”

Optus embarked on their Marketo journey a few months ago when the new privacy reforms came in and needed to overcome the security and regulatory hurdles alongside its marketing strategy, she said.

“It was a very extensive change of management exercise,” Polle said. “But also, we actually had to take a step back, go smaller and prove that we were responsible and we were considerate of the environment we were in.”

“Simultaneously, it is about understanding the pain points of your IT director or your marketing team and whether they have a solid idea of the world we are operating in. It’s about understanding our customer and learning how to speak in their world.”

Polle said Optus changed its team structure about nine months into the implementation of Marketo and now has a central marketing operations team of four dedicated Marketo program specialists, plus two digital execution and two graphic designers. Polle said Marketo has the capacity to be up and running very quickly, but in the long-term, she suggests thinking about it as a part of a hollistic IT transformation.

“It is not something that can be run on marketing alone,” she added. “You need to bring in that discipline into marketing and give parts of your team permission to tackle some of those processes. Use something that your team is very comfortable in to test out new technologies and processes. Then simultaneously, let your other part of the team keep the lights on while you’re getting your new strategy in place. Then just tell everybody about it.”

Flight Centre’s head of digital – corporate, Kevin Wordon, who is responsible for seven brands globally, said the international travel business has been with Marketo for four years and has its platform integrated across seven countries, with another three on the horizon within the next three to four months.

“We are quite multi-disciplinary,” he said. “I have web developers, integration specialists with the likes of Salesforce and Marketo and digital marketing specialists – so we’ve taken the strategy of combining all these people into the same team.”

In the first year of implementing Marketo’s platform, Kevin said nobody at Flight Centre really took ownership of it.

“So I was really put on board to do that,” he said. “So if you are taking your marketing journey on a new direction, find a champion. If you’re trying to get that sales alignment, find champions within your sales team and use Marketo’s sales insights as well. Try and find the champions in sales to drive it out.”

What was helpful to Flight Centre was that Marketo’s tools have a lot of functionality and the capacity to be broken down into different modules that can be implemented globally, he claimed.

“We developed a modulised roll-out plan across the world,” he explained. “So initially we said we wanted an email marketing tool as module one, then a subscription-based CRM integration, and so forth. We’re now about to implement module three across the world. So we’re really breaking down the big wins and not bombarding our teams with too much technology too soon.”

According to Wordon, when it comes to digital marketing and automation, we all suffer the same hurdles.

“For us it is about getting stuff out there, do things really quickly and be willing to show the results,” he said. “It’s also about keeping our IT friends on board as well as the marketing team. Build your team around the needs and around the wins as well.”

Moving forward, Chavez said there are so many things marketers can do with Marketo, and that a lot of times, it is about figuring out how to best roll things out within their own organisation.

“I think a lot of brands now are looking to Marketo to provide best practices, and to how they should be doing things within their organisation,” she said. “From a product perspective, what I see is this really great desire to use as much as they possibly can.

“But sometimes change within an organisation that takes time, and so we want to be supportive, and help them provide software that actually allows them to bring that change and be disruptive over time, in order to be successful. It’s a journey, just like anything. And we like to stay conscious of that.”

Mobile wallets: The hidden commerce model

mobilepaymentstoday.com

Most of the conversation around commerce and mobile wallets has been centered on the distribution of coupons and offers.  

Undoubtedly, coupons and offers will play a key role in the future development of mobile wallets.  Distributing coupons and offers can be quite lucrative; Groupon, for example, boasts over $3 billion in revenues. Coupons and offers are also important elements in driving consumer usage; our experience at Softcard was that our most active users – by far – were those who used merchant offers. But this focus on coupons and offers neglects another hidden, and perhaps more lucrative, commerce model: Attribution.

Attribution is defined as the practice of determining the role that each marketing channel plays in informing and influencing the customer journey. There is an old saying in marketing – “I know half of my advertising budget is wasted, I just don’t know which half!”  In the online world, attribution is relatively straight forward, usually measured based on ad exposures and click-through rates on campaigns.  

In the offline world - where mobile lives - it is often unclear which marketing vehicles drive traffic and ultimately purchase. Models based on statistical regression (known as Return on Marketing Investment (ROMI) models) are often used to assess the relationship between marketing spend and overall lift, though these models have their own flaws. Some marketing vehicles, particularly newer digital ad units, are difficult to track. Moreover, the models often do not accurately reflect the interaction among different marketing vehicles.

Mobile wallets have the potential to change attribution given their unique advantages including:

• Very broad distribution: Over the next five years, mobile wallets will likely become ubiquitous, particularly as EMV regulation drives higher acceptance of mobile payments at retailer points of sale.
• Location capabilities: Mobile wallets are much more likely to be open when the consumer is in the retailer and therefore can be used to more effectively track location.
• Unique identifiers: Mobile wallets have access to information that can be effectively leveraged to track a consumer across devices, both for mobile and online, enabling them to understand the impact of multiple marketing vehicles on a given consumer at a very granular level.
• Privacy controls: For those consumers concerned with maintaining their privacy, mobile wallets are going to be much more effective vehicles in providing consumer privacy controls. 

The greatest challenge for wallets is that they usually cannot see the transaction itself. There is also an ongoing tension around who “owns” the data. Is it the retailer? Is it the financial institution? Is it the consumer? As a result of these limitations, most mobile wallets do not even have a framework to effectively collect this information. It is unfortunate as this is potentially a multi-billion dollar opportunity that has been left on the table.  

However, even given these limitations, there are several ways that mobile wallets could collect this information if they wanted:

• Enable collection at the point of sale: At Softcard, we developed a technology called SmartTap which was embedded at the retailer POS and enabled the mobile wallet to communicate directly with the POS. The wallet could detect the retailer and would send a unique wallet ID, along with coupons and relevant loyalty cards, which could be used to track purchases. Several retailers including Subway and Kroger had already been trialing the technology when the venture was sold to Google. However, the key challenge with this approach is getting retail acceptance at the point of sale, particularly given the reluctance of the POS manufacturers to cooperate.
• Capture location at purchase: GPS and Wi-Fi location data (latitude and longitude) can be captured during the payment process and overlaid with third party mapping information to estimate where a purchase was made. The challenge is with retailer locations that are in close proximity, such as in a mall, where these location techniques are not sufficiently accurate. However, the proliferation of micro-location technologies such as beacons could help overcome this challenge in the future.
• Acquire data from the financial institutions: Most banks are eager to develop revenue streams leveraging their financial data. A few very large banks, such as Bank America, have already begun to develop attribution services. However, most banks lack the distribution and capabilities to provide this service themselves. Mobile wallet providers could act as a central repository to collect, analyze and distribute this information (in an anonymized format).

However, collecting the purchase and location information is only half the battle. Mobile wallet providers will also need to make several additional investments including:

• Privacy policy and controls: Mobile wallets need to enable consumers to easily opt out of tracking. Most likely this will not have a material impact on the mobile wallet’s ability to provide accurate information.
• Anonymized data exchange: Mobile wallets need to link users to their broader mobile and online presence. A third party would likely be required to hold sensitive personally identifiable information (PII), match user identifications across devices and aggregate information in a way that is both actionable and legally permissible.
• Analytic capabilities: While the data itself is interesting, the analytics that one could do with the data is where the value truly lies. Perhaps most intriguing is the ability for mobile wallets to use these insights to develop predictive models to improve their own effectiveness as marketing vehicles. 
• Link to ad buying: One of the biggest frustrations with ad attribution is that it is not actionable. Imagine if marketers could use the data generated by this superior data to target the right consumer, with the right vehicle, with the right creative, at the right time?   

What is all this investment potentially worth? Well the IAB estimates that Internet advertising (including mobile) is a $50 billion business in the U.S. Given the inefficiencies in ad attribution, it would not be unreasonable to think that the data could be used to capture 10 percent of spend, or $5 billion, in the U.S. alone!  

4 Experts Discuss Mobile App Development and Marketing

business2community.com

Tom Taulli from Forbes runs Option Taxes, which offers an iPhone app for employee stock options. He’s also the author of several books, including How to Create the Next Facebook: Seeing Your Startup Through, from Idea to IPO and The Complete M&A Handbook. As for his background, he has launched various startups. Follow Tom at @ttaulli.

1) What would be your advice to a company that wants to start mobile app development?

First of all, pick the right platform.  That is, where is your audience primarily?  iOS?  Android? Then come up with a limited feature set, focusing on those things that really matter to users.  You do not have to do everything in version 1.0.  Just get started and iterate.

It is easy to get un-focused, thought, and make an app that is way too bloated.

As Steve Jobs once said:  My best decisions are when I said no.

2) Do you think mobile apps can be useful for marketing and branding? Why? 

Absolutely.  People spend tons of time on their phones.  And nowadays, they just expect a company to have an app.  Yet the app must be useful — not just advertising.  So provide some type of service, provide a benefit.  This will help create some brand loyalty.

An interesting example of this is Ace, which makes bandages.  They are a sponsor of Little League Baseball.  So to leverage this, they created an app that allowed parents to create baseball cards of their kids.  It was very popular.  More importantly, it helped to create interest/excitement about a mature, ordinary brand.

Allison Howen from WebsiteMagazine, a creative and adaptable journalist with experience in both print and digital media. Follow Allison at @allisonhowen. 

1) What would be your advice to a company that wants to start mobile app development?

 A company looking to develop a mobile app should begin by researching the needs of its target audience. It is very important to make sure the app being created serves a purpose and provides value to consumers, because this will result in more downloads and more time spent engaging with the app.

Once the concept of the app has been outlined, the company needs to work with its team of developers to create and test the app across devices, mobile networks, customer segments, etc. Testing is extremely important because App Stores will reject faulty apps. Plus, apps that aren’t rejected but still have issues will undoubtedly receive poor reviews, which can really impact the app’s downloads long-term.

2) Do you think mobile apps can be useful for marketing and branding? Why?

Mobile apps can definitely be useful for marketing and branding. 

Take Target as an example. The retailer has done a great job marketing its “Cartwheel” app, which provides consumers with savings on their in-store purchases. The app offers value to consumers (savings on their purchases), so it is something that loyal customers regularly engage with. It also can increase customers’ average order value (AOV) because they may decide to purchase items they otherwise would not have as a result of discounts offered through the app. Moreover, Target uses email to further engage with its Cartwheel users and let them know about new savings or expiring offers. Overall, the app has helped Target market its products, increase brand awareness, foster customer loyalty, improve conversions and bridge the gap between its online and offline presence.

Mohul Ghosh, digital marketer, traveler, emarketer and writer. Follow Mohul at@_mohul. 

1) What would be your advice to a company that wants to start mobile app development?

Answer:

1. Its not programming.. its personal: Several new mobile app development companies focus so much into the ‘technical’ aspects of app development, that they tend to forget that the whole business they are in, is lot more than just programming: its being personal. The developers should know and understand how a business operates, and depending on the ‘culture’, ‘tradition’ and USPs of the business, their app development work should proceed. Mapping their database management skills and C++ programming with the revenue and profit dance of the organization is crucial for their success.
2. Design is not luxury, it’s a necessity: Steve Jobs famously called Apple a design company! It’s the interface, the visual aspects, the ease of navigation and the design structure of the apps which becomes the most important criteria for success of any mobile app. On several occasions, the developers and the client becomes to engrossed into the technical aspects, that they tend to ignore the art, the craft of the business. I will say that

2) Do you think mobile apps can be useful for marketing and branding? Why?

Answer: Yes, of course! Mobile apps have now become mainstream tools of engagement and branding, and no business can afford to ignore it. If the websites were the norms of the last decade, then mobile apps is the necessity of this decade. Infact, such is the impact of mobile based transactions that Myntra.com, India’s biggest fashion retailer has shut down their desktop website, and asking their users to shop via their mobile apps! Flipkart, largest Indian ecommerce portal has already shut down their mobile website, and made mandatory to shop via their mobile app. Speculations are rife that they can shut down their desktop website as well.

Globally, we are experiencing a insane rush towards mobile and mobile centric products, and if an entrepreneur refuses to acknowledge the same, then it would their biggest blunder. Marketing and branding campaign without mobile app in focus is as good as vacuum.

Waqas Pitafi, CEO at DevBatch that has already developed over 200 mobile apps. Follow Waqas at@wpitafi. 

Q1) What would be your advice to a company that wants to start mobile app development?

Mobile usage has many forms. We have mobile websites, mobile landers, rich media, etc. App is a long term investment that also requires commitment. My advice to a company who wants to start mobile app development is as follow:

1) Work with right App Development people

Developers that have cross platform and native app experience are the best to work with. They have great design ideas, and code skills, with brilliant portfolios. Look for someone cheaper or someone who can code fast.

2) App Analytics

Any app that you develop must have analytics and attribution. There are plenty of free tools or paid one’s that tell you how many sources of traffic you are getting.

3) App Store optimization
Make sure your app gets to app store page and looks beautiful so that it can be sold to the correct market.

4) Marketing your Apps

The most important thing when you are done with coding is to market your app. If you have designed a great app, make sure everyone knows about it. For advertisements, you can use social media, print, radio, or whatever suits according to budget.

Q2) Do you think mobile apps can be useful for marketing and branding? Why?

Now, businesses have quickly understood the way to use applications and also to utilize them as perfect channels for marketing. There are lots of studies recently conducted that reveal the buying behavior of consumers was much more effective when companies interact with their customers via mobile app.

Using apps as direct marketing channels can engage potential customers, that didn’t had the access to your products before, which also improves the efficiency of your business.

IoT Technology Aims to Optimize Production Chemical Optimization

rigzone.com

Production chemicals remain a major cost for operators, particularly in a time of low oil prices. 

The need of exploration and production companies and service providers to effectively manage production chemicals served as the genesis of a new line of chemical management and optimization products.

Late last month, San Antonio-based WellAware – a provider of end-to-end solution for oilfield data collection, storage, visualization, mobility and predictive analytics – launched its line of WellAware Chemical Management and WellAware Chemical Optimization products.

In the past, chemical tanks and pumps have been monitored manually, with technicians driving to each well site to check treatment status and uncover issues, such as low tank levels, leaks, inoperable pumps, and over/under target injection rates. These issues result in not only high labor, transportation and chemical costs, but also significantly impact downtime and production levels, said WellAware CEO Matt Harrison in a statement.

Milam told Rigzone the company developed the product after being approached by both exploration and production companies and chemical service companies looking to reduce operating costs, minimize pump and well downtime, and optimize production.

At $100/barrel oil prices, it was easy to hire another field technician or pumper, and to give someone a truck and tell them to drive and check on wells each day, and enter data manually into a spreadsheet, David Milam, executive vice president of product management and marketing with WellAware, told Rigzone. But this approach is not cost-effective at $50/bbl. Being able to collect data via remote telemetry using the company’s heterogeneous communications network, which supports multiple wireless standards to ensure availability in all regions, is extremely important from a cost standpoint.

At a recent Houston conference, Milam said he heard operators cite chemicals, transportation and labor, and electricity as their top three operating expenses. Some operators said that over 80 percent of their operating budgets are being spent on production chemicals in shale plays, which are different animals from conventional plays and pose different production challenges.

In the Eagle Ford – where WellAware has been active since its founding two years ago – the top two challenges facing operators include hydrogen sulfide, a deadly chemical, and paraffin, which clogs up wells like cholesterol clogs arteries in the human body, reducing production and increasing unplanned downtime, Milam said.

WellAware pointed to data from the U.S. Energy Information Administration (EIA) and other groups that demonstrate the need for such products. According to the EIA, operating expenses topped over $50 billion in 2014. Data from the Society of Petroleum Engineers reported that downtime that year was more than 10 percent. Data from the U.S. Bureau of Labor and Statistics showed that the average worker in oil and gas operations was seven times more likely to get injured.

The products also provide configurable chemical usage reports and dashboards so that operators and chemical service providers can analyze the effectiveness of their chemical management programs and identify needed changes. Current chemical injection rates can be directly compared to the latest production levels, and new recommended injection rates are provided to reflect changes in well conditions. This transparency allows operators and service providers to have the most effective treatment program to optimize production at the lowest possible cost.

Besides cost, Milam sees the company’s technology as a way for companies to uplevel their workforce, freeing up workers for other tasks besides driving from site to site.

WellAware radio mounted on a chemical tank. Source: WellAware

With profit margins having been slashed by low oil prices, oil and gas companies can’t afford to do the same things they have been doing in the past.

“Instead, these companies have to figure out a better way and how to leverage technology to reduce costs,” Milam said.

The company already provides exploration and production and midstream services; Milam said the company saw a huge chance to help upstream and midstream operators reduce operating expenses, minimize downtime, and ensure safety and regulatory compliance. In June of last year, the company attracted investment and interest from Dick Cheney, former U.S. vice president and former chairman and CEO of Halliburton, Mexican telecom investor Carlos Slim and Ed Whitacre, former CEO of AT&T and General Motors and a former member of ExxonMobil’s board.

Milam said WellAware’s full-stack solution enables operators to navigate the three layers that need addressing in the digitization of the oilfield. First, all the hardware to measure data needs to be assembled in the field. A typical oilfield with 1,000 wells could have 10,000 different sensors and equipment from different original equipment manufacturers that speak different dialects, said Milam.

Once it’s wired up, the challenge is collecting the data via a telemetered means. That’s usually done either putting a cellular radio on the assets. But just as with cell phones, getting access can be difficult. In places like south and east Texas, cellular access is below 40 percent, and in the Permian Basin, less than 20 percent on a square mile percentage.

Cellular companies do build towers along highways and in towns in these area, but coverage is spotty in oilfield areas, Milam said. The remote locations of many oil wells means that cellular networks often fall short of providing needed data coverage, WellAware said. Satellite monitoring is cost-prohibitive for frequent polling rates, and 900 MHz require a high upfront capital expenditures and are often plagued by interference issues. The third layer – visualizing data and performing alerts on that data – poses the next challenge, Milam said.

To help its customers increase automation in oil and gas operations while ensuring security against cyberattacks, WellAware in May announced it would partner with On-Ramp Wireless. On-Ramp Wireless, a provider of long-range connectivity for the Internet of Things (IoT), and WellAware are partnering to create a wide-area IoT communications network using On-Ramp’s Random Phase Multiple Access technology. This network will cover more than 55,000 square miles of the most active U.S. oil and gas fields, which represent more than 50 percent of total U.S. production, WellAware said in a May 21 press release.

The RPMA network, already prebuilt over the key oil and gas shale plays, delivers more than 99.9 percent data ability and supports over 5,000 radios per access point, making it the lowest total cost solution available, WellAware said.

WellAware radio installed near the wellhead. Source: WellAware

Spending on digital oilfield services and processes – which is being pursued by oil and gas companies to increase efficiency, productivity and safety in operations – will grow by an estimated $24.6 billion in 2014 to $38.49 billion by 2024, with a compound annual growth rate of 4.6 percent from 2014 to 2024, according to a report from MarketsandMarkets. The current low oil price environment has prompted E&P companies to slash drilling and spending plans and lay off workers. However, the need to manage visibility and costs in oilfield operations has not gone away, meaning the need for greater efficiency in operations is needed.

Exploration and production will not go away as oil and gas companies being required to drill a certain number of wells to maintain leases, said John Saucer, VP of research and analysis for Houston-based energy advisory firm Mobius Risk Group, in an interview of Rigzone.

Companies are drilling fewer wells, but are focusing their efforts on the best and brightest prospects, which are the most productive and deliver the biggest bang for their buck. These sweet spots – and the fact that some wells previously drilled but were waiting on production hookups – have supported growth in U.S. production, said Saucer.

Low oil prices also are forcing companies to be more efficient, cherrypicking sites for E&P activity. These cost-cutting measures are putting pressure on vendors, from chemical and seismic providers to companies that provide sand and water. Vendors also are putting pressure on themselves to stay competitive for the remaining business opportunities available, said Saucer.

More efficient, lower-cost operations will be important moving forward, as the companies that own and operate oil and gas will be backed by private equity companies who want consistency and predictability in rate of returns – more like the return on bonds versus growth equity returns.

“It will be less about concern over an uptick in prices and more concern over making money at these levels,” said Saucer.

Companies will have to be smarter in terms of their lease and general and administrative expenses.