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Performance-based contracts in E&P-III: Why they are getting to be more important now than ever before
Apr 26: Why is there a need to use external partners in performance based contracts?
8Firms like ONGC have several innovation institutes but but such "closed" innovation activities limit ONGC from responding to changing environments.
8For Internally, ONGC does not have all the necessary resources to succeed in complex environments
8Furthermore, internal innovation practices, such as R&D, may not fit the current needs of organizations as they are characterized by high costs and risks, slow time to market and inflexibility.
8To be more innovative, firms increasingly complement their internal innovation capabilities with solutions, ideas, and technologies from external partners such as suppliers and service providers (in the oil and gas sector this could be, e.g., maintenance providers of refineries or oilfield and drilling services providers).
8External partners enhance and drive innovation in products and services, as well as service outsourcing contexts in which providers innovate to improve and optimize the daily operations performed for the buyer.
8Innovation may occur with external partners as result of mutual learning, complementary resources and knowledge sharing.
8Traditional frameworks used by oil and gas companies are procuring material supply and oilfield services on a primarily transactional basis, with services performed or material procured at predetermined prices, rather than performance bases under which the service provider takes a greater share of both risk and reward.
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