Saudi Aramco is the national oil arm of the Saudi Government and is the biggest oil company in the World. The company is credited with being in control of the largest oil deposits in the world that have been proven. It also controls large deposits of gas and has built a complex and extensive network for the refinement and distribution of gas and petroleum products. This fact is restated in the book (Vitalis, 2007). The company is assumed to be the most profitable firm in the world due to its expansive operations and worldwide demand of oil. In 1980, the Saudi Government acquired approximately 100% of the company and changed the name from Arabian American Oil Company which was its previous name when ownership was being held by American firms to Saudi Arabian Oil Company.
In any company, the process of change in human resource or systems and assets has to be carried in a manner that can be carefully monitored and measured. Management has to be in place in order to ensure that considerate planning and implementation has to be done within the timeline proposed. According to (Dialdin, 2009), all these activities are carried with the full involvement and input from employees of the firm. In the case of Saudi Aramco, A change management team has been put in place so as to gather the views of every employee and come up with ways of best implementing solutions to address these problems. The company had to enroll for training, all employees that were to be affected by changes in the enterprise resource planning systems. The views and the reaction of the people to be affected by the change were collected and taken into consideration, to foster a comfortable working environment for all. Since the company has numerous operations that are geographically spread all over the world, there were various systems that are being used and need all employee to be trained on their usage. In his book (Nawwab,2006) concluded that the process of training involved preparing managers and division heads on how to conduct forensic checks and other auditing practices relayed to conformity. This was followed by training other employees on quality management practices. After a set standard on which everyone aspired to was set, the team members looked on how to best tweak the existing systems. This process was conducted electronically including the collection of views to the final implementation of the system. This reduced the backlog that would have been created by storing data in hard copy i.e. papers and books.
Change of Ownership
In his book, (Brown, 1999) states that Saudi Aramco was formed after the discovery of crude oil in the Damman dome which is now the present Dhahran. Oil was discovered after the California Arabian Standard Company entered into an agreement with Socal to explore oil and on behalf of the concession it shared with the government. After 3 years of exploration, Socal partnered with Texaco which was better at marketing oil and this led to the creation of Caltex as the company that both had a 50% stake on the control and exploration of the oil. This led to the setting up of the Ras Tanura terminal which was to handle petroleum exports of the company. The terminal at first played its part in the export of crude oil to Bahraini where the oil was refined. Later a refinery at Ras Tanura was set up, later becoming the largest refinery in the World. Following the Second World War and America’s support for Israel, the Saudi Government decided to have a controlling stake at the firm. This came steadily as at first they acquired a twenty five percent stake in the company. In the ame book, (Brown, 1999) restates that by 1980, the Saudi government had approximately 100% ownership of the company. (Brown, 1999) restates the fact that, through the leadership of the King and a group of technocrats, the company has been able to diversify into other sectors of the petroleum industry such as refining of oil and marketing of oil among other activities. In the same book (Brown, 1999) confirms that although change of ownership was highly contested, the Saudi government was successful in wrestling over control from the big American firms that comprised of Standard oil of California (Socal), California Arabian Standard Oil (Casoc), Texas Oil Company, Socony Vacuum, and Standard oil of New Jersey. This partnership is however alive through various projects that the Saudi government has with them through various project both within and without Saudi Arabia.
Change in Enterprise Resourcing Planning Program
An enterprise resource planning program assists the company in the control and management of day to data business activities (Dialdin, 2009). This management is done through the use of speedy flow of information to the persons in the organizations requiring it. It entails the use of a central database that allows the storage, retrieval and modification of data so as to allow the easier business process.
In his book (Dialdin, 2009) confirms that Saudi Aramco decided to use the SAP systems in order to ensure that vast information related to mining, refining among other activities are captured correctly and can be used by people within the organization. Priding itself as the biggest oil company, Saudi Aramco required a solution that was reliable and could perform best to follow the motto and ethos of the company which are performance reliability and innovativeness. In his studies (Nawwab,2006) concluded that under the flagship efforts of the then corporate IT vice president, Ibrahim Al Mishari and Al Zayyat who is the SAP manager, the company was able to implement SAP system on a corporate wide basis to involve over 144,600 employees trained on its usage. This involved setting up of a change management team, responsible for the creation of certain guidelines and criteria in order for implementation to take place. The team comprised of members from each department within the organization and who represented the views of employees in their departments.
Rationale for Change
Drivers for the above changes were driven by the organization’s needs and needs of the Saudi government. At the time of acquiring the company, the Saudi government was tired of concessions and benefitting from only a fraction of the profits. In his book (Nawwab,2006) concluded The Saudi government also had a long-term vision for the company as they had planned to increase infrastructure to serve the numerous oil wells that served the company. Since the company contributed over half of the kingdom’s revenue, the company is considered a national asset and if anything is to happen to it then the kingdom would suffer greatly.
As for the change in the ERP systems, the company was driven by the need to consolidate information and make it easy for employees separated geographically to access the information in real time. Also at the time, information was also duplicated since at had been stored in various databases and in various forms such as hard copy, compact discs, floppy discs etc (Dialdin, 2009).
These are just some of the drivers that brought changes in the company.
Open System Model Input-Process-Output
Using this system the open system in regards too the case of Aramco can be described as the company as the entity and it takes in the resources from the surrounding environment in form of human capital i.e. staff and employees employed at the firm and the vast petroleum resources that it mines and refines. (Dialdin, 2009) states that for the survival of the company, the firm needs to process and produce output between the open systems and subsystems that exist. When assessing this open system within the realms of Aramco, we must first investigate both inward and outward relationships. Inward relationships comprise of members of staff, members of administration, board of directors. Before any change has been implemented, we can see how the company is able to exchange feed back with both internal and external environments and the feedback is evaluated and internal systems are adjusted with respect to the evaluation. Also within this environment, there exists boundaries that to some extent are complicated to identify due to the vast size of the company and the dynamic operations it engages in. The boundaries within the organization are permeable and this assists in the free flow of ideas within the company. Innovation within the company is encouraged through this open system.
A study conducted by (Tahlawi, 2006) concluded that the external environment in the case of Aramco comprises of external constituents and factors that the company has no direct command. These external influences are political such as the ownership of the company by the government of Saudi Arabia. This makes the company vulnerable to political decisions made by the policy makers and stakeholders in the government arena. Technological influences also play a part in the day to day activities of the firm and this was clearly observed in their change to the SAP system. Due to the big size of the company, it was forced to adapt the latest technological Enterprise resourcing software in order to match the needs of the company. Another external factor on the company is through ecological influence. In the same study conducted by (Tahlawi, 2006), the company has to abide by rules and regulations that foster conservation of the environment. Effects to the immediate environment are closely observed and the latest technology employed for this task. Recycling initiatives such as implementation of a smoke free office environment and the tree planting week have been commissioned by the firm. Being a petroleum producer, the company has gone to the extent of establishing a department to look in to conservation matters and regularly contracts services of other environmental bodies to verify and exchange relevant feedback about its progress.
The website belonging to the company states that Aramco has conducted various research projects in order to understand its external environment so as also to be able to influence it. The company has successfully done this in the past through conducting several public relations exercise. The company has been responsible in the set up of major infrastructure projects such as the development of the power grid on the Eastern part of the country. In his studies (Nawwab,2006) concluded that since it is the biggest oil company in the world and contributing over half of the Kingdom’s revenue, the company is the second largest employer only rivaled by the government. The company promotes other local companies by purchasing their products and hence contributing to the nations’ prosperity. In his book (Stegner, 2007) states that the company has actively engaged with the outside public by constructing public amenities such as schools, which the company has erected over 135 schools that serve Saudis and other nationals. The company has set up hospitals, housing projects and promoted Saudi culture through the promotion of artists in the Kingdom. Aramco strives to educate local leaders and locals on various topics that involve the company. It is through these education initiatives that the company is able to engage positively giving out encouraging feedback from outside environment.
Out of all these processes Aramco is able to achieve outcomes that are vital to the success of the company. A good example of the benefits that were accrued by the employees of the company from the SAP is the adequate flow of knowledge and positive change in behavior of users of the system. Another example of positive outcome from change in ownership of the firm is the better conditions that the company realized as a state of stability was established (Vitalis, 2007).
Impact of changes in Aramco
The SAP system project went live at the end of 1997, after executives and mangers at the company realized that there was disconnect in the flow of information between employees who were involved in major projects at the time. There was a clear lack of incorporation among the four divisions of the company i.e. Sales and marketing, petroleum scheduling & planning, finance & treasury department and product & operations. In his book (Dialdin, 2009) states that using customized solutions such as the SAP oil downstream management application to replace existent legacy systems, paper work was eliminated and repetition of data entered into the records was eradicated. Data can be modified and this modification can be seen across the organization by all employees. Control of information to the relevant persons was made more secure as only relevant persons could access information. All manner of transactions can be tracked online from quantity of petrol mined to final billing to the customer.
The change of from American to Saudi ownership has brought forth the realization and reinvestment of revenue back to the Kingdom as opposed to revenues flowing back to America. This has had a rapid positive effect on the economy of the Kingdom. The revenues have been ploughed back t o implement major infrastructure and social projects within the Kingdom (Brown,1999).
Brown, Antony. (1999) Oil, God, and gold: the story of Aramco and the Saudi kings. New York, Miflin Houghton.
Dialdin, Ali. (2009) Saudi Aramco and its people: a history of training. Jeddah, Saudi Arabian Oil Company.
Nawwab, Ismail. (2008) Aramco and its world: Arabia and the Middle East. Dhamman, Aramco.
Saudi Aramco. 2010. Saudi Aramco & Its World. Web.
Stegner, Wallace. (2007) Discovery: the search for Arabian Oil. Jeddah, Selwa Press.
Tahlawi, Muhammad. (2006) A land transformed: the Arabian Peninsula, Saudi Arabia, and Saudi Aramco. Jeddah, Saudi Arabia Oil Co.
Vitalis, Robert. (2007) America’s kingdom: mythmaking on the Saudi oil frontier. Stanford, Stanford University Press.