Legacy Tech And Tight Budgets: What’s Stalling AI In Energy Sector?

While energy companies continue to focus on data, analytics, and AI at their core operational systems, a KPMG's report found that progress remains uneven due to challenges such as legacy systems, and budget constraints.

The challenge now, and the growing urgency, is to shift from pilot projects and small deployments to full scale implementations.

"However, progress remains uneven due to a number of factors including legacy systems, budget constraints and gaps in execution," according to KPMG's latest Global Tech Report.

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"Around 60 percent of energy executives agree that legacy systems are a barrier to capturing full ROI on new technology investments. While tools are being adopted, many organisations struggle to modernise core systems, leading to digital debt and limiting long-term value," it said.

Karyn Mercer Partner, Technology, Data and AI KPMG Australia, said, "Executives know that legacy systems need to be invested in — but will those investments be disrupted by AI? Instead of major hundred million dollar upgrade projects, they are looking to build new front-ends in smaller and more nimble projects and architectures. They don’t want to strand their investments, but need to get their business moving.”

The question of value is also coming into focus. While around four in ten energy executives report ROI of 200 percent or more on their technology investments, the majority (57%) are only at around break-even (91–100%). The proportion of those achieving value-adding ROI should arguably be higher and tracks behind the cross-sector average of 200%.

Meanwhile, most organisations have started integrating AI and other emerging technologies into their operations as intention turns to action — not just their IT systems but in a growing number of cases their operational technology (OT) as well.

Top areas of adoption where energy respondents say that strategies are funded and on track with scaling up include data and analytics (47%, cybersecurity (42%) and AI (41%).