Schlumberger made it's reputation in energy, but it's future may lie in smart card technology
by Susan Karlin
It is safe to say that everyone in the energy industry knows the name Schlumberger Ltd. The company has built a 75-year reputation as an expert in oil and gas services under its Oilfield Services division. It still drives company revenues. The division is part of a $13.7 billion global technology service company, headquartered in Paris (where it was founded), New York, and The Hague, which employs more than 80,000 people in nearly 100 countries. In the United States, the Schlumberger name is less well known outside of energy, but that may soon change. The company is making a technology push in the U.S., attempting to leverage a recent acquisition and its technological leadership in Europe to proliferate the adoption of smart cards, a much talked about technology that holds promise in many industries.
Smart cards have been around for years in banking, health care and telephony. The credit card-size plastic smart cards store personal records and computer access information on embedded microprocessor chips that hold up to 64K of memory. Schlumberger helped write the book on this technology; it was the first to industrialize and incorporate Java capabilities into smart cards. Through its SchlumbergerSema Group, it manufactures 35 percent of the world's smart cards, making it one of the giants in this area, alongside Gemplus and Groupe rancois-Charles Oberthur, both in France and Giesecke & Devrient and ORGA in Germany.
That the smart card first took off in France and Germany is no surprise. Smart cards are widespread in Europe and Asia, mainly to circumvent unreliable phone lines and data systems. Smart card processing chips can store data, such as identification indicators and cell phone subscription information and can authorize a transaction.
With no such infrastructure issues, the U.S. has made more limited use of the smart card. But, in the post-9-11 world, where security -- both physical and virtual -- has become a buzzword in American business, some companies have begun trading in old fashioned photo IDs for smart cards. Not only does the smart card store more personal information, but it also provides for authentication, which indicates whether the card is being used by the right owner. The cards are now also being used to expedite transportation and medical transactions, and to tighten security through the use of digital signatures, encryption and biometrics indicators, which use biological markers, fingerprint mapping, eye geometry and voice and facial recognition as identification methods.
"The number of Fortune 100 companies inquiring about security has significantly accelerated since September 11," says Xavier Flinois, president of Schlumberger Network & Infrastructure Solutions, a division of Oilfield Services, in Houston. "Companies want to make sure the right people are entering their buildings and accessing computer files. Smart cards are a very visible technology in this terrain."
Schlumberger's smart card-based information security technology, offered through its DeXa Suite of Services brand, undergoes constant refining, owing to security needs of Schlumberger clients. "Our core business in the oil and gas industry keeps us ahead of the curve in understanding how security works to provide secure real-time transmission of confidential data between multiple customers," says Flinois. "People see oil and gas as a low-tech industry with hard hats. But it is actually very high tech. In 1993, we established a global data network between oil rigs way before anyone was talking about the internet."
Schlumberger dove into the systems integration side of the smart card business last year, when it acquires Sema PLC, an Anglo-French IT services company, and combined it with parts of its Tests & Transactions and Resource Management Services businesses. The result is a $4 billion SchlumbergerSema business segment, which provides consulting, systems integration, managed services and products to the telecommunications, energy, utilities, finance, transport and sector markets. The division employs 30,000 people serving customers in 65 countries. "Purchasing Sema was a smart move on its part because it gets Schlumberger into the wireless billing and transaction processing game," says Charles Cagliostro, executive director of the Digital Security Initiative of the Smart Card Alliance, a trade association.
"The card represents the account and the back end collects the money," he adds. "Where smart cards contain security and personal information like cell phone number and whether your phone is authorized to make the call, the billing system tracks how long you've been on the phone and what your plan is. In effect, they now are in both sides of the wireless market. Because Schlumberger will have a better handle on the features needed for transactions, it will be able to put them in their cards first, giving them a competitive advantage."
Although Schlumberger is not the only company to take this approach, its move has been among the boldest. "There's been a trend in the past couple of years of smart card manufacturers bringing in IT and systems integration services, but Schlumberger's position is notable because Sema is such a large, well-known name", says Gartner Research analyst Andrew Phillips. "The smart card industry is becoming focused on authentication for building access and network security. Although less traditional smart card applications, these areas offer strong growth for vendors that can integrate smart cards within a larger IT infrastructure. So the challenge is making smart cards work in an unproven area and figuring out how to design and evolve smart card technology to improve security issues for both office and remote workers using computers and PDAs."
Schlumberger is used to these challenges. Flinois estimates the company sinks nearly $2 million a day into technology research and development. In the process, it has developed a reputation for constantly tweaking technology to meet its clients' specialized needs. Alan Schwartz is president and CEO of Accident Prevention Plus, a company in Palm Beach Gardens, Fla. that uses Schlumberger's smart card technology to analyze wear and tear on commercial vehicles and driver safety by tracking brake usage, hours on the road and vehicle handling. "I'd worked at Schlumberger in the past, so I knew how good their products were," Schwartz says. "They gave us the necessary training and assistance in designing and manufacturing of card specific to our needs and power requirements."
Having successfully pulled off the setup of an IT infrastructure for the Salt Lake City Olympics, whoosh required millions of concurrent transactions (see sidebar), Schlumberger may next turn to outfitting airports, one of the most complicated environments to secure with high-tech security systems.
"Smart cards are an interesting future piece of the company, particularly if Americans begin to accept them," says Allan Eyre, president of JAE Consulting, Inc., an investment advisory company in Chester, NJ. "Although they're starting to make inroads in the medical and transportation industries, people here are not prepared psychologically to use them as identification. They see it as government intrusion. But, the day will come when we need this for national security, when cards bearing embedded pictures, eye maps and fingerprints will be assigned to us the way people now get a social security number. But that day is a long time in coming. If 9-11 didn't make us do it, it's going to take a while."
However long it does take, Schlumberger will likely be among the leaders -- creating as solid a reputation in smart card technology as it has long enjoyed in energy.
Susan Karlin is an award winning journalist based in Los Angeles, who has written for Newsweek, Forbes and The New York Times.
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