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Petronas swallows its IT department and cannot digest it

TWICE IN THE PAST MONTH, PETRONAS's computer systems at its IT and Human Resources departments failed. It said a senior executive punched a wrong code and gutted it. This could happen once - even that would have raised eyebrows - but twice? The more plausible is its cavalier handling of its IT professionals, who found their jobs at stake when it peremptorally hived off its IT department to a new 80 per cent subsidiary, Iperentis Sdn Bhd, with eight individuals as the minority shareholders. It would have a cast-iron contract to process Petronas' IT needs. All this was told them through videoconferencing a month ago.

But Petronas was less than honest. Many questions asked filtered through the system were ignored. Including who the eight individuals are. And if jobs are at stake. It only answered what it wanted to. The IT professionals got mad. A few days later, the computers on the 30 floors of the Petronas towers at the Kuala Lumpur City Centre (KLCC) housing the IT and Human Resources departments failed. Don't be surprised at this. The IT department, I am told, is 700 strong. It took eight hours to put it right, with the engineers and computer specialists working into the night. A fortnight later it happened again. The bad blood between the IT specialists and Petronas worsened. And no end is in sight. Not with Petronas' imperious management.

It is easy for a professional to gut a computer system. He knows the tricks of the trade. And knows how to hack it so it would cause the most damage. A decade ago, the computer system of the bank then known as Bank Bumiputra (it is now Bumiputra Commerce) crashed. It never said what caused it. But it was this cavalier treatment of its IT department, a threat to retrench without explaining why. That was restored in time, but it learnt its lesson. In a time of a declining economy, many companies find it convenient to cut down its IT departments. Its workers are not in the public eye, and it would not cause a public relations ruckus if a few hundred of them were retrenched, as it would if 50 office workers were.

And since management these days are run by accountants and management specialists who believe only in reducing the red ink in a balance sheet. You would see that in practice. A company gets into trouble. An accountant is brought in to restore it to profitability. For a high salary and usually a three- or -four year contract, he cuts and chops the company to bits, selling off subsidiaries and retrenching staff. He is paid by results, and he walks off at the end of. But the system he has set up is guaranteed to fail a few years down the road. By that time he is off 'rescuing' some other company. The banking system collapsed this way. As did Tabung Haji, the pilgrimage fund board. And hundreds of companies listed on the Kuala Lumpur Stock Exchange.

Petronas has every reason to be less honest. It has squandered its tremendous reserves for a number of projects it had no business to be involved in. It owns Putra Jaya, the administrative capital that is a drain on the public purse. It owns Proton, the F-1 motor racing circuit in Sepang, and a slew of companies and products that is far removed from its main product: petroleum. The US$1billion sponsorship costs for the F-1 championship in Sepang and the Sauber Petronas F-1 racing team appears to matter more than the future of its 70 IT specialists. It owns the Petronas twin towers, forced on it by the government so the Kuala Lumput City Centre (KLCC) would show the world how developed a country Malaysia is. Its considerable funds are used to cover government shortfalls and other financial needs. I suspect the Petronas management sees red ink dominating its balance sheets after its unrestrained financial profligacy. And it does short term staunching by such measures as hiving off its IT department.

One IT man present at this videoconferencing did not see why Petronas should outsource its IT needs. Shell did it in the 1990s, but the fear of its data getting into unauthorised hands led it to buy it back a few years later at far more than it sold it for. He wonders if it is to improve its balance sheet. If it is, why would it not say who the eight minority shareholders are. He thinks it is so when Petronas buys it back, it would be at far higher cost and these individuals would beneft. And reduce the IT staff Petronas now has. All this, he argues, was done for what he sees as a scam. He may overstate his case, but then why did Petronas stonewall the queries?

Leaders in developing countries see their national oil companies as private banks, into which it can dip in to massage their egos at will. In the 1970s, the Indonesian oil company, Pertamina, was all but bankrupt in a series of shady deals in which its senior officials siphoned off hundreds of millions of US dollars to off shore accounts in Singapore and elsewhere, and allowed its contractors to bilk it dry. It nearly brought the Suharto governemnt to its knees. Nigeria misused its huge wealth from oil, and is so bankrupt that it has to be rescued. Even Saudi Arabia went on a spending spree but the bubble burst brought forth all the ills other countries in similar straits faced. As in Malaysia. We have not reached there yet. But if it goes as it does, that would be sooner than later.

For at the heart of it all is this belief that petroleum companies should be allowed to do what it wants, with Parliament not allowed a say in its running. Putra Jaya, for instance, is out of parliamentary oversight because Petronas, as an off-budget agency, is out of its reach though its funds develop it. Yet Putra Jaya is Malaysia's administrative capital. Tens of billions of ringgit are spent on it. With no appreciable returns. And guarantees to lead Petronas, if not Malaysia, to bankruptcy.

What has all this got to do with two computer crashes in Petronas in a month? Everything. It is a law unto itself. It can, and does, spend its huge resources as it likes, with no fear of parliamentary or other brakes to stop it. Since its senior management is directed and, often, staffed by officers in the government, and its direction controlled by no less than the Prime Minister, Dato' Seri Mahathir Mohamed, it has no reason to fear. Or so it thinks. Dr Mahathir did think so, indeed it is his trademark that he gets what he wants, come hell or high water. And now wishes he did not. The man cannot even retire without the nightmare President Suharto now faces of seeing his children and acolytes going to jail for assuming no law could convict them for what they did. A similar reckoning is in store for Petronas. How it set up its IT subsidiary is only the tip of the iceberg.

M.G.G. Pillai
pillai@mgg.pc.my