Services Contracts Management Models

Abstract: There are different options of service contracts, considering strategic importance (core business) and internal company skills. According to the strategic importance, services classification could vary among several areas of vertical performance. As an example, in the upstream area of Petrobras, geological and geophysics data have strategic importance in the same level from the field acquisition to processing and final analysis. On the other hand, outsourcing is indiscriminately used for field acquisition and further processing when what should be applied is an internal management service contract model. The secret for success is to choose a contract model that fits better each kind of service among the existing choices:Outsourcing (management and operation)–Insourcing–Co-sourcing (internal management and third part operation)–Alliances / Knowledge Acquisition Introduction Some options of management models and services executions can be chosen according to the operational, strategic importance and capabilities availability as showen below:(Figure available in full paper) Insourcing A company should apply an Insourcing Model when the activity is core to the company, requires internal management, internal team, temporary resources to fullfil peaks and when using the company's own assets and technologies. Some of the benefits of adopting the Insourcing model are:Focus on the Company StrategyData Confidentiality WarrantyInternal Capability DevelopmentWorkforce Specialization For example, in Petrobras geological and geophysics data have strategic importance in the same level from the field acquisition to processing and final analysis. So the company applies the Insourcing Model, with specialized human capital to analyze the siesmic data from the Brazilian's basis. That way it escalates its reserves volume ans consequently the company market value. Alliances Model applied for Core activities, when the company does not hold the knowledge. The type of management is typically shared (Partner/Contractor), the execution teams are mixed and the work is done with own and third party assets and technologies. Some of the benefits listed are:Knowledge and Technology sharing for both partsTeam development speeds upAbility to develop this activity independently in the future For example, in one activity with high strategic importance and where the company has low capability in its workforce, the organization should look for strategic alliances in which the activities management is done in partnership with the contracted. Petrobras has been setting alliances with companies that hold knowledge in horizontal well drilling technology. With those alliances Petrobras has developed its workforce and nowadays the company is able to develop fields through the horizontal well drilling technology with is own workforce. Co-Sourcing (internal management and third party execution) This model is applied in low strategic importance activities and when the execution management ought to be internal, the execution team is external, and the usage is Own and Third Party assets. The fulfillment of corporate policies and rules are taken through execution management.