TRANSITION FROM SCADA TO A CLOUD SOLUTION: MARKETING, DESIGN, RESULTS. D GOLOVACHEV

TODAY’S AGENDA 1. Project background 2. Market drivers for changes 3. Risks & benefits 4. Costs analysis 5. Change management 6. Implementation 7. Results

SHORT BIO  Degree in physics and management  Spent 12 years in venture industry as the founder (hardware&software projects with complex physical basis)  Now with Trimble in NZ – tech lead in VSS project  What do you know about Russia?  It is cold there during long winter (down to -70C)  The largest country with 140 mln of population  Only 25% of people live in Siberia which is 80% of territory  People are straightforward

WHAT IS THE PROJECT  Automate distributed system of wells  Increase energy efficiency – 40% of all costs is energy in upstream  Get data from wells – analyse (hydrodynamics) – send commands to pumps  Typical distances ~1000km, no roads, weak communications, multiple regions

PROJECT BACKGROUND - PROBLEMS  Classic SCADA system architecture 16 bytes per sec per device >10000 devices ~1Tb of data 16kBit/sec

CRITICAL APPLICATION – COSTS OF PEOPLE AND VISIBILITY 2000km 1000km 5000km 15000km Single customer

MARKET DRIVERS – OTHER ISSUES Service quality  Long time to react on support cases  Time to deliver new features for a customer  Horizontal scalability – system response time  Customer personnel trainings Costs  Costs on infrastructure and licenses (CAPEX)  Traffic costs  Support costs of different instances of the same system for different customers  Maintenance costs of the solution Integration with corporate systems 30% of CAPEX per year

BUSINESS MODEL – PERFORMANCE CONTRACT COST SAVING TO FUND OPEX – key for profitability

COSTS ANALYSIS – CHARTS - COMPARABLE BEFORE (per installation)  CAPEX - $2mln  Hardware - $1.4mln  Software - $200k  Installation costs - $400k  OPEX - $600k per year  In-premises personnel - $300k  In-premises maintenance - $100k  Trainings - $100k  Other costs – $100k  Performance contract IRR ~11% AFTER (per object) - projection  CAPEX - $5k – average installation  Hardware - $5k  Software - $0k  Installation costs – $2k  OPEX – $280k  In-premises personnel - $0k  In-premises maintenance - $0k  Trainings - $100k  Software & infrastructure - $80  Other costs - $100k  Performance contract IRR ~15% Investment required ~$4mln Payback period ~2,5 years

SOLUTION – CLOUD SAAS Common infrastructure

IMPLEMENTATION – TAKE SOMETHING TO THE CLOUD Object 1 Object 2 Low-level equipment Data abstraction Local DB Tech algorithms Data transportation Data replication System DB Analysis Security UI Azure Ad-hoc communications Integration

BENEFITS - RISKS  Corporate security rules violation  Business critical data is under third-party control  Communication channels – failure leads to loss of control  “Tighter” connections between customer and contractor  Interaction with corporate systems (GIS, finance etc.)  Transparent transition & data migration  Legal liability  Low reaction time in case of software failure  No need of trained personnel on- premises  Continues delivery of features  Ability to build “emergency centers”  Horizontal scalability  Lower costs (CAPEX)  Much lower costs (OPEX)

KEY CHALLENGES  Seamless integration with existing corporate systems  Reduce communication channel risks  Create high barriers for competitor to reproduce the solution  Step-by-step transition to cloud solution to reduce investments Saxe's Elephant

A LOT MORE STAKEHOLDERS THAN EXPECTED Project Core customer division IT & Security Senior management Other contractors

CLOUD PLATFORM – AZURE  Hybrid cloud (2010)  Decision making feature  MS certified as a platform provider for customers  Multi-cloud backup  Smooth integration with MS software and identity providers  Cheaper MS SQL  License mobility

BABY-STEPS STRATEGY Private cloud Split into services Move some services to public could Hybrid cloud SaaS Monolithic application SOA Security issues Data migration

KEY RISKS – CHANGE MANAGEMENT – DETAILS RISKS GRAPH  Changes in business processes of customers  Changes in staff costs  Cultural changes  Changes in investment programs – company capitalization  Internal  Customer  How it impacts  Motivate customer to switch to cloud solution  Lower costs  Lower risks of accidents  Lower delays in decision making  Focus on core processes  Promote reliability, flexibility&support by continues delivery  Faster feature development  Emergency center – collaboration between offices

KEY METRICS MetricIsolated solutionCloud solution System availability99,7%99,9% Time to react after emergency 48 hours8 hours Real-time data delays5 min Number of people to support one system 164 Time to deliver feature\fix bug 2 months1 week Time to connect new object\install new system 2 months3 weeks

RESULTS – CUSTOMERS ARE HAPPY AND WE ARE HAPPY

SUMMARY  Takeaways for the solution  OPEX down  Scalable for other customers  Competitive advantages  Key points  Not everything goes to the cloud  Cost savings  Steps (not everything at once)  More stakeholders than expected

SUNNY SUMMER