How the pandemic accelerated energy giant Phillips 66’s push to modernize its IT and revamp the $114 billion business — with some help from SAP

  • Phillips 66 – an energy giant with over $100 billion in annual revenue — began its digital transformation in 2017, just as the oil and gas industry was on the upswing from a rocky few years. 
  • Now, the sector is once again in turmoil as a result of the coronavirus pandemic. But the uncertainty is actually helping to push the company’s digital overhaul along, according to Chief Digital Officer Zhanna Golodryga.  
  • “It’s very hard to transform where the company is doing extremely well,” she told Business Insider. “It’s much easier when everyone is under pressure and you have to take some efforts and measures really fast.” 
  • Among other changes, Phillips 66 tapped SAP as its enterprise resource planning, or ERP, platform and moved 80% of its workloads to the cloud. 
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When Phillips 66 started its digital journey in 2017, business was booming again. 

The oil and gas industry was beginning to emerge from a downturn over the prior few years. It was the perfect time to make an investment in new enterprise-wide technology as a way to differentiate itself from rivals, according to Chief Digital Officer Zhanna Golodryga.  

Now, the sector is under enormous pressure as the coronavirus pandemic erodes demand and oil prices drop. It’s the kind of whiplash to which the industry is well-accustomed after the highs and lows over the past decade. 

But the current upheaval is actually turning out to be a game-changer for Phillips 66’s transformation effort. And the eagerness to continue such a significant investment during the ongoing economic turbulence is evidence of just how important these IT modernization initiatives are to the future of the company.  

“It’s very hard to transform where the company is doing extremely well,” Golodryga told Business Insider. “It’s much easier when everyone is under pressure and you have to take some efforts and measures really fast.” 

The majority of the initiatives underway are estimated to drive some sort of value for the firm — whether that be improving profit margins, reducing operational costs, or avoiding unnecessary expenditures. And Phillips 66 is already seeing the benefits of some of those investments.  

The company was one of the first in the industry, for example, to announce it would cut $700 million in spending in 2020. Golodryga attributed the speed with which it could make such an important decision to the work done over the past three years. 

“Purely digital transformation by itself does not stand. It just doesn’t work. We’re a publicly traded company. Our shareholders expect returns and they expect more than just really cool technology,” she said. 

Revamping a $100 billion operation 

Oil and gas companies looking to maintain or increase their leadership position during the wreckage caused by the coronavirus pandemic “will need to redouble their efforts in this moment, protecting or even scaling up technology, digital, and artificial-intelligence investments,” consulting firm McKinsey & Company wrote in a May report

Phillips 66 is already well on its way. In 2017, the company tapped SAP to build a targeted enterprise resource planning, or ERP, platform for the oil and gas industry built around its popular S/4HANA tool

The software integrates many aspects of the business — like manufacturing, finance, and human resources — into one system that, among other advantages, makes it easier to analyze data across the enterprise to improve decision-making. It’s the latest effort by SAP to target its core applications towards specific industries, such as commercial real estate

In particular, Phillips 66 wanted to use SAP’s S/4HANA to extract as much value as possible from its hydrocarbon operations — the main component of petroleum and natural gas. The overall chain from procurement to production accounts for the lion’s share of its $100 billion-plus in annual revenue.

Phillips 66 already has 80% of its workloads hosted in the cloud

The first step in the IT modernization process was moving away from physical data centers. It currently has over 80% of its workloads hosted in the cloud, which Golodryga estimated is the highest in the oil and gas industry.

And there is no one sole cloud provider. Instead, the company relies on a mixture of services from Google, Amazon Web Services, and Microsoft. Its ERP platform, for example, runs on AWS. 

With SAP’s software, Phillips 66 used a multi-phase implementation. So far, the company has completed three of the stages — including deploying across human resources and its West Coast hydrocarbon operations.

Employees, for example, have self-service access to more of the apps they need — eliminating the need to go through the HR department for common problems — and the software will help improve performance reviews, per Golodryga. 

It is also helping to cut down the number of software in use by traders and marketers.

Prior to the overhaul, Phillips 66 used over a dozen different programs. That meant employees had to check numerous spreadsheets and other resources on a regular basis. Now, all of that is housed in SAP’s S/4HANA, making it easier for those roles to access data stored across the organization.  

A fourth phase — scheduled to go live next month — will encompass its wealth management and procurement units also located on the West Coast of the US. The final release will cover global asset management operations and is slated for January 2022. 

Once it’s complete, Phillips 66 is hoping the system it built with SAP becomes the standard across the oil and gas sector. And since it’s an early adopters, the company is hoping that ultimately gives them a “first mover” advantage. 

“We’re going to have a product that is going to be utilized across the industry. This is what sets us apart from the competition,” said Golodryga. 

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