Growing regulatory and customer expectations and geopolitical turmoil are putting energy companies in the spotlight. New research from KPMG suggests that the industry is banking on technology investment for its future growth.
New research by KPMG International, the KPMG Global Tech Report 2023, based on a survey of 2,100 executives from 16 countries and nine industries, shows that energy companies see new technologies as a lifeline they can leverage to overcome their market’s challenges.
The survey finds that the energy sector is determined to pursue technology investment despite market headwinds. In 75 percent of the market factors measured in the survey, the energy industry displayed the most resilient confidence levels to disruptions such as geopolitical volatility, cost escalation and market competitiveness damaging confidence about investing in new technologies.
“As the energy business is cyclical, companies are committed to making technology investments while keeping the broad picture in mind,” says Sushant Rabra, Partner at KPMG in India. These investments have allowed energy companies to make good use of innovative technologies. For example, energy is one of the sectors most likely to have used low-code/no-code platforms to increase their company’s profitability or performance over the past 24 months.
The sector is also aware of the risks attached to tech innovation. According to the research, energy respondents are 8 percentage points more likely than the average across all sectors to say their organisation must be more proactive when it comes to integrating trust, security, privacy and resilience into technology rollouts.
However, the sector is facing barriers to progress. The research finds, for instance, that the energy sector is more likely than any other to say that a lack of artificial intelligence (AI) expertise is having an impact on its ability to innovate and stay competitive.
The energy sector believes in the power of strategic technology investment, but companies should focus on accessing the talent that can bring their digital transformation ambitions to life.
The 2023 Global Energy CEO Outlook by KPMG found that 52 percent of energy companies wanted to invest more in their people to enhance their skills and capabilities (a seven percentage point increase from 2021). Experts warn that technology investments can only be successful alongside appropriate talent investment.
Most energy respondents have confidence in the capabilities of the tech infrastructures their workforces have helped create so far, in some cases their confidence exceeds the average across sectors. As seen in the KPMG Global Tech Report 2023, 85 percent are confident that they can improve efficiency levels and cut costs with their existing tech stack, which is 10 percentage points higher than the average across all sectors.
According to Rabra, this confidence is because “the energy sector has historically been at the forefront of adopting new technologies. Now, we’re seeing a lot of innovation in core business models.” One example of this is in the sector’s adoption of low-code/no-code platforms that can fast-track processes.
“Compared with classic platform buildout, low-code/no-code platforms make processes up to five times faster,” says Rabra. “Which expedites time-to-market, time-to-value and time-to-change.” Digital transformation projects involving low-code/no-code systems have boosted organisational profitability and performance for 72 percent of the energy executives in the survey.
“Low-code/no-code platforms are being used to improve the customer experience, service quality, ESG [Environmental, Social, and Governance] compliance and overall collaboration,” says Rabra.
This progress explains why 74 percent of energy respondents say that their business’s leaders are confident in the resilience of applications built by these platforms. The average across all sectors surveyed is 59 percent.
“Energy organisations are aware that this is the way forward,” says Rabra. “They have seen the value of these systems first-hand, so they are not going to go back to classical application development factory models.”
That said, low-code/no-code platforms require coding from scratch, which could limit control of the code and how it is executed. But Rabra says that energy organisations are trying to safeguard these systems. “Companies are using more cloud-based standard platforms,” he says. “They are going through extensive security and scalability testing, compliance reviews and third-party assessments.”
Both regulators and consumers are watching energy companies closely, which might explain why energy executives in the research say that regulatory obligations and security concerns are their top triggers of digital transformation. They also say that stronger data privacy or cyber security are the user expectations that are most influential on digital transformation projects.
To meet these expectations, energy companies monitor security internally and in their wider ecosystems. “It’s often repeated that a chain is as strong as its weakest link, so energy firms hold ecosystem partners to a very high standard,” says Rabra. “Energy companies often create governance models for the entire ecosystem to adhere to, helping ensure a clear and strict security baseline.”
These safeguarding exercises create built-in trust. According to 72 percent of energy executives, digital transformation efforts involving cyber security have increased profitability and performance over the past 24 months — 12 percentage points more than the average across all sectors.
“The energy industry is asset-heavy in the upstream and customer experience heavy in the downstream,” says Rabra. “As such, there’s a lot of value to be created, especially with new business models. Then, there’s the preservation of that value — and that’s where the focus on cyber security and compliance comes in.”
This security-by-design approach creates trustworthy digital transformation initiatives that energy companies can implement technology with confidence moving forward. “With new business models — including renewable energy — I’m quite optimistic about the growth technology promises,” says Rabra. “And the industry is just getting started.”
KPMG member firms have deep expertise in business technology. Our transformation, innovation, and profound industry expertise positions KPMG professionals to address market challenges and provide in-depth industry perspectives. KPMG professionals have the ability to meet organisations where they are at in their transformation journey, whether that is helping them to successfully adopt appropriate solutions, increase innovation and/or embark on broader digital transformation.
Get in touch to learn more about how KPMG can support transformation in your organisation.
