Texaco Fuels E-Business with $20 M Fund

Texaco Inc. is quietly executing a comprehensive electronic-business strategy that includes bringing online an electronic procurement system by Jan. 1 and creating hundreds of digital communities that link 18,500 employees worldwide.

The $36 billion White Plains, N.Y.-based energy giant has also created an internal $20 million venture fund to finance electronic-business initiatives put forth by the company's various business units.

"Where we see e-business first having the biggest benefit is internally, making employees more efficient and effective," said Greg Vesey, vice president of electronic business.

To that end, Texaco has implemented an extensive intranet application, known as PeopleNet, that functions as a giant worldwide knowledge base for far-flung workers.

"What we're trying to create are communities of people with like skills sets around the globe," Vesey said. "If there is a deepwater driller in the Nigerian business unit and another deepwater driller in Brazil, they can transfer technology and knowledge."

Texaco is also working with consultants from PricewaterhouseCoopers LLP to implement buy-side procurement software from Ariba Inc. Vesey said he expects that project to be completed by the end of the year and to cut procurement costs "substantially" by giving the company a much more accurate picture of inventory already on hand.

"If a person has to order drill pipe, the system will first look at the entire Texaco inventory around the globe to see if and where it is available," he explained. If inventory is available, the system will calculate the cost of shipping and insurance, then compare those costs to the cost of buying pipe at an online marketplace.

Earlier this month, Texaco signed a two-year, $20 million contract with Red Sky Interactive, a New York-based Internet services firm that will deploy up to 60 information technology workers and e-commerce specialists to Texaco's White Plains headquarters and its IT arm in Houston.

The contract represents as many as 20 e-business projects, according to Howard Belk, president of Red Sky. Among these is an Internet-based procurement system at Texaco's marine and aviation fuel division, which provides fuel to large shipping companies whose equipment is scattered around the globe.

In addition to Red Sky, Texaco has contracted with several other technology and IT service providers - including IBM Corp. Global Services and Concert, the AT&T Corp. and British Telecommunications PLC global venture - that are working on various electronic-business initiatives that eventually will be introduced to all Texaco business units, Vesey said.

Texaco now employs about 450 IT workers, primarily in Houston. Going forward, it expects to outsource much of its electronic-business activities.

"It's an ever-shrinking number," Vesey said of the size of Texaco's IT department.

"Our theory with the Red Sky agreement was that we had to bring into Texaco people with New Economy thinking," he added.

Texaco is also a founding partner, along with Chevron Corp., of PetroCosm.com, a Houston-based online business-to-business exchange for the oil and gas industry.

"The newspaper articles have all been around Commerce One Inc.'s and Ariba Inc.'s technology," Vesey said. "But that technology is just a small piece of an exchange. You also have customer relationship management software, collaboration tools and on and on. We almost look at our investment in PetroCosm as our way of paying for the new [electronic procurement] process."

Compared with other big oil companies, Texaco is neither a leader nor a laggard on the electronic-business front, analysts said.

"All of the big [oil] companies are involved one way or another with e-business and e-procurement," said Albert Anton, an oil industry analyst at Carl H.

Pforzheimer & Co. in New York.

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