The shared services concept is not new, of course, as other best-in-class companies have successfully applied it to individual functions within their businesses (e.g., HR, finance, IT). Schlumberger, however, applied the shared services concept to bring together seven functions under one roof: finance, HR support, IT operations, procurement and sourcing, contracts, distribution, and facilities and construction. This effectively eliminated the siloed approach associated with tasks that were duplicated across multiple product lines.
Collectively, the SSO model benefits from three distinct business principles. By sharing volume-sensitive services across product lines, we create economies of scale and eliminate superfluous efforts. Transferring best practices across businesses and leveraging expertise and know-how capture economies of scope. Lastly, tailoring the level of service to meet a product line’s needs achieves scalability. The service categories we identified can be performed at a higher level of quality and improved cost levels under the SSO than if they are pursued individually by each product line.
As the SSO reduces its operating costs, this can reduce the costs for individual product lines as well. For example, implementing a new logistics framework optimized the $1.2 billion the product lines collectively spent on these services. This created numerous benefits, such as faster turnaround for tools and improved project readiness for deepwater operations.
Now that we have defined functions under the SSO, the next phase is to move from a function-based approach to a process-based approach, which enables the product lines to be more customer focused. This would identify one person as the focal point, with ownership of every stage of the process and charged with continually seeking to optimize it.
Furthermore, as the company continues to grow its business through organic and inorganic means, the SSO will take advantage of business synergies and ensure that it offers superior levels of service at the lowest transactional costs.
For example, the Cameron acquisition, which is still subject to regulatory approvals, will integrate our reservoir and well technology with an industry leader in surface process and flow control and marks the start of a new epoch in drilling and production system performance. Cameron has five product lines—drilling systems, subsea, surface systems, valves and measurement, and process systems—and thus there is very little product line overlap with Schlumberger. Customers will benefit from expanded technical capabilities, improved efficiency, and a closer commercial alignment to lower the cost per barrel and increase recovery.
The Schlumberger global footprint includes 500,000 transactions a month and a global inventory currently with a value close to $5 billion. Optimizing the SSO will have a substantial impact on our financial performance. When our footprint increases to include Cameron, we will be able to expand upon the benefits of our transformation due to our increased buying power and cost synergies.