Why low cost is not enough

In a recent posting to LinkedIn, comments from an oil company contact were reported to the effect that high levels of investment in hydrocarbon allocation systems were unsustainable. The poster invited people to consider whether it was time to concentrate on value for money. I won’t link to the post, partly because it was on a closed group, but also because I wanted to focus on the general issue that it raises, rather than the specifics of the post.

The implicit suggestion in the poster’s question, that buyers in oil companies are not already interested in value for money, is a little insulting. The general point is that lower cost does not necessarily equal higher value and, indeed, the relationship between cost and value is nebulous at best. Oil and gas companies select hydrocarbon allocation and production reporting systems based on a range of criteria, of which cost is undoubtedly one, but there may be issues of sustainability, appropriateness, experience, fit, technical architecture, and many others.

Even if two products are functionally equal, it does not mean that the lowest cost of the two will be selected. I might believe, for example, that the higher cost is justified by a pattern of investment in long-term R&D that will benefit me, or that the level of support will be higher.

Given that above, and the fact that you might have seen us advertise a named user subscription for energysys.com at £500 per month, you might reasonably ask whether we’re a low-cost provider, and why we don’t charge more for a product we think is the best in the business. The short answers are that we’re not, and we could!

The focus of our business model is value and innovation. While we certainly want to reduce costs, this is not as an end in itself but a result of our relentless focus on identifying and eliminating anything that does not add value. By building the most advanced infrastructure, with the most flexible and configurable software, and delivering that in the cloud to numerous clients, we can transform the economics of the market. The unique aspect of our service is that it is possible for us to offer the same enterprise production allocation system to companies with one or two users, while simultaneously scaling to firms with hundreds of users, using a pricing model that represents real value for every one of them.