Solution Provider Shares Lessons On Surviving The Oil Market Slump

The popularization of hydraulic fracturing in the late 2000s and early 2010s resulted in boom times for the oil and gas companies of Texas but times have since turned tough, leaving the solution providers that serve that industry to struggle with an economic slump.

Hydrofracking -- a horizontal drilling method to extract natural gas from shale rock -- drove American-based oil production up from 9 million barrels per day in 2008 to 14 million barrels per day in 2014, with trade activity at the Port of Houston climbing by 30 percent on an annual basis.

"The oil production increased well beyond anyone's imagination," Will Frazier, managing director at financial advisory firm Stout Risius Ross, said during a breakout session Sunday at The Channel Company's 2015 XChange Solution Provider in Dallas.

[RELATED: Accudata Enters IoT Space With Honeywell Wireless Gas Detection Solution]

But declining demand due to a slowdown in China, coupled with a decision by the Organization of the Petroleum Exporting Countries (OPEC) to not cut oil production, caused the bottom to fall out.

Oil prices plummeted over the past several months from a high of $149 per barrel to just $50 per barrel, prompting many Texas-based energy companies to consider significant layoffs, according to Jason Wright, vice president of sales and marketing for the TechCess Group, a Houston-based managed services provider (MSP).

"They (OPEC) are going to continue flooding the market until people run out of cash," Wright said.

That leaves Texas-based solution providers in the precarious position of trying to figure out how to survive an economic bust that could put many of their customers out of business or leave them with virtually no spending money.

Jay George, director of sales at Midland, Texas-based NetsWork, said he's had a couple of customers delay IT-related projects due to a reversal of their economic fortunes.

But the declining oil prices have actually prompted many of George's customers to look for ways to improve processes and reduce core infrastructure costs. Specifically, NetsWork has seen an increase in customers requesting network assessments, George said.

The belt-tightening has also prompted many customers to look for ways to outsource their IT functions, resulting in a golden opportunity for solution providers, according to John Perry, chief operating officer at the International Facility Management Association (IFMA), a trade group for property managers.

"Paying salaries on IT is not investing in the future of your organization," Perry said.

Next: How TechCess Has Helped IFMA Streamline Its IT

Perry has leveraged TechCess in recent years to cut down on the number of help desk tickets the company is dealing with, which in turn has allowed IFMA to redeploy resources toward business intelligence or other areas that directly touch customers.

He said it's vital that channel partners work well not only with department heads, but also with rank-and-file employees when IT-related problems arise.

"If I have to constantly hear negative feedback under me from the line of business, that's a pain point and something I want to get out of," Perry said.

Wright said TechCess has focused on coming up with a standardized and systematized way to bring new customers into the fold, anchored around a 30-day on-boarding process and a 90-day stabilization process.

TechCess is specifically focused on easing the transition for clients as they lose internal IT staff as well as coming up with service-level agreements that provide uptime guarantees.

Perry and Wright also urged solution providers to put content on their web sites that reflects how they can help customers.

TechCess, for instance, has in recent months focused its social media strategy around how-to guides and content that addresses issues business owners are struggling with, Wright said.

He said the materials have also helped with recruiting younger workers, who wish to be employed by an outfit that's seen as a thought leader or expert in their field.

Perry said end users wish to be sold through content, not advertising, noting that most customers have done online research into solution providers before even putting in an initial phone call.

"People are qualifying you based on your web site," Perry said.

PUBLISHED MARCH 1, 2015