Analysis of Strategic Alternatives to configure eBusiness models in the Oil Industry Heitor Mansur Caulliraux PhD GPI/COPPE/UFRJ Adriano

o Proena PhD GPI/COPPE/UFRJ Luiz Fernando de Jesus Bernardo Eng Logistics Manager/CENPES/PETROBRAS Rodolfo Sivieri Eng Electronic Commerce Manager/PETROBRAS Ivan De Pellegrin MSc. GPI/COPPE/UFRJ Roberto dos Reis Alvarez MSc GPI/COPPE/UFRJ Introduction Companies suffer a positive impact on their operational and economic performance, insofar as the business as a whole reacts in a form that adheres closer to external dynamics. For this purpose, it is necessary to have a business model that is supported by the full use of technological resources eBusiness enabling greater integration between customers, vendors, suppliers, business partners and between company units, rendering processes and transaction more efficient and speeding up decision-making. eBusiness in the Oil Industry where and how to invest? Some eBusiness initiatives such as eProcurement and eCommerce, are widely disseminated and may be effective to reduce transaction costs, improve the level of service in trade relations, and explore price elasticity in the competition processes. Rarely, however, are single and partial initiatives, such as electronic purchases or sales, sufficient to provide opportunities for significant improvements in the overall performance of the organization. For instance, it should be noted that, in transport and stocking activities, in the Oil chain, the opportunities to reduce costs upstream from the refineries are little exploited by the current eBusiness initiatives that are concentrated on the external relations of the companies. It should be stressed that approximately 20% of the costs in this industry correspond to logistic activities and that a large proportion of these costs is between production and refining. In this contexts, two issues that have a positive impact on intra and intercompany business may be rendered feasible by an eBusiness model: the integration of processes beyond the borders of business units and the improvement of decision-making by individual players, beginning with the total availability of information in the chain. As results one can achieve better coordination of the interorganizational processes with corresponding benefits, such as cost reduction, response time, reliability in deliveries and operational flexibility. However, although conceptually acknowledged, in practice the difficulty in performing a quantitative analysis of these benefits has been an obstacle to the concentration of investments in eBusiness to support the development of a more integrated business model. In many cases, the lack of appropriate criteria to support decisions of these investments has led to the development of partial and mistaken solutions. A simplified analysis of the Oil chain (Exploration , Production, Transport, Refining, Distribution) might suggest that

one should concentrate on the Production link, where there is a greater addition of value. In this link the eBusiness could, for instance, flexibilize the exchange of information regarding stocks, enabling the optimization of offloading operations, transport, etc. But possibly a more significant impact would be to reduce project times, development, renovation or start up of production units. Efforts related to collaborative projects and to the acquisition of engineered products, for instance, have a very significant potential for gain in Exploration and Production. From a strictly financial perspective, the acceleration of construction and the start up of production units or the reduction of time needed to renovate operational units may be more useful than the reduction of purchase costs of MROs favored by eProcurement initiatives, for instance. Even if it is specifically a matter of purchasing, the opportunities to reduce the costs of MRO-type materials appear to be very limited if compared to other types of items. In the case of Petrobras purchases for 2001, approximately 62% correspond to engineered items, 11% to electromechanical MROs, 10% to generic MROs, 6% to specific MROs, 9% to special chemicals and 2% to generic chemicals. Out of the total investments performed by the company from 1954 to 1996, approximately 64% are concentrated in E&P activities, 13% in refining, 12% in transport, 7% in subsidiaries and 4% are in other areas. These numbers support the suggestion to concentrate initiatives relating to acquisition in engineered items relating to E&P. However, in order to align the investments in eBusiness with the corporate strategy, it is necessary to understand the interrelations between all the links in the productive chain. It should be observed that the activities of transport, refining and distribution are essential to ensure the appropriability of the profits provided by the production assets, i.e., the maximization of the overall performance of the company depends on all links in the chain, not only on the link that adds the most value. Thus, the criterion of adding value does not appear sufficient for a correct evaluation regarding where and how to apply efforts at eBusiness. It is necessary to analyze the whole chain with a more systemic approach. Along this line, a well-disseminated analysis approach is Business Processes Engineering, which enables a number of qualitative analyses, although it does not satisfy the need for quantitative information to support investment decisions. On the other hand, the alternative of analysis based on Computational Modeling and Simulation (hard simulation) of the productive processes might provide information as return/investment, but encounters a number of technical and methodological difficulties due to the complexity of the system. Anyhow, it is a challenge to be considered by the companies to support investment decisions based on more accurate criteria. A third approach would be Systemic Thinking which establishes a cause-effect relationship for the understanding of relations between objects of the system that is being analyzed, allowing a simplified mathematical representation (soft simulation) and enabling the evaluation of alternative scenarios, from both qualitative and quantitative perspectives.

Conclusion: For companies that see eBusiness as a strategic resource to achieve their objectives, the higher gains will not be achieved with isolated investments in initiatives such as eProcurement or eCommerce. These eBusiness initiatives, in fact, are easily imitated by competitors and do not sustain competitive advantages. These initiatives, without a robust strategy, aligned to corporate planning, can raise the complexity of intracompany integration without achieving significant economic benefits in the intercompany relationship. On the other hand, efforts towards supporting integrated operation of the productive chain offer more interesting opportunities for gain. The difficulty in quantifying gains resulting from changes in business models towards eBusiness appears to be delaying investments in this line. The use of models that are representative of the business and production processes of the company, integrating its various links, as well as the Systemic Thinking approach, may be useful alternatives to guide the development of an eBusiness project, allowing an estimate of the return on investments in different configurations of the business model, including the consideration of the different scenarios that the company takes into account in its corporate strategic planning.