AW: Last summer, ChevronTexaco announced a reorganization, effective January 2004, of its global downstream businesses along functional lines, rather than the current geographic focus. Tell me about this move.
Parino: The main driver for the changes to ChevronTexaco’s global downstream organization is to lower costs, improve efficiency and achieve sustained improvements in its financial performance, with the aim of making ChevronTexaco a competitive company wherever it does business.
We now have a global president for each of four functional divisions: Refining, Supply & Trading, Marketing and Lubricants. Each one of those functional presidents has a global chief information officer reporting to them and the Global Downstream CIO.
AW: When and how will these changes be implemented at ChevronTexaco?
Parino: The new functional model was announced mid-year 2003, along with the senior management team. The company wanted to bring together the three regions that once comprised the downstream operations for Chevron, Texaco and Caltex. In the past, these had operated as separate brands across separate geographic regions.
After the 2001 merger, the company became a global operation and doubled its refining capacity. The increase in the number of assets, and their geographic distribution, is one of the primary drivers for moving to the new functional organization model. Since mid-2003, implementation of the organizational changes has moved very quickly and is on schedule to be operational this month.
AW: How will this organizational change impact the information technology and process control functions?
Parino: There are five global service functions in ChevronTexaco’s new downstream organization: Information Technology, Human Resources, Finance, Procurement and Legal. In moving to the new model for downstream IT services, we had to look at how we defined the IT service function for refining, specifically.
In taking a more holistic approach to refining IT, we said we needed to include all of our networks. In a highly secure process control environment, there are multiple layers of networks. At ChevronTexaco, it starts at the top with the wide area network (WAN), moves down to the local area network (LAN), then to a plant network, then, through a firewall, down to the process control network. Below the process control network is a local control network, on which the distributed control systems reside.
Currently, the WAN and LAN are Ethernet networks. In the past, the process control networks were proprietary by vendor, such as Honeywell and Yokogawa. The next-generation process control networks are now high-speed Ethernet, and we are moving our process control networks to Ethernet, as well.
The move to Ethernet changes the skill sets necessary to implement control networks. The skill sets needed to put applications on the process control networks, and the security issues we’re concerned with, are similar to the skill sets and concerns for the LAN and WAN environment.
For instance, picture it as the valve, pump and compressor are just nodes on a much larger network. Each node is almost like a small computer, and can provide localized control and diagnostics. At the local control level, our long-term approach is to standardize on Foundation Fieldbus networking, and control devices with embedded intelligence and diagnostic capabilities.
In summary, as we look at our asset base for refining IT, it includes all of our classic office IT applications, as well as the manufacturing-specific applications and the process control applications and networks. This was a fundamental decision that we made. Many, if not most, in our industry continue to separate IT and process control as two distinct functions. In a traditional organization chart, you will see this as two separate groups. We think our organizational changes distinguish us from our competitors.
AW: Besides networking, what other process control functions are now part of the refining IT service organization?
Parino: The IT pyramid for refining, from an asset perspective, starts with the infrastructure at the bottom layer, which includes networks, desktop computers, telephones and the process control network. [See diagram, p. 41] Next is the transaction systems layer, including our back office systems, asset management and maintenance systems, yield accounting systems and the process control historian systems, among others. The next layer is the customer/supplier facing applications and operational applications, including e-business operations, supply chain management, and real-time performance monitoring and management systems. The top layer is decision support, which includes performance dashboards, reports and analytics based on KPIs (key performance indicators).
Refining IT “owns” this pyramid and is part of the downstream IT service function. We support global refining and work closely with the business to manage the IT assets.
Many companies, when they get above the infrastructure and transactional layers, give ownership of the operational and decision support applications to the individual business units. Business analysts will manage the application portfolio to determine where investments will be made.
In our model, we will work closely with the business, but we will manage the business applications as part of the downstream IT portfolio of assets.
AW: Why did ChevronTexaco choose to integrate the IT and process control functions?
Parino: We want to use automation to add value to our operations. As we looked at our automation strategy for the next five years and beyond, in order to get the most value out of our investment dollars, we believed we needed to combine all of our information assets. By considering the whole IT and process control asset pyramid, we can make the best automation investment decisions and have the best capital stewardship.
The change is also a low-cost model for technical shared services. By bringing the IT and process control functions together, we can leverage resources more effectively across the organization.
AW: What benefits does ChevronTexaco expect to gain from integrating IT and process control?
Parino: In refining, when we decide to invest in technology, we’ll now do it in a global functional way. We can implement changes more rapidly and get the new technology out to our refineries much more quickly. This will generate more value with better decision-making and shorter cycle times.
In the past, we didn’t operate that way. Individual sites would make their own decisions on whether they wanted to invest in a particular technology. The new model will ensure that consistency and best practices are adopted throughout the entire organization. With our more holistic view, we can say, “What is our strategy and how do we want to standardize and globalize our technology base?”
In the process refining business, a slight improvement in yield or utilization can be worth huge dollars. We are expecting good returns from this new model by being able to achieve optimizations much more rapidly.
AW: Do you have a measurement system that you will put in place to quantify benefits from this change?
Parino: We’ll use our existing measurement practices. We have a well-entrenched scorecard system that uses KPIs related to our key business drivers. Of course, each new project will have its own set of metrics to justify its investment, but these will all cascade up to the existing measurement system.
What’s new here is being able to deploy and achieve benefits more quickly. For
example, this will show up in our key business metrics for utilization, operating expense targets and high-value product yields.
AW: What does this change mean from a technology perspective?
Parino: As I mentioned previously, the main driver for the change in model is to lower costs, improve efficiency and achieve sustained improvements.
With regard to changes in the way we deploy technology, the primary change is our move to a standard Ethernet and Foundation Fieldbus platform. We’ll also be deploying more Web-based applications, including Web Services, and development within Microsoft .Net.
The way we set up our networks for security will change to standard security practices.
AW: How specifically will security issues change?
Parino: This is an area where the new organization gives us an advantage. Our security standards are established at the corporate level in ChevronTexaco. We now have a global view of process control, because it’s part of one global refining IT group.
In many companies, after the security standards come out of the corporate IT department, the automation people spend a lot of their time resisting the standards, because they interfere with what they are trying to do for the business on a daily basis.
When our corporate group was developing security standards for the process control networks, we were able to work with the business and “speak with one voice” to understand what the security needs were from both a process control and IT perspective.
AW: How does the organizational change impact employee culture and skill sets?
Parino:In the past, IT and automation was segregated. IT was thought of as a service function and a high-level information provider, whereas the automation engineers were considered to be direct contributors to the business.
Now, there’s been a bit of a cultural change for both. If you think of the IT function broadly, it’s a key enabler for information delivery, including that from the process control systems.
Everyone understands that there are certain skill sets needed, and this reorganization does not change that. Process control engineers have a specific skill set, which will continue to be utilized, while others have skills centered on networks and infrastructure.
All of these functions do not meld together to produce a generalist who can do everything. The organizational change is making it easier for process control engineers and IT infrastructure professionals to interface and work together.
As part of the implementation, we will examine training needs for process control engineers, for example, in .Net programming. On the IT side, we’ll look at providing a better understanding of the process control applications and business objectives.
AW: Do these changes affect your procurement strategies?
Parino: Procurement is now set up as an enterprise-wide corporate function. To purchase things more globally, the procurement organization has category managers. We will have a category manager in the automation space that will help us procure things more effectively.
AW:What is the best piece of advice you can give to an organization that wants to combine its automation and IT functions?
Parino: To me, the most important thing when you make an organizational change like this is that it must be in tune with the company’s business objectives. We can make this change because our business wants to move to global standardization and low-cost technical service delivery.
If I just decided, myself, that I wanted to change the way we deliver technical resources to our internal ChevronTexaco customers, but the business was still operating at a regional level, it would be a very difficult to implement. You don’t do something like this unless it’s aligned with and supported by your business model.
I’m very optimistic that this will be a successful move for us. It makes too much sense not to do it this way.