Case Study: BP's Transformation Under CIO Dana Deasy
Two years ago, the CEO of one of the world's largest corporations laid some very tough love on his 500 top managers. Despite having revenue in the range of $300 billion, BP had become, said CEO Tony Hayward, "a serial underperformer" that had "promised a lot but not delivered very much."
Those same 500 top BP managers also heard at that March 2008 meeting a Morgan Stanley oil and gas analyst tell them that while the rest of the energy industry was undertaking rapid change, BP was building a legacy of consistent failure both in finding and extracting new energy, and in refining and marketing finished products.
And unless BP transformed its entire global business dramatically and rapidly, the analyst predicted, "BP will not exist in four to five years' time in its current form."
One of the people in that meeting was BP CIO and group VP Dana Deasy, who'd joined the company four months earlier as its first global CIO. He was a key figure in Hayward's strategy to restore revenue growth across the enormous company, refocus the behavior of the company around high performance and accountability, and reduce the stifling complexity of the organization. That effort already had resulted in the elimination of up to four layers of management.
As Deasy listened to the sobering comments from his CEO and from a highly influential analyst, he thought about the transformation he had already launched within the IT organization, which like the company overall had become bloated, passive, unfocused, and unconcerned with performance and accountability.
Deasy considered how he wanted to strip out $800 million in IT expenses from BP's overall IT budget of $3 billion; cut in half the list of IT vendors that had ballooned to more than 2,000; dramatically overhaul BP's ranks of 4,200 IT employees; rationalize and reduce the 8,500 applications in use at BP around the globe; and turn IT from a tactical services unit to a business-driven and embedded strategic weapon for the company.
No stranger to challenging CIO roles, Deasy took the CIO post at BP with full knowledge of the tumultuous times ahead, with an eagerness to be a part of something special.
"We were several billion dollars behind our competitors in oil and gas, and there was a real and very pressing concern in the company due to that," Deasy said in a recent 90-minute interview. "Another part of the gap that Tony wanted to see closed was around organizational simplification: fewer layers of management, smaller corporate staffs, and deeper talent across key functions."
While noting that BP at the time had some great people in IT and some cutting-edge systems for exploration, Deasy also understood fully that he was going to have to drive enormous change in personnel, processes, and objectives across the entire IT organization in order to support and enhance the larger overhaul taking place across all of BP.
He saw a fundamental problem with the 4,200 IT employees BP had. "What was most startling to me about that number, only 55% of those IT professionals were actually BP-badged. The rest were contractors," he said. "So I was really struck by the very deep dependency we had on outside contractors."
Then there was the complexity that lay behind that $3 billion IT budget: "That encompassed everything, from the back office to the coalface: refineries, platforms, PCs, networks, and right on out to the stuff that actually touches the coalface of the company."
And so in the face of that sprawl in people, budget, priorities, requirements, business objectives, suppliers, and priorities, and inspired by Hayward's stark assessment of BP managers having a legacy of being "serial underperformers" who promised more than they delivered, Deasy committed in late 2007 to a three-year overhaul of every facet of BP's IT operations. This would coincide with Hayward’s shakeup of the entire company.