When Two Worlds Collide: Offshore Outsourcing in Europe

11 March 2009 (Last Updated March 11th, 2009 18:30)

Offshore operators in Europe have been slower to take to outsourcing contracts than their US counterparts. Penny Jones investigates how that has not stopped Aker Solutions from parting the waters to make way for a more direct approach.

When Two Worlds Collide: Offshore Outsourcing in Europe

For years the US has been at the forefront of IT offshore outsourcing to companies offering a cheaper and more specialised workforce such as those in India. Now a global shortage of skilled IT staff is forcing European companies to consider outsourcing, even in the offshore oil and gas industry which has been more reluctant than others to join the trend. After years of treading carefully due to concerns over security, quality control and remoteness, lead industry players such as Aker Solutions AS are starting to realise the benefits that outsourcing, particularly in the field of IT applications, can bring.

IT outsourcing growth

In the last two years alone, IT outsourcing contracts within the offshore industry have been growing. The recent credit crisis may have brought some of these to a halt, or seen plans delayed as companies scramble to rein in costs but that does not mean the overall view towards outsourcing has changed. Even the recent scandal featuring Satyam Computer Services in India, which faces closure due to fraud, is likely to have a positive affect by way of stricter regulation, which would offer better protection for foreign companies using outsourcing services.

For those firms that successfully manage an outsourcing agreement, benefits can be achieved from better meeting goals of globalisation and collaboration to improving time-to-market ratios. Outsourcing can also allow a company to concentrate on core capabilities while additional service offerings are met.

Aker Solutions AS recently chose Indian-based IT services and solutions company ITC Infotech as its software services partner in the area of engineering services. ITC Infotech's consultants from their engineering services vertical provide services across a range of Aker Solutions projects, particularly in the area of computer-aided design (CAD) for the creation of Aker Solutions's custom drill and other engineering parts.

The relationship has been a large step forward for Aker Solutions. In working alongside the ITC Infotech team in India, according to Aker Solutions's project manager Trygve Aamlid, Aker Solutions is breaking free of conservative ideas held in Europe, especially in Scandinavia, and in particular when it is outsourcing work to India.

According to ITC Infotech president for strategic account management Hardeep Garewal IT outsourcing has certainly been on the rise in the offshore oil and gas industry where it is also used for human resources, non-SAP applications and other engineering roles.

Being so new to the game, however, meant Aker Solutions had to carefully manage the rollout of processes as well as intellectual property and security while delivering a high-value client relationship.

"In the last two years alone, IT outsourcing contracts within the offshore industry have been growing."

"We had to prove that outsourcing to India did work when it came to Aker Solutions, and there were significant challenges in that," Mr Garewal says. "The work we do is more complex compared to the general IT work but it is of a very high value to the client because it involves product design and adhering to deadlines that could affect the go-to-market initiatives of the client."

Aamlid admits the Aker Solutions in-house staff were initially uncertain about the decision to outsource but once the teething stage was over the benefits were easily seen. Projects that would have once taken Aker Solutions months to even establish in terms of staff allocation were being finalised in significantly less time without comprising the quality.

The cultural challenge

The most obvious challenge for both teams was cultural, from a business and geographical perspective. In a relatively short period of time ITC Infotech's consultants were involved in a significant number of initiatives at Aker Solutions, Kristiansand. A number of personnel work within Aker Solutions in Kristiansand and in ITC Infotech, India on Aker Solutions projects. Both teams agree that the association was slow and steady to commence with, but eventually when Aker Solutions gained the required confidence, the projects were ramped up quickly.

Aker Solutions itself works as a service provider for the oil and gas industry. It deals with everything from integrated industrial solutions and project execution to ways of bringing product to market. Its Aker MH AS business has the members of ITC Infotech team providing services in the areas of design and documentation.

CAD is a constantly evolving programme that is indispensable in the offshore rig industry today. It can be used to draw, map and model every aspect of an offshore rig offering planning and analysis unlike other applications. The importance placed on CAD means its complexity changes regularly, keeping up with innovations in the field.

"Outsourcing can allow a company to concentrate on core capabilities while additional service offerings are met."

ITC Infotech has been able to help ease its workload for Aker Solutions by creating a range of standardised templates for its design work. Each piece of equipment is documented as the parts are designed. This means that working plans carried out on each part can be easily recovered along with plans for assembly, maintenance and upgrading. Overall, this allows for reductions in training and maintenance overheads (CAD can offer 3D modelling to show how parts can be assembled) while increasing the skills value of on-rig and other staff, not to mention the time saved by standardising future designs.

"We now provide Aker Solutions with the technical documentation on how to repair equipment and carry out certain roles which makes it easier for them to find someone to do a job in the North Sea, for example, without having to rely only on people who are familiar with the rig," Garewal says.

In terms of cost savings, neither Aker Solutions nor ITC Infotech was ready to divulge figures. Both companies did confirm, however, that in many ways it went beyond the direct impact on the balance sheet.

As the skills crisis continues to grip the areas of IT and engineering, initiatives such as outsourcing will have to be considered more by the offshore industry. And pioneering in this particular area can only offer valuable insight into how the processes could be more finely tuned and explore other areas of future benefit.