Monday, November 30, 2009

The issue in a nutshell.

The Oil & Gas Journal is covering The Society of Exploration Geophysicists (SEG) annual meeting in Houston. The topic of discussion is the exact issue that this software development project is designed to solve. The key issue which I wrote about in the Preliminary Research Report in May 2004. From the Journal's opening paragraph.
Energy research and development challenges are becoming more complex, demand integrated and individual approaches, and are in need of wider funding sources, concluded a forum at the Society of Exploration Geophysicists annual meeting in Houston.
When I read these types of articles I get frustrated and angry. Frustrated and angry at the do-nothing bureaucrats who currently occupy space at the oil and gas companies. The last six years has seen my efforts to promote this software development project, community and associated research, with absolutely no support, and not one penny from the oil and gas companies. The Journal's discussion goes on to quantify the amount of effort that needs to be undertaken.
John McDonald, Chevron vice-president and chief technology officer, reminded SEG delegates that the world took 125 years to consume the first trillion barrels of oil and is using the second trillion in 25 years. It is estimated that another trillion barrels remain to be discovered, ostensibly at a cost of $20 trillion over the next two decades.
This current bunch of bureaucrats suggest and expect we just hand $20 trillion over to further line their pockets? Where is the outrage? How is it that I was able to write the Preliminary Research Report in May of 2004? Was I the only individual in the oil and gas industry to realize this? Of course not, what was known in May 2004 was that this was a trend that was developing in the industry. And as I state in that report, the industry needs to move away from the banking mentality of guaranteed returns on their oil and gas investments. And begin developing the necessary resources and organizational structures necessary to support an innovative and performance based organization to address the underlying sciences.

So what are you going to do, Mr. budget director? Will you now undertake to do a study of the issue? Spend time and money marshaling resources towards coming up with a new vision of how the industry will solve these difficult issues. Gain a consensus amongst budget directors on what that vision should be. Hire SAP or Oracle to build you a system that gets you closer to your customer? You should be finished well after 2029 and therefore, your retirement will be fully secured.

You had your chance in May 2004, and instead did nothing. Now the consequences of your inaction will be the result of you being removed from the industry. Besides I think your going to be busy explaining what the hell it is that you have been doing all this time.

Bringing six years of research and a governing vision to the industry today has to be worth something. The community is ready and willing to move, the financial resources are all that is needed to be dedicated to this software development and community. Interested shareholders and investors should email me here with commitments to move forward. And please join me here.

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Sunday, November 29, 2009

John Hagel on Pursuing Passion

Passion is something that is being discussed more and more in the business community these days. It's something that I feel fortunate to have discovered and have been able to focus my energies on this software development project. There is a comfort and peace afforded to those who find their passions, it is in many ways the reward for taking the risks and enduring the sacrifice. In terms of the discussion, passion is a difficult topic to define and describe what it is, and why it affects people in the way that it does. John Hagel has taken the time to define it from the point of view of a business necessity. I would highly recommend reading his document, I think he does the best job of it yet.

Hagel makes the point that with the economic conditions we find in the twenty first century, passion will be a necessity. As he states.
If we have not found a way to make our passion our profession or to discover passion in our profession, we will very quickly succumb to the growing economic and competitive pressures that are shaping our global business landscape.  The pressures will inexorably mount. Without passion, we will increasingly experience stress, our energy will be steadily drained and we will ultimately burn out under the mounting pressure. At best, we will be marginalized as we find ways to achieve “balance” and safety valves for the mounting pressure at work.
The definition of passion is broken into two distinct types. Hagel says there are "true believers" and "explorers." The true believer is described as "Their passion is enduring and it does focus, but it can also blind – leading the entrepreneur to reject critical input that does not match their preconceived views." Not a productive environment in my opinion. Collaboration is a major means of how ideas are developed today. To ignore the ideas of those that are involved is somewhat disrespectful. I'd like to think that this project would be defined as an "explorer" which Hagel describes as.
These are people who see a domain, but not the path. The fact that the paths are not clearly defined is what excites them and motivates them to move into the domain. It also makes them alert to a variety of inputs that can help them to better understand the domain and discover more promising paths through the unexplored terrain. They are constantly balancing the need to move forward with the need to be present in the moment and reflect on the experiences and inputs they are encountering.
I have prepared the supporting research that proves the Joint Operating Committee provides the innovative and organizational performance that the oil and gas producer must have. From this research I have been able to sketch out a vision of how a system based on the JOC would operate. The Draft Specification is the beginning of the involvement of the Community of Independent Service Providers. This is where the passions of many people will take the Draft Specification and build the software applications they will need in their day to day work in the oil and gas industry. Hagel notes;
Passion is also about pursuit. It is not passive. People with passion are driven to pursue and create. They may read books and observe others, but they are not content being bystanders. They feel an overwhelming urge to engage, to experience for themselves and to test their own capabilities. Passion compels us to act.
The heading of this blog calls to those with passion to act.
A global community of professionals dedicated to optimizing the performance and profitability of innovative oil and gas producers. We are focused on developing IT systems based on the Joint Operating Committee. The legal, financial, operational decision making, cultural and communication frameworks of all producers.
A community of people open to new ideas, who know that energy is the life blood of our global economy. People of action who demand more from IT, please join us.
I hope that I have designed a path for others with passion to follow. The comprehensive nature of John Hagel's article is best read in it's entirety, and please review his passion manifesto. The one comment that I would leave you with, if you are in oil and gas, is People, Ideas & Objects is the place where you can find your passion and act to make a difference in the industry. Please join me here.

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Tuesday, November 24, 2009

McKinsey on Enterprise 2.0

We have an interesting video of Professor Andrew McAfee talking about technologies under the label of Enterprise 2.0. This will be the fourth time that I have highlighted McAfee's work and the sixty third McKinsey article. All I can say is I'm glad this body of work is behind me. I still have many McKinsey articles that I want to write about, just not enough time in the day.

Professor Andrew McAfee coined the phrase and defined what "Enterprise 2.0" is and means. Particularly from the point of view of how organizations will be affected by these technologies. Like the recent discussion of Google CEO Eric Schmidt, McAfee is not talking about the technologies for the sake of the technologies but the massive impact that the Information Technology revolution is having on business.

Last time I highlighted the work of Professor McAfee and his Enterprise 2.0 concepts he was at Harvard. He seems to have escaped and moved closer to the river by joining MIT and is now the principal research scientist at the "Center for Digital Business" at the MIT Sloan School of Management. He also has a book coming out called "Enterprise 2.0: New Collaborative Tools for your Organization’s Toughest Challenges". Lastly the McKinsey article has this video presentation of this paper. (Video is available here.)

McKinsey ask a number of pertinent questions. McAfee's answers provide real value for this community in terms of what and how "Enterprise 2.0" and People, Ideas & Objects application modules will affect today's work place. The following is how I see it for oil and gas.

McKinsey: How is Enterprise 2.0 changing the way we work?

McAfee's answer to this question is in line with the collaborative developments of WikiPedia. How the initial start attempted to control the contributions of people, and only after scrapping the process and leaving it to self organized teams did the value, quality and quantity increase.

I see a much larger change. The 7 / 24 clock will be the time people are available to work. Asynchronous Process Management, a cornerstone of the People, Ideas & Objects Technical Vision will permit people to work when and where they want. The office will not be used even half as much as they are today, and the quality of life will be substantially higher. When the computer screen looks the same at home or in the coffee shop as it does at the office, an office will become a place to go to concentrate. The rest of the day will be interspersed with personal and work related activities completed as required.

McKinsey: How do you get this started in an organization?

McAfee comments;
There’s a lot of debate about that question right now. And the debate is typically between people who advocate [a top-down approach and those who advocate] almost a purely bottom-up approach—in other words, deploy the tools, stop worrying about what’s going to happen, and get out of the way as the management of the company and let it percolate up from down below. Or, if you hear about a grassroots effort, encourage it, support it financially, but, again, get out of the way, let the bottom-up energy happen.
People, Ideas & Objects has chosen the bottom-up grassroots method of solving these problems and building the software based on the Draft Specification. I like McAfee's comment that if you hear of a grassroots effort, encourage it, support it financially. Music to my ears so start spreading the news.

This software development can not be a sustained and quality effort unless the users are compensated financially for their time. This is a big part of our budget and defines why our approach is different from the rest of the marketplace. As McAfee states in this document, developing the community takes time and effort.

McKinsey: What else can undermine adoption?

McAfee notes the unreasonable time frames put on by management. People, Ideas & Object software developments, or any collaborative project, will not be zipping along before the end of the quarter. Such expectations are how the hierarchy greases the wheels with the consumption of human energy and spirit.
Another failure mode is to be too concerned about the possible risks and the downsides. If we get wrapped up in those, we’re not going to take the plunge and actually deploy any of these new tools and turn them on and encourage people to go ahead.
I don't see the downside here. Collaboration brings many risks to the bureaucracy. However their risks are the result of the collaboration out performing the bureaucracy. I can live with those risks, and I think that McAfeee's audience is different to those of this blog. He is preaching to the unconverted and as such has to hedge his comments while he moves the Trojan horse into place.

McKinsey: What is the CIO’s role in encouraging Enterprise 2.0 and managing the risk?

McAfee notes;
A lot of them see their roles as essentially conservative, though. In other words, “My job is to not increase the risk profile of this organization before everything else.” That’s a legitimate concern, it’s a legitimate job for the CIO, but all my experience so far tells me that Enterprise 2.0 doesn’t increase the risk profile of an organization.
This is probably why I get in so much difficulty with companies. I ask sarcastically what's a CIO? I don't see them surviving in the long run. Much like secretaries and draftsmen these positions may disappear rather quickly. These types of comments should be directed to the CEO or the CFO as they have the proper authority and responsibility to make the decision.

In my presentations to the industry I noticed something that I had never learned or considered before. When I talk to CEO's or CFO's I feel there desire to pick up People, Ideas & Objects software developments. Why they haven't is that they would do serious damage to their firms by changing direction to quickly, without the urgent need and support for the change. They therefore pass on the opportunity until such time as we proceed to a point where they can make the change.

McKinsey: What does this mean for middle managers?

McAfee notes;
If you’re a middle manager who essentially views your job as one of gate keeping or refereeing information flows, you should be pretty frightened by these technologies, because they’re going to greatly reduce your ability to do that. They’re going to reduce your ability to filter what goes up in the organization and what comes down in the organization. And they’re going to greatly reduce your ability to curtail who your people can interact with, talk with, and receive information from. So if you’re inherently a gatekeeper, this is a real problem for you.
In my presentations to the industry it is this group of people that feel challenged by these technologies and the People, Ideas & Objects application. The class of workers known as middle managers career and position are toast. I don't foresee many of these people continuing to be effective in the very near future. If this is news to anyone in middle management, good morning.

McKinsey: How should companies measure the success of Enterprise 2.0?

McAfee notes;
Again, you see a lot of energy, you see a lot of people very willing to take a few seconds to answer a colleague’s question—even if it’s a colleague they don’t know. So when I see successful companies tackling this tool kit, I see them doing a little bit of thinking upfront about what problem or opportunity they’re trying to address, then deploying an appropriate technology in response to that. They then measure progress: How much uptake are we getting? What’s the traffic look like on this? Which is very different than measuring ROI, I think.
In the Preliminary Research Report I suggested that companies use the revenue per employee as a measure of an oil and gas firms performance. Revenue per employee can vary significantly from company to company based on the unique attributes of its asset base. It has direct application between producers and is an accurate measure of the firms current and future capabilities. This is particularly the case as those producers with low revenue per employee will have difficulty increasing the revenue factor without having to address a possible over staffing issue.

The purpose, or competitive advantage, for the Community of Independent Service Providers and People, Ideas & Objects software applications. Is to provide the innovative producer with the most effective and profitable means of oil and gas operations. Revenue per employee will be a critical method of how the community advances the science of management and business for the oil and gas clients using this software and community. Please join us here.

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Monday, November 23, 2009

Pemex makes the change.

The market for People, Ideas & Objects software application is the oil and gas industry in general. This includes the International Oil Companies (IOC's), National Oil Companies (NOC's), Independents and start-ups. All of which of course use the Joint Operating Committee (JOC) as the means to deal with their partners. All of these types of organizations have the same needs from the point of view of managing their oil and gas assets.

Each barrel of oil equivalent is on a steep upward curve in terms of the volume of science and engineering involved in bringing the products to market. It is this upward cost curve that challenges the bureaucracies to keep up. What they are finding is the pace of change and the demand for innovative thinking is beyond the capabilities of the hierarchical firm. This is the situation for most of the western based producers and service companies.

People, Ideas & Objects approach is particularly unique from the point of view providing the NOC's. Pemex, Saudi Aramco, Petronas and the China National Oil Company to name just a few. Traditionally they have been charged with developing the countries energy resources for the country itself. Whether that is for its internal consumption of energy, management of royalties and / or export. The challenge to them is similar to the IOC's and Independents in that the level of effort per barrel of oil equivalent continues to escalate.

Mexican firm Petroleos Mexicanos is now indicating they will change how they develop their energy resources. In the Oil and Gas Journal, an article documenting the change notes.
Mexico’s state-owned Petroleos Mexicanos and the Secretaria de Energia (Sener) are preparing risk contracts that will be offered to oil companies—international and domestic—in order accelerate the search for oil and gas, according to local media.
These risk contracts have been used with a multitude of other methods by the NOC's before. The one constant is the Joint Operating Committee (JOC) is the means to manage these contracts. Recall the JOC is the legal foundation of the oil and gas industry. This is on a systemic and global basis with IOC's, NOC's etc. Pemex establishes the following framework for these contracts;
Sener explains that it is urgent "to speed up the discovery of new oil fields and the incorporation of reserves, as well as increase Pemex's execution capacity, particularly through new contracting schemes so that specialized companies can support its activities."
Clearly indicating that the support they are looking for not only includes the producer firms but also the service companies. Pemex is one of a number of countries that are establishing this trend as a result of the new realities of the scientific developments of the oil and gas industry.

Evidence of this is reflected in the research of the Baker Institutes Energy Forum's Cases under the heading of "The Role of National Oil Companies in International Energy Markets". In particular I want to highlight the research that was completed on for Malaysia's Petronas NOC. Reading that document clearly reflects the conclusion resonates with the work being done by the People, Ideas & Objects community. It also resonates with Petronas' strategy, history and economic needs.
In 2005 a Vice President of Petronas speaking before the Asian Energy Forum presented the firms corporate strategy. He emphasized several elements including growth and maximizing returns for shareholders. Growth has brought the move towards a global strategy with the desire to be an overseas investor in upstream and downstream sectors as well as encouraging foreign investment in Malaysia, while maximizing shareholder profits; he also noted the company's efforts to benefit local needs through a long term program involving Malaysia, host countries and other firms.
He asserted that it is important for Petronas to work with credible partners for several reasons:
  1. Risks mitigation
  2. Access to market
  3. Access to proprietary technology
  4. Political strength
  5. Government to government relationship p. 21
In my opinion this strategy is wholly consistent with both the Community of Independent Service Providers (CISP) and People, Ideas & Objects. Why?, due to the activities and operations of Petronas and other NOC's, the IOC's, Independents and start up producers need to align their governance and compliance frameworks with the JOC's legal, financial, operational decision making, cultural and communication frameworks. This alignment brings a transparency  between the participants that increases the accountability of all oil and gas operations for all concerned, irrespective of the individual strategies employed by each participant in the JOC. The current situation where the corporate compliance and governance frameworks are focused only on the individual corporation is inconsistent with the legal, financial, operational decision making, cultural and communication frameworks and operations of the JOC of which they are party to.

By granting a concession, lease, risk contract or any other vehicle to establish these oil and gas operations, a JOC is created. It is therefore necessary that the systems and procedures of those participants to the JOC have the JOC identified, supported and implicit in the day to day and strategic operation.

Additionally, each NOC or government that is interested in optimizing their oil and gas operations, both from a royalty income stream or as an active explorer and producer, want to have their jurisdiction open and active with the remainder of the oil and gas industry. Having the capacity to operate on the same basis of the global oil and gas producers and suppliers provides synergies to all involved. Using a standard system, such as People, Ideas & Objects amongst all participants of the industry enables access to the resources of the service companies, producer firms and other groups that may be involved in the JOC and available through an application based on the Draft Specification.

This also works for Petronas and other NOC's from the point of view of their strategy of wanting to be involved in oil and gas operations on a global basis. They, with standard systems based on the JOC, can easily participate based on known methods and means of operation on a global basis.
This is not a case of nationalization, although nationalism was a factor in its original formation. It has been a generally solid and well-respected partner to both private and state entities around the world. While it has become involved in a wide range of agreements with other companies and states in which its equity percentages has varied, Petronas itself is 100% state owned. It has no present intention to privatize. p. 35
Involving NOC's in the future in this manner is also consistent with the activities of the Baker Institute with their governing objective.
The Baker Institute Energy Forum is a multifaceted center that promotes original, forward-looking discussion and research on the energy-related challenges facing our society in the 21st century.
This future needs to be backed up by a software development capability as provided by the Community of Independent Service Providers and People, Ideas & Objects application modules. Please join us here.

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Sunday, November 22, 2009

Eric Schmidt's Google IO Keynote

Dr. Eric Schmidt, CEO of Google presented the keynote at the Google IO conference. Many of the things that he says are consistent and applicable to work being done by this community. What I want to highlight in this post is the maturation of the underlying Information technologies. We entered this decade with the misguided belief that IT systems would collapse due to some storage related issues with the date. The final nail in the coffin of tech careers came with the 2001 dot com meltdown. The one constant throughout these issues was the focus on technology. Technology fails when its presented as the reason for change. In many ways as a result of the fallout of these technical failures, the belief that technologies day had ended became the standard thinking of people outside of technology companies.

This software development project focuses on the business issues inherent in the oil and gas industry as the justification for change. In addition, are the structural economic changes in play during this time of renewal. Schmidt agrees;
And let me tell you that it's time, it's time for us to take advantage of the amazing opportunity that is before us.
Yes now is the time when all the planet's line up. The technology, the business environment and society demand a greater efficiency. Schmidt notes in terms of the maturity of technology.
Why is it time? Because people are frustrated. They're tired of the complexity of all the systems that have been built up over the last 20 years. They do not work.
Schmidt then talks about an interesting characteristic of innovation. That innovation always happens elsewhere. Great ideas come from everywhere. That confirms what we have learned about innovation in the Preliminary Research Reports findings. Professor Giovanni Dosi notes the endogenous and exogenous forces of a firms innovativeness. The role of science and its development need to be the focus of the oil and gas producer. In an iterative loop scientific capability enables the innovations, and in turn those innovations advance the science. Major impacts to the science, as Dr Schmidt notes, usually happen elsewhere. The need for the scientific capability of the producer firm has to be mirrored through the industry and the service suppliers.

In a fast moving and innovation driven oil and gas industry the necessary resources need to work together. With the escalating demand of the sciences in each barrel of oil equivalent, and the retirement of much of the industry brain-trust. Building separate and mutually exclusive capabilities in each oil and gas company has to cease. The Resource Marketplace Module deals with these and other issues, such as who owns the Intellectual Property (IP) of the science and innovation.
Scalability and Power is just at the beginning of getting this right. The message is that this is the real beginning of the real win of cloud computing. Of the real win of applications. Of the real win of the Internet. Which is changing the computing paradigm - the one we have all grown up with - so it just works. It works no matter what device you are using, whatever operating system your using, as long as your connected - even if you are not connected - your online and have everything you need.
I'm not one to highlight the technological aspects of this software development project. The focus of People, Ideas & Objects is on the business attributes of changing to the Joint Operating Committee as the key organizational construct. However, Users need to know that the time and technologies maturity is now. Voices like Eric Schmidt, who has also been the CEO of Novell Networks and Sun Microsystems, is able to provide the necessary credibility for the users to join me here.

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Thursday, November 19, 2009

More constructive changes.

In my last post I showed how the Information Technologies needed to be monitored more closely by oil and gas companies. Noting that SAP's Gravity application was too powerful to be put in the hands of users without a method to ensure the technologies did not violate the compliance and governance models. This is a type of risk that I have identified many times in the past few years. A risk that grows larger each day.

It's one thing to criticize and another to provide solutions. That is what the Draft Specification is about, providing the innovative oil and gas producer with the vision, community, tools and methods needed to ensure they are compliant and working within their compliance and governance requirements. Management have chosen to stick with their bureaucracies and SAP, which defines and supports the management, for their own purposes. This blog has targeted the shareholders and investors that own the oil and gas companies, are dissatisfied with their managements, and see the Draft Specification as an alternative.

I mentioned the Military Command & Control Metaphor (MCCM) in my last post. That's for the members of the Joint Operating Committee to establish a chain of command and governance of the assets managed by the JOC. That an engineer from company A, a geologist from company B and an administrator from company C can see that the authority and responsibility are held by certain individuals and are capable, authorized and responsible for making the decisions for that JOC. This would be expanded to include the designated staff from each producer who are part of the JOC, the field operations people and those that may be consultants and / or suppliers to the property.

Not to get too off track here, I want to make a point that has not been stated before. The source of the People in the CISP are globally sourced. This provides the producer with the best possible means of having the most competitive offerings available to them.

The MCCM and the Compliance & Governance Module of the Draft Specification are designed to instill a JOC with the requisite authority, command and control based on the compliance and governance requirements. In a world where the number of people that work for a JOC may total thousands, having anything but a highly dynamic and flexible work force can only be managed by the ultra slow bureaucracy or the MCCM of the Draft Specification. If we are to expand the economic performance of the oil and gas industry we will need a more defined division of labor. A global marketplace of the talents necessary to expand the performance of the oil and gas industry. To suggest anything else is irresponsible, and SAP should know better.

How is it that the software development being undertaken by People, Ideas & Objects is able to employ the MCCM? The methods of how the development is undertaken is User involved. The User base, or as they are referred to here as the Community of Independent Service Providers or CISP is composed of the entire population of the industry. This entire population of the industry is also part of the Resource Marketplace Module. A module that provides People from suppliers, producers and vendors to market, engage and build business relationships. Where their qualifications and capabilities are able to designate their offerings as their potential role in the JOC based on the MCCM. It is then the producers of the JOC to engage in the resource and establish the transactions between the producer and its suppliers / vendors / CIPS. And designate the individuals with the requisite authority, responsibility, task, calendar etc. of the JOC. People, Ideas & Objects being part of the CISP can be included in the JOC's MCCM and therefore undertake the appropriate software developments and have the JOC with the requisite authority to make the changes to the software.

Our competitive advantage, of both People, Ideas & Objects and the CISP is to provide the most profitable means of oil and gas operations. Dare I ask what SAP or Oracle provides the oil and gas producer. Please join me here.

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Tuesday, November 17, 2009

Changing deck chairs on the Titanic

I should thank SAP for this post. They have published a YouTube video of their use of Google Wave, and its all that I thought that Google Wave could be used for. Here's the Video.

What the video doesn't show is the level of security being used and the location of the individuals. It is more then reasonable to assume these individuals are located at various different places and could theoretically be anywhere, and through a standard browser. It is also possible to provide the highest levels of security that are technically possible to those users, wherever they may be. And these attributes are well reflected in the video, but I have to argue the damage that a tool such as this would bring to any oil and gas company.

What is it that SAP is missing in terms of providing this solution? What we learned in the Preliminary Research Report was that change needed to be introduced in the proper fashion. Specifically the cognitive and motivational paradox are key issues that are not being addressed in SAP's use of Google Wave. The cognitive paradox identifies that people perceive the new with an understanding from the old. Taking the old and superimposing their understanding on the new is a danger in SAP's use of Google Wave. The motivational paradox recognizes that people are concerned more with production, or getting their job done, then learning the new methods or tools. These two paradox have been critical in the need to understand how change is introduced in the Draft Specification. Simply there has to be a clearly defined break from the old. A significant break in which the new can be approached in the manner that is somewhat a blank slate.

Change for the sake of change, is wrong. Particularly with SAP's use of a new technical tool. Technically driven change is a disaster in the making. That is why People, Ideas & Objects is basing these changes in the strong economic forces in today's depression. Orchestrating this level of change is not possible unless there is the type of economic reforms that people like Professor Carlota Perez speak of. The old dinosaur bureaucracies are failing, actively destroying shareholder value, and are leading to the renewal for new and innovative ideas and organizations. This opportunity is ours to take.

I see serious problems in allowing this type of powerful technology (The Google Wave application, not the SAP application) introduced without any support for the changes made. And more importantly without the full consent of the management or ownership of the firm. In this video they introduce a number of people who collaborate on a new process that does not have the requisite authority or responsibility to make any changes. Designing things because they can collaborate does not make it a valid process. In oil and gas I could take Google Wave and quickly write a new process that would involve the collaborations of any number of producers involved in a Joint Operating Committee. This would be dangerous and irresponsible, that SAP misses this point is of concern to me. This is also why the Draft Specification developed the Military Command & Control Metaphor.

Particularly for a publicly traded company, decisions and actions have to have a document-able audit trail, compliance and governance implemented and operational. When we think of a JOC we have multiple organizations legal, financial, operational decision making, cultural and communication frameworks. It is my opinion that allowing this type of application, of which many examples have been written about here, is irresponsible for the management to allow. I also have an opinion that management are not that interested in working that hard to stop this type of activity. Just as they do not go out of their way to be more proactive with respect to compliance or governance. As I said it is just irresponsible of management to "allow" this to happen, but chaos may be the better choice for them to make.

In oil and gas management's sole concern is the compliance and governance of the company. It is People, Ideas & Objects "design" to have the compliance and governance moved from the bureaucracy to align them with the legal, financial, operational decision making, communication and cultural frameworks of the Joint Operating Committee. As one learns in most MBA programs the separation of operational decision making and compliance leads to no accountability. This is managements to exploit in the current market. There motivation is to ensure they are not eliminated by having compliance and governance more accurately managed within the software.

We have also learned that the division of labor is the primary means of enabling economic growth. The video shows the influence of many different people involved in the process, however, it is more a matter of convenience that these people are motivated and the scope is based on expedience. When we consider the interactions of people through a JOC we have interactions that, if left to an ad-hoc development, would not provide the value that the appropriate analysis would bring. As I have frequently mentioned, the current oil and gas industry is populated with potentially thousands of different jobs as a result of the growth of the industry. Allowing poorly implemented technologies such as SAP is doing in the video can lead to a destruction of that division of labor for something that is not efficient. Leading to the chaos mentioned and presenting to all the kings horses and all the kings men, the never ending story of Humpty Dumpty.

We are entering a world where the tools are very sophisticated and capable of significant benefit to society, if used properly. We are also viewing the world from a high level of sophistication in terms of its economic order or division of labor. These are being altered without an appreciation or understanding of how fatal even a small decline might cause the company. Management should be concerned at what might happen when falling from these lofty heights. Making undocumented changes and not implementing the appropriate levels of compliance and governance is irresponsible, bordering on criminal. Managements have been able to disassociate themselves from the shareholders and investors by entrenching themselves in a rigid compliance framework. This is also why no one has ever been fired for recommending SAP.

Ah the things you can say when you've been ostracized for your ideas, truly liberating.

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Sunday, November 15, 2009

What about those prices.

Two conversations that are taking place are the relatively high oil, and the low natural gas prices. The opposite directions of oil and gas prices seems to be a result of the North American natural gas markets being satisfied by shale gas developments. What is the future of these prices.

It would seem to me that the economic developments and stimulus have done nothing to stem the depression we find ourselves in. The U.S. dollar is under attack and they seem not to be able to, or want to do anything to stop the decline. Those individuals that are holding U.S. bonds will soon realize the pain that was delivered to mortgage holders last year. As big as the mortgage market is, the size of the U.S. bond market will have as big and if not bigger dent's in the world economy. Hang on to your hats.

So the demand for energy may fall further, this is almost a guarantee as I see it. The two economic phenomenon that I have been banking on this past decade. The transition between the old to the new economy. And, the increasing difficulty for the bureaucracy to produce and explore for oil & gas. That I never put these two theories together, and predict that the prices would collapse shows how real life is always surprising.

So there we have it. The next step down in the economy is baked in the cake and the shock will hit the commodity markets, and the oil and gas prices will decline. The decline in prices will be sharp enough to bring great difficulty to the producers. We have moved to a high production cost environment. The management have hung their hats on the phenomenal earnings they made last year based on those higher prices. I wonder if they will take the blame as much as they took the credit for those spectacular results. Lets hope they do and are summarily fired as they should be.

What's driving these price declines. The inability of producers to be able to shut in production is causing the prices to collapse for the short to mid-term. Some producers have been able to shut in their 100% owned properties. Properties that have multiple owners are able to shut in production through the operational decision making framework of the Joint Operating Committee. The problem is that the ability to do so, in a material way, is constrained by the sheer numbers of JOC's and the contractual commitments of the producers. The conflict within the participants of the JOC is unable to be resolved because in essence, no one clearly identifies the JOC as the key organizational construct of the energy producer.

Why would the industry continue to produce at the volumes they are when these volumes are killing the prices. Shutting down of any future activity has been the very dull tool the industry has used to weather the storms. Not spending money on drilling more wells and facilities has been taking place now for almost two years. Earnings are in significant decline with not many companies showing a strong balance sheet or reserves. The traditional price-taker mentality is in full effect with no one seriously considering the necessary mechanisms to reduce the amount of product being brought on the market.

Continuous production of product in the face of such a dire forecast shows the need to have the systems and organizational structures of the industry rebuilt. Specifically around the JOC and with the systems I have described as the Draft Specification. I sought to resolve this problem by putting into place the necessary mechanisms for the Joint Operating Committee to determine at which price levels would trigger a 10% decrease, and if future declines needed another 10% decline in production, at what price level that would occur. Giving an automated means for the JOC to predetermine what is best for the property.

These conflicts and contradictions in oil and gas are are no longer able to meet the needs of the industry. Time has now come for the producers to act and support this software's development. Or, they can continue to watch the prices decline further and further and hope no one fires their buts. It has been well known for a very long period of time the energy price elasticity. Meaning that large price changes are brought about by small changes in production. Management I'm sure are hoping that these economic principles don't apply to them, and will wait it out to see if that is the case.

Continuing to muddle along as a corporate strategy is now putting the industry in serious jeopardy. Without the appropriate tools to manage the business, the management are damaging their shareholders investment and the industry capability. Leaving it in their hands is irresponsible in my mind, we should be building the software and community that will support the innovative oil and gas producer for the future.

Let me make it absolutely clear so that there will be no confusion. I have received no support and no funds from the industry for this project. Zero! In September 2003 I was ostracized and kicked to the curb when I first proposed these ideas to management. And laughed at by those perfect management teams since. It is not recommended that anyone should expect that operational code be written and waiting for companies to start using. What I have done since 2003 is complete the Preliminary Research Report. Researched the viability of a system based on the JOC. Based these ideas on an economic and academic foundation that total's over 700,000 words on this blog. And detailed a vision of what the systems would look like when the industry is using the JOC as the key organizational construct. The software development of that vision is what is needed to be done, and from scratch for lack of a better word. I have done everything humanly possible to make this vision real. It is not my fault that people will be disappointed with the progress of this project. Please join me here.

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Wednesday, November 11, 2009

A revolution is at hand.

Times have changed. There is a strong and supportive attitude toward our armed forces. When the challenges to our peace and freedom are weak we don't seem to have an adequate respect for the military. It's times like these when we are at war and the war is everywhere, we see the military in a different light. I for one am glad that we have stood for freedom and peace for as long as we have. Those that wish to diminish our freedoms should think twice.

On Monday the Boston Globe published a photo series called the big picture, I highly recommend you subscribe. On Monday they did a series of photos of "Kazakhstan's radioactive legacy". The images are graphic and are amongst the most difficult to view. These are the product of a country that takes people's freedoms and peace for granted. Thank you to our military.

With the twentieth anniversary of the fall of the Berlin Wall, Christopher Hitchens, one of my favorite authors. Noted in this weeks Slate article ,
Lenin once defined a revolutionary situation as one that occurred when the rulers could not go on in the traditional way and the ruled did not wish to continue in that old way. Engels was more metaphorical, saying that revolution was the midwife that delivered a new life out of an older body.
Not to suggest that we are in revolutionary times, but the information revolution has been speculated to mimic the industrial revolution. So in light of these, how does People, Ideas & Objects bring about these changes. Hitchen's notes;
Throughout the 1980s, democratic insurgencies in the Philippines and South Korea, as well as the long resistance of the anti-apartheid forces in South Africa, showed that when the ruled do not want to go on in the old way, all they really need do is to fold their arms.
It's time for the management to cease, fold their arms, and join us here .

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Tuesday, November 10, 2009

Our Competitive Advantages

This post is about the technological competitive advantages of People, Ideas & Objects. The unique advantages that technological developments bring to our approach to ERP systems development. It's important that users and producers understand how our advantages can deliver the systems as defined in the Draft Specification. If people are not sure if what we are doing is even technically possible. Then it is difficult for them to see how a start-up can take such an opportunity and deliver on it. In a nutshell, yes we can. The proof has been written about elsewhere and I will refer to these so the individual can do their own research. This is important, as I do not expect anyone to have to take a leap of faith that this risk is not being identified and addressed.

I want to also stress that the identification of yourselves to any producer as being affiliated with this project is not advisable. The management of the oil and gas companies are not constructively approaching the systems or organizational needs of the innovative oil and gas producer. Secondly, to suggest that the individual give up their current career for this opportunity would be too much to ask. I would only expect that people would be involved with this project on a part time basis to begin with.

Contrast the competitive advantages that are being developed in People, Ideas & Objects to the competition. Oracle has spent $39. billion to bring out their Oracle Fusion product. How has this product been built to deal with the issues of the innovative oil and gas producer? SAP has a checkered past in the industry and they too have what I would consider critical faults in their offerings.

The first thing is to define the priority of the development. In systems you can have any two of three priorities. Either 1) the speed of development, 2) the quality of the development or the accuracy of meeting the users requirements, or 3) effective cost control. Making this decision is academic when we consider the scope of the application, the financial resources of the oil and gas industry and our fundamental value proposition and business model. The speed and quality can be attained in a start-up, I'm not certain that it can be built into a large organization such as SAP or Oracle. Our speed and accuracy are something that have been available to SAP and Oracle in the past. Asking them to overcome the speed and focus I know is too much.

The key technological advancements that make People, Ideas & Objects the most competitive in the oil and gas marketplace are as follow.


By for the most powerful of programming environments. And blah, blah, blah techno talk. Needless to say this is an easy and unanimous choice.


Employing the re-usability of Java. Rebuilding everything from scratch is just not necessary. So much infrastructure and capabilities have been built into open source and other frameworks. Providing infrastructure and capabilities at a level that enables flexibility without the constraints.

Open Source

In combination with Agile / Scrum, Frameworks and Java, Open Source brings so many of the qualities that it is hard to document them all. Realizing the value in software development is in the journey, not the destination.

Data Model

Maybe one of the more difficult decisions, but this is what we have so far. We will be using the Professional Petroleum Data Model (PPDM) data model. And in answer to the technical question are we relational or object relational, I'll need to be convinced that an object relational model would work in a complex application such as People, Ideas & Objects. Until then we are relational. Performance may not be as fast, however, accuracy will be predictable.

The PPDM data model has the combined efforts of the industry in defining a data model for use by members of the petroleum industry. Our use of this work, which is substantial, eliminates a difficult area of concern. PPDM increases the quality of the subsequent developments. At the same time I think PPDM's data model has not been rigorously tested in the marketplace. And therefore we will be looking critically at the data model to see if it can be enhanced through a more strict interpretation of Relational Theory. And if it can be optimized for the innovative oil and gas producer. 

Modular Specification

The Draft Specification is modular for a reason. Modularity is a key attribute of simplifying systems development. Interactions between modules are easily handled and the overall system design can be accommodated. In total we will be employing fifteen development teams in the agile / scrum development methodology.

Agile / Scrum

This is a method that has simplified development to its most efficient. Scrum increases the performance of a development team from two to ten times the standard. That's correct, a two to ten fold increase in productivity. This doesn't sound at all believable but I can assure you it is true. Although it is open and available to anyone that wants to strive to achieve these multiples of development efficiency, it is difficult to implement retroactively in teams that have been together for a long period of time. Many developers are unable to transition.

One of the key attributes of Agile Scrum teams is the focus and role of the user. It is critical and the methodology makes itself accountable to those users in quick, short, intense development periods. I'll talk more about this methodology in the future, one of its key advantages is that the team can be distributed as far, and as wide as is required. Enabling the best of the best developers to be recruited and involved in this development. The key mode of communication between users and developers is the User story.

User Driven

You can not expect the user to be satisfied with systems that do not involve them. Users can not expect worthwhile systems that they did not have a hand in. The difficult and time consuming aspect of building systems to the users specification is the development of the community. People have had time to be able to codify these ideas and think of new and innovative ways for the system to be built to deal with a nuance of their day to day activities in their jobs. This will be the real key competitive advantage of this community.

User Interface

I don't use Windows systems. Two hours with one of those machines and I get frustrated either at the slow pace of my work or the fact they seem to break every time I push them. Using Mac's as machines and Unix / Linux are the only ways in order to deal with computers.

I have a wonderful ability with computers. When I started in oil and gas in 1977 I was introduced to them and they have been my friends since. In fact all my best friends are computers. The way we interact with them is critical to the productivity of the user. To ignore the user interface is to miss out on much of the computers value.

Users need to see the approach we are taking is going to be successful. Committing to a losing cause is in no one's best interest. How their involvement in the quality of systems is clear. What is not clear is how an application of such scope and functionality can be approached and built. The performance of technology, its reliability and maturity are providing productivity gains that are surprising to everyone. I'm seeing a distinct move away from the Oracle and SAP style of application offering. The need for fast, innovative firms is being demanded throughout the world. This can only be provided by a software development capability dedicated to the innovative firms. Please join me here.

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Monday, November 09, 2009

Nouriel Roubini on the carry trade.

A big part of this software development project is a lesson in how change is adopted in business. For People, Ideas & Objects to succeed requires the status-quo be replaced by the new. People need to realize the way things are done are no longer working. Our current economy provides the understanding that the current bureaucratic firms are consistently being faced with difficult situations. It appears to me that the efforts in trying to keep these dinosaurs operational is far in excess of what is needed to start over.

Our economic problems seem more and more to be a product of not accepting that the status-quo should be replaced. In the past ten years it seem we have lost the capital discipline necessary to carry out the further development of the economy. Housing is not an investment. Investments provide returns, not happy family moments. Climate change and alternative energy do not provide returns. They are man made cost centers that will be funded by taxes or the consumer.

Investments need a return and are productive in nature. They should not rely on luck but skill, and they should be based on cold and unbiased financial criteria. I don't want to come off preaching but these lessons seem to have been lost, particularly in the U.S. Professor Nouriel Roubini is well known for his precise calling of the economic crisis that started last fall. Today in the Financial Times he is calling for the "Mother of all carry trades faces an inevitable bust."

To suggest the economies have recovered is a bit of stretch for me. Stuffing $12 trillion into the global economy, keeping interest rates as low as possible, only shows how bad things are. At some point these factors will change and I suspect the U.S. will be no longer permitted to abuse their number one asset, the U.S. dollar as reserve currency. It is easy to forget the stimulus that has been injected provides a strong cushion to the effects of the economic damage. It is clear there is damage and that damage will need to be repaired by time, policies and capital discipline.

Arnold Kling states

In spite of all the sophisticated rhetoric about "quantitative easing" and "new tools for monetary policy," the only way that I can understand what the Fed was doing is to say that the goal was to stimulate bank profits, not the economy. If your goal were to stimulate the economy, you would inject enough reserves to do that and not pay interest on reserves. That might require buying some long-term bonds or mortgage securities, but not the hundreds of billions that the Fed actually bought.

Everything the Fed has been doing over the past fifteen months makes sense if you think of their goal as transferring wealth from taxpayers to banks. If you try to explain it as an attempt to implement an expansionary monetary policy, you won't even get past my high school students.
Reading Nouriel's article in the Financial Times makes it clear speculators are using the U.S. dollar as the funding currency in the carry trade. Enabling them to speculate on any type of asset they can access with the excessive liquidity in the market. This isn't gambling, it's gambling with the game fixed in their favor.

The point of this blog post is that the hard work we face is necessary. These efforts to support the economy will fail and take the status-quo management with them. Someone has to pick up the pieces, and for oil and gas, that is People, Ideas & Objects. Please join me here.

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Wednesday, November 04, 2009

Forbes says no to big software!

I have to say I'm impressed. We haven't covered any Forbes articles up until our first one yesterday. And today they knock another one out of the park. Maybe they are focusing on the business value of technology, and if so it would be a welcome change. The author of this article has a strong background in IT as noted here.

Roger Burkhardt is the president and CEO of Ingres and serves on the board of directors. Prior to Ingres, Roger served for six years as the CTO of the New York Stock Exchange. He and his team were responsible for the transformation of the NYSE to a fully electronic model, and conducted much of their IT work using open source.
Just as I have stated here many times before, People, Ideas & Objects is a ground floor opportunity. One that has offered a compelling vision for people to rally around and build the solution in the Open Source, higher quality and lower cost environment. Saying so long to the Oracle and SAP big bang style of application integration.
The recession has cast a bright light on the tactics used by Big Software companies to lock in their customers through multi-year license agreements. In these agreements, annual fees go up, but can almost never be reduced--even if the customer's business has downsized.
Which brings up an interesting point, one that I had not noted before. The services provided by the Community of Independent Service Providers are under the control of the producer. If the producer needs to scale back, then that can be arranged with the contracts they have with the individual service providers. With the rental of the software based on a per barrel of oil equivalent per year basis. If a firm makes an acquisition or divests a property these are reflected in the rental rates in the current year. Nothing unexpected, nothing constraining, just a cost plus allocation over the entire industry.
According to Sims, open-source software is not only as good as proprietary vendor software, but in many cases, he claims it's even better. In addition, he says he has saved his company over 50% in IT costs annually since he replaced proprietary software from Oracle, Microsoft and Hewlett-Packard with open-source solutions.
You don't have to take it from me, but he has a point. Please join me here.

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Tuesday, November 03, 2009

Some uses of Google Wave

I am one of those that became enchanted with Google Wave after I saw its initial demonstration. Few technologies have the potential to be game changers. Applications like email and the browser were in the same class of announcement as Google Wave. That we can implement the application in the People, Ideas & Objects - Draft Specification modules. And use it as a means of collaboration during development, make the application a critical part of our developments. I highly recommend that you view this video.

Several groups have been granted early access to Google Wave. It has been received particularly well by the people who have had access to the application. In a Forbes article, author Dan Woods notes the recent response to the application and the implications to ERP software vendors.

But the flexible collaboration of Google Wave is out of reach for the current generation of enterprise software. In addition, the flexibility and configuration of the data structures offered by Google Wave would make modern SaaS software seem restrictive. This freedom will require governance and a new way of thinking, but that is a topic for another day.
If we look at the Draft Specification, it has the "freedom will require governance" problem. The Joint Operating Committee by definition is represented by many different producers. All of the modules have this fact as a critical aspect of how this application will be able to deal with the unique aspects of the oil and gas industry. The JOC is the cultural means of the industry. The Draft Specification is the only application capable of recognizing and building on these attributes.

The combination of the Security & Access Control Module, Governance & Compliance Module and the Military Command & Control Metaphor are how People, Ideas & Objects provide this "freedom will require governance" model. This is a key point. Unless these attributes are built into the application at the start, then the ability to retrofit a ground breaking application with these attributes doesn't exist, in my opinion. I noted this essential attribute and noted the risk that the industry would face as a result of technologies advancement, without explicit management support, would lead to the leakage of control over the firm. Leakage over the day-to-day and strategic attributes of the firm. As technologies become easier and simpler to introduce, the role of management can be circumvented AND hence their responsibility to make sure this does not happen. As I mentioned in Technologies Darker Side in the Preliminary Research Report, companies were advised of this risk, and I reiterate the risk here and now. If the management of firms remain negligent to this risk, there will be consequences to the investors of the firm.

Please join me here.

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Monday, November 02, 2009

Who has the money.

It should be no surprise to any one that the money that supports these developments and the Community of Independent Service Providers (CISP) comes from the oil and gas producers. I have spent a significant amount of time doing the research that supports the Draft Specification. The distribution of the ideas contained within that document has been heard far and wide. Time now to put this project into a commercial venture. This post sets out to detail how the money that supports the software developments and the community of people that will use the software in their future day to day operations.

Let me state clearly that the Users, People, or Community of Independent Service Providers (CISP's) are all one in the same. And the key focus of the quality and value of the software that is being made. I would hope that the involvement of the user has been clearly expressed in my writing over the past few years. User involvement is the critical and difficult component of how this business will succeed. Clearly, to my way of thinking the sustained commitment and enthusiasm of the user base has to be supported by a strong financial motivation. This post is how the user can make a lucrative and long term career and profession around this "ground floor" opportunity.

CISP's or users have two sources of revenue. One is from the producers they work with for the services they provide, and the second is for the work with the developers from People, Ideas & Objects. Making the application operate in the manner that the User needs in order to be effective in providing their services to the producer. The User being the critical hub of all activity in this community. All of this is high value added work and I can not think of many positions that would be more involved and interesting. Whether the individual who joins this community desires to be a sole proprietor or expand to a substantial firm, these options should be considered open and available.

All the work that will be commissioned by People, Ideas & Objects will be through a work order system. The Users participation will be very heavy at the beginning phases of development. Then when the specification is deemed by the Users to meet theirs and the producer's needs, the developers will begin the process of writing the system. It will be at that point the amount of time that the Users will be involved will decline slightly, limited to guiding the developers through the initial building process and defining and directing the future changes and enhancements they want in the system.

The users revenues from the producer will be for planning and implementing their system, training their staff, running their applications, monitoring and maintaining the firms use of the People, Ideas & Objects software. Anything and everything of an administrative, accounting, land, production, legal etc at the producer client. They will be well educated and senior enough to fully understand what the producer wants and needs. They are the people who know how to do the job, and they can detail these requirements to the developers to build the tools they need to do their job. Our collective objective is to ensure the producer is provided with the most profitable means of oil and gas operations.

The services to the producer are billed and managed by the users organization. People, Ideas & Objects does not foresee the need or desire to be involved in these operations. We are software developers.

So how does People, Ideas & Objects source their funding. The producers that use the software will be subject to a "rental" fee based on their production profile. And yes if a start up producer doesn't have any production then there is no software rental fee. And of course, for users that conduct work with People, Ideas & Objects developers, their clients lack of production does not preclude payment for their services in developing the software.

These rental fees are assessed on an annual basis and for 2010 the assessment will be $1.00 per barrel of oil equivalent per day. So a firm such as Exxon which has 3.921 million barrels of oil equivalent per day, their 2010 software rental assessment would be $3.921 million for the year. Conceptually when we include the National Oil Companies, International Oil Companies, Independents and start up operations. We could conceptually have a revenue stream of approximately $120 million. However that is probably far in excess of what will be realized. And that does not preclude us from increasing the $1.00 charge in subsequent years to a multiple of that.

These fees will be assessed on producers that have contracted with People, Ideas & Objects to participate in the further development of the Draft Specification. The obvious question is why would a producers do this? I think the development of this software under the direction of the user community. With the overall objective of providing the producer firm with the most profitable means of oil and gas exploration and production. The business model that charges the costs of development over the entire industry, once, is compelling and a significant reduction compared to the fees that are paid for SAP and Oracle. Simply there participation is a value adding process to their firm. Having the Users and developers working to most effectively run their firm.

Therefore any producer that wants to begin this process is welcome to join. I know that it is in the best interests of the Users not to identify themselves to a producer. I would caution anyone to do so until this process is moved further ahead. We are fighting the vested interests of management and they like nothing more then to attack any new and innovative way of doing their job. They have different ideas and they will use their budgets to exercise their desires. So please be careful. I will publish within this community a list of any producer that wishes to join this process and have paid their software rental. And to say that we may never see a producer step up is a real possibility. That is why I attempt to deal with the investors and stakeholders of the producer firms. They are the ones that must direct the management to fund these developments. If you know of someone who fits that description then please forward them this information. And please as always join me here.

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