Showing posts with label Competition. Show all posts
Showing posts with label Competition. Show all posts

Tuesday, May 27, 2014

Industry Specific ERP Systems

Modern miracles like the decentralized production model work because they are developed for the oil and gas industry. Just like SAP’s success in manufacturing is so strong. But don't take SAP’s success in manufacturing as the reason that it will succeed in oil and gas. And don't take the Preliminary Specification and expect it to do anything in the manufacturing sector. ERP applications need to be developed specifically for the industry that they operate in. The one size fits all type of ERP software product that is used to limited success currently. Is no longer capable of providing value to the dynamic, innovative and profitable oil and gas producer.

For Ford and GM there is no choice as to which system you want to operate with. SAP was designed and built for a major tier 1 manufacturer such as they are. What it does is schedule and manage the tier 2 and tier 3 manufacturers to bring their supply chain in line with Ford or GM’s needs. All that Ford or GM have to do is say they want a red truck to be built and the purchase orders for all the parts are distributed to all the manufacturers that build those parts and they are brought to the assembly line exactly when they are needed to build that truck. SAP does this with a precision and ease that make it their business in any manufacturing environment of size and scale. This is where they dominate and are the defacto standard ERP system.

At the same time SAP, which is the standard ERP system in the oil and gas industry, has essentially nothing to do with what happens in the oil and gas industry. Oil and gas is somewhat remotely related to a manufacturing process. Or it could be suggested that might have been the case in the past. And therefore elements of the SAP application might have been able to be retrofitted. With what I assert, the dynamic, innovative and profitable oil and gas producer needs, is the focus on the sciences on a go forward basis. And therefore the ability of SAP to deal with the needs of the oil and gas producers demands in the future are lost due to their focus on the tier 1 manufacturing capabilities.

At the same time it would be inappropriate for People, Ideas & Objects to market the Preliminary Specification or the decentralized production model to the likes of Ford or GM. Systems today have unique attributes that are industry specific and once outside of that industry, those software attributes are counter to the interests of any the other industry.

We may see what People, Ideas & Objects are imputing in their offering coming about in other industries in the next few years. What we are imputing is a homologation of the industry on one ERP system. And in the case of oil and gas that one system is People, Ideas & Objects Preliminary Specification hosted in a cloud computing configuration. With the capital costs of development, the focus necessary to complete the developments, high levels of inter-company interactions and the advantages of standardization. Competition in the ERP systems space will be between industry specific players with intra industry competition being a thing of the past.

Some would disagree with me on the viability of a model based on the ability to compete within an industry as a sole provider. Those that would disagree should be reminded that it is the Intellectual Property of the Preliminary Specification that is the source of competitive advantage that is used by People, Ideas & Objects. The ability and capability to circumvent that IP doesn’t exist in the marketplace. Therefore making the scenario that I have sketched out here the more probable one for the 21st century.

The Preliminary Specification provides the oil and gas producer with the most profitable means of oil and gas operations. People, Ideas & Objects Revenue Model specifies the means in which investors can participate in these user defined software developments. Users are welcome to join me here. Together we can begin to meet the future demands for energy. And don't forget to join our network on Twitter @piobiz anyone can contact me at 403-200-2302 or email here

Tuesday, July 26, 2011

Budget, Copyright and Success


Adding to last weeks discussion of how the copyright is used to support the assessments to the producers and enables the users to innovate freely within the community. Today I want to talk about the benefits of the copyright with respect to the budget. With a $1 - 2 billion budget for software development. Producers should seek comfort in the fact that only one software development will be licensed. People, Ideas & Objects will not have look-alike software development projects springing up and diluting our effort. Multiplying the industries software development costs with multiple instances of the same developments. This post explains how the copyright ensures the resources of the industry remain focused on one solution.

The basis of competition in the software development business, as I have stated here before, has to be on Intellectual Property (IP). To provide a solution that initially provides unique functionality lasts only minutes in terms of a competitive offering. This limited form of competitiveness ends up diluting the original investors financial investment, their innovative-ness in bringing a solution to the market, and has become the sole basis of how most of the software developers try to compete in the oil and gas marketplace today. This may seem like a benefit to the oil and gas producer, however, I would suggest they have a good look around.

Nothing substantial in terms of scope or investment has been undertaken in the ERP software development for oil and gas for almost 30 years. To approach the oil and gas market on the basis of an enduring competitive advantage would be the only reasonable approach to the market. That is why I have taken the strong position, in terms of Intellectual Property, that I have. However, as we can see, there are advantages to taking this strong position on IP for the producers themselves. That advantage is the focused software developments on one solution producing highly engineered solutions that meet the needs of the marketplace, and are not diluted by multiple demands for the types of resources that a software development project of this scope and scale demands.

I am not suggesting that there won’t be solutions that compete with People, Ideas & Objects in the marketplace. What I am asserting is that there won’t be any based on using the Joint Operating Committee as the key organizational construct. To compete, what someone would have to do is to generate their own research, outside the areas of where I have conducted my research, and develop their own solution. This process took me 8 years and if someone where to start today they could probably finish this research by 2020.

The fact of the matter is that the oil and gas producers have fewer choices in the future as to who provides their ERP software systems. One thing is for certain, software providers will have to ensure that the copyright and IP that is provided is as sound and secure as that which is provided by People, Ideas & Objects. To successfully compete in the marketplace today demands this level of commitment to the marketplace, and eliminates the fly-by-night providers who ultimately only siphon off the energy industries focus and financial resources on software development.

For the industry to successfully provide for the consumers energy demands, it’s necessary to build the systems that identify and support the Joint Operating Committee. Building the Preliminary Specification is the focus of People, Ideas & Objects. Producers are encouraged to contact me in order to support our Revenue Model and begin their participation in these communities. Those individuals that are interested in joining People, Ideas & Objects can join me here and begin building the software necessary for the successful and innovative oil and gas industry.

Please note what Google+ provides us is the opportunity to prove that People, Ideas & Objects are committed to developing this community. That this is user developed software, not change that is driven from the top down. Join me on the People, Ideas & Objects Google+ Circle and begin building the community for the development of the Preliminary Specification. Email me here if you need an invite.

Wednesday, July 20, 2011

Copyright Notice

Politics, can’t live with it, can’t live with out it. This post is about the political realities around the use of copyright in the oil and gas industry. Specifically the copyright that I hold in the research around using the Joint Operating Committee. There are two key points that need to be considered, again, as there seems to be some belief in the marketplace that actions taken by industry members are not subject to the political or legal realities of copyright law.

First of all let me restate the copyright notice. Look at any and all blog posts and knols that contain any of my writings and you will see the copyright for these published works. These are all based on the original idea of using the Joint Operating Committee which originates in my September 2003 research proposal to industry. Now on with the politics.

Producers management and specifically the C class executives, will not wish to "break the (copyright) laws" by using any other software that does not comply with my copyright. This isn’t in a producers best interest due to the fact that it could be financially costly for them to proceed with the development, implementation or use of any other software that violates this copyright and therefore would be unusable. The financial costs of these activities, the time lost in implementing them and the potential loss of further time when the software would not be available for use could be severely detrimental to the producer firm. The software marketplace could be an organizational graveyard for the unaware or careless management.

The second area where intellectual property can be politically disruptive to a producer is when dealing with the hardware, software and services of major vendors like SAP, IBM and Oracle. They have no interest in diluting the legal value of their assets by belittling or diluting their assets by contaminating them with software that is not supported by associated research. That is to say they live and die by the value of copyright and have as much interest as I do in seeing that my copyright is upheld. It in fact supports their copyrights indirectly. They also have no interest in contaminating their IP with IP that may be in direct breach of someone else’s IP, and therefore indirectly becoming party to a breach. It was with this in mind that I informed these firms of my copyright, based on the Preliminary Research Report, in an email dated October 15, 2004 and cc’d to many of the CEO’s of the major Canadian producers.

On a related point. Oracle recently was awarded $1.3 billion in litigation with SAP for their breach of Oracle’s IP. Two very clear points are noted as a result of this. As I noted in the previous paragraph, no software vendor will violate another vendors legitimate claim. And secondly, this is now being extended so that customers don't want to be party to illegitimate use or violation of others IP.

Customers of People, Ideas & Objects can rest assured that the clarity and pristine nature of our IP is impeccable. The value of the idea of using the Joint Operating Committee as the key organizational construct is immense, and the development of that idea is evident and available for anyone to review through this blog and the referenced knols. There are over 800,000 words, 6 good sized text books, that support the work that has been done and that is reflected in the Draft Specification. This effort has been undertaken to ensure People, Ideas & Objects customers of our ability to compete in this marketplace.

For the industry to successfully provide for the consumers energy demands, it’s necessary to build the systems that identify and support the Joint Operating Committee. Building the Preliminary Specification is the focus of People, Ideas & Objects. Producers are encouraged to contact me in order to support our Revenue Model and begin their participation in these communities. Those individuals that are interested in joining People, Ideas & Objects can join me here and begin building the software necessary for the successful and innovative oil and gas industry.

Please note what Google+ provides us is the opportunity to prove that People, Ideas & Objects are committed to developing this community. That this is user developed software, not change that is driven from the top down. Join me on the People, Ideas & Objects Google+ Circle and begin building the community for the development of the Preliminary Specification. Email me here if you need an invite.

Sunday, October 25, 2009

McKinsey Interaction Costs Part II

This is the second post of McKinsey's review of Interaction Costs. The original McKinsey documents are located here and here. As in my first blog entry, the discussion is about the role that people will have in future organizations. How work is changing over time from transformational to transactional and on to tacit. McKinsey notes in its opening paragraph.

Like vinyl records and Volkswagen Beetles, sustainable competitive advantages are back in style - or will be as companies turn their attention to making their most talented, highly paid workers more productive. For the past 30 years, companies have boosted their labor productivity by re-engineering, automating, or outsourcing production and clerical jobs. But any advantage in costs or distinctiveness that companies gained in this way was usually short lived, for their rivals adopted similar technologies and process improvements and thus quickly match the leaders.
Durable competitive advantages, like in other industries, have been hard to develop in oil and gas. Much of the last 30 years has been a battle of survival from one crisis to the next. Most of these crisis were due to the high cost of capital, or low commodity prices. There have also been a variety of issues that are unique and local, such as the lack of take away pipeline capacity in Western Canada.

Today I see a different business that is driven by the earth science and engineering capabilities of the firm. Driven by these sciences ever increasing volume of work per barrel of oil equivalent. Application of the science and engineering knowledge to the asset base is the unique, durable competitive advantage of the producer firm. Sustainable competitive advantages are attainable in oil and gas to those that can build their capabilities in the earth sciences and engineering disciplines.

As we have mentioned here many times the key ingredient is the quality of the team that occupy senior management. Providing the resources and direction to reveal the long term value is the skill of these teams. The key is that oil and gas exists in the minds of oil and gas (wo)men.
New McKinsey research reveals that these high-value decision makers are growing in number and importance throughout many companies. As businesses come to have more problem solvers and fewer doers in their ranks, the way they organize for business changes. So does the economics of labor: workers who undertake complex, interactive jobs typically command higher salaries, and their actions have a disproportionate impact on the ability of companies to woo customers, to compete and to earn profits. Thus, the potential gains to be realized by making these employees more effective at what they do and by helping them to do it more cost effectively are huge - as is the downside of ignoring this trend.
What can I say. McKinsey have been able to provide advice such as this throughout the past decade. What is needed in oil and gas is the organization, its systems, the people that support the team and the team itself to operate at a higher level. A level that is focused on innovation in the earth sciences and engineering capabilities and the never ending increases in the demand for these talents for every barrel of oil equivalent.

SAP is the bureaucracy. Started in the 1970's to deal with the various tiers of manufacturers in the auto industry, SAP has branched out into all the industries on the planet. SAP is the most popular choice of senior producers and holds the number one position of ERP systems in oil and gas. I have seen installations that use the budget system to calculate the gross and net expenditures on a Statement of Expenditures or Statement of Operations. To suggest that they recognize the Joint Operating Committee is beyond the scope of what is possible. With the numbers of companies, and the volume of installed code, there is not enough energy in the universe for SAP to make the changes to support the innovative oil and gas producer.

Much can be said about Oracle Fusion as well. Oracle recently showed some of the aspects of their new system. They should be credited with the energy to at least rewrite the software code. That only took them $39 billion. So one can see the scope of how difficult it is for these applications to change their stripes. Now Oracle has to embark on the other aspect of moving the universe by changing their paying customers to the newer far more expensive software. Exactly, what was Oracle's CEO Larry Ellison thinking.

Neither of these two software vendors have listed the energy industry as a primary focus. They have ceased to be a viable alternative in the oil and gas marketplace for their inability to understand or deal with the unique attributes of the producer. That is they do not know of the Joint Operating Committee's existence. Neither of these two applications have any vision of what the oil and gas firm can understand or appreciate.

Neither of these two software vendors have a business model that meets the needs of the producers. Or a business model that provides the value of the software to the benefit of the software user. Theirs are more interested in corporate survival, due to their $39 billion in investments. It is however, reasonable to assume that both these two software vendors will be able to deploy vast armies of marketing people to impress the "old school" management with another version of their software.

This will be a test of the "old school's" managements survival from the pre-crisis economy. McKinsey sees this reality just as I do here at People, Ideas & Objects.
As more 21st-century companies come to specialize in core activities and outsource the rest, they have greater need for workers who can interact with other companies, their customers, and their suppliers. (Enabled in People, Ideas & Objects by the Resource Marketplace Module)
Thus the traditional organization, where a few top managers coordinate the pyramid below them, is being upended.
Raising the productivity of employees whose jobs can't be automated is the next great performance challenge -- and the stakes are high.
Companies that get it right will build complex talent-based competitive advantages that competitors won't be able to duplicate easily -- if at all.
I think that I am on record as stating that "best practice" is one of the worst acts that management conceived. For oil and gas producers to maintain their competitive advantage is to focus on their asset base, which includes their land lease and productive assets augmented with their earth science and engineering capabilities.
The good news concerns competitive advantage. As companies figure out how to raise the performance of their most valuable employees in a range of business activities, they will build distinctive capabilities based on a mix of talent and technology. Reducing these capabilities to a checklist of producers and IT systems (which rivals would be able to copy) isn't going to be easy. Best practice thus won't become everyday practice quite as quickly as it has in recent years.
Much of the McKinsey article focuses on the changes in the types of work that is being undertaken at firms today. Documenting how jobs, and particularly new jobs, are focused on tacit interactions. How over time jobs have transcended transformational to transaction oriented and now "tacit" work.

As I indicated in Part I of this review, the reductions in transaction costs is a focus of the Draft Specification. This second McKinsey article is on the role that people will fill in the future of work. Please join me here.

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Monday, October 19, 2009

A Brief Summary

The last two blog posts highlight the value of the Draft Specification and why the industry needs to begin the process of building this application. The Users and Producers are both major beneficiaries of being involved in this project. The Users have the opportunity to build the systems and Community of Independent Service Providers. These Users are focused on ensuring that they provide the most profitable means of operations of any producer.

For the Producer, not only do they get the systems and software that identify and support the Joint Operating Committee, the natural form of organization in the industry. They also have the ground work inherent in their organizations that will enable them to remain innovative for decades to come. With People, Ideas & Objects, producers will have their organizational DNA able to carry them for at least twenty more years.

The other thing we have learned in these last two posts is that the competition has no vision. Oracle has been in "rewrite" mode for the better part of this past decade. Buying ERP vendors by the dozens, they have inherited a legacy of applications that are being brought under the name of the rewritten Oracle Fusion. That's a compelling vision! Until now we have not had the benefit of a well defined competitive offering from Oracle. Now that Fusion is defined we can move away from their declaration of it being a competitive offering.

The strategic positions and offerings of Oracle, SAP and People, Ideas & Objects are there for each producer to begin their evaluation. And don't forget to evaluate the different business models. People, Ideas & Objects is charging the costs of developing the application once, across the entire industry. I don't think that Larry Ellison with his $24 Billion in acquisitions, and $15 Billion of research and development on Fusion, will have his customer in mind. He probably is more concerned from which direction his board will be attacking from.

Oracle and SAP products provide technological solutions to business issues. They recommend their products to be purchased and installed in a "big bang" style. Change of the magnitude of People, Ideas & Objects is considering is successful when done from the ground up. The problem with ground up driven change is that it needs a vision. The difficulty for Oracle and SAP is they have no vision of what the innovative oil and gas producer needs.

If your a user interested in getting involved, please join me here. If your a producer that wants to start supporting this development, please call me by using the call me feature at the bottom of the left hand column.

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Sunday, October 18, 2009

Producers Have Choices

Shadow boxing has been something we've had to do here for the past number of years. Our opponent, Oracle was under development with their Oracle Fusion product suite. Fusion is now being promoted, that is to say it's being revealed, to help interested producers decide which system, Oracle, SAP or People, Ideas & Objects, they should use. As no one in their right mind would select SAP the decisions were somewhat delayed until Oracle revealed their hand. Now its D-Day.

For the past four years the giant Elephant in the room has been what Oracle was spending their time and money on. Since their acquisition of PeopleSoft, J.D. Edwards, BEA and Siebel they had been busy developing their Fusion offering and strategy. Therefore it's now time to expand our focus of the competition to include Oracle Fusion. I think I have seen enough to know that the Oracle's Fusion product is not designed or suitable for the oil and gas producer. But then I am biased.

Last week Oracle had their annual OpenWorld conference in San Francisco. Oracle CEO Larry Ellison made the keynote presentation on Wednesday. The one hour, forty minute presentation is available here. I highly recommend the viewing of this video to see the type of applications that Oracle is bringing to the market. Viewing of the conferences other presentations are available here. Of interest there is a good video of Sun Chairman Scott McNeally who appears to be retiring from Sun. Always entertaining.

The most obvious point in viewing Ellison's keynote is that he has spent a lot of money. To make this offering the following table reflects how much money Oracle has spent.

PeopleSoft - J.D. Edwards
December 2004
$10.3 billion
BEA
January 2008
$7.85 billion
Siebel
September 2005
$5.85 billion
Research & Development
2005 - 2009
$15.0 billion
Total Investment in
 Oracle Fusion
$39.0 billion

And that does not include any sail boats. The serious question that has to be asked is how is Oracle going to make a return on this investment? All of this money has been expended to bring out a generic set of modules that deal with the company as a silo'd entity. Again it has no consideration or understanding that the Joint Operating Committee is the key organizational construct of the innovative oil and gas producer.

In a direct comparison of the module specifications, we see the stark difference between the Draft Specification and Oracle's costly Fusion offering.

Modules available in Oracle Fusion.

  • Financial Management
  • Human Capital Management
  • Sales and Marketing
  • Supply Chain Management
  • Project Portfolio Management
  • Procurement Management
  • Governance, Risk and Compliance

Vs. People, Ideas & Objects modules

Generic Modules

Security & Access Control Module

Accounting Modules

Partnership Accounting Module
Accounting Voucher Module

Marketplace Modules

Petroleum Lease Marketplace Module
Resource Marketplace Module
Financial Marketplace Module

Producer Modules

Compliance & Governance Module
Research & Capabilities
Analytics & Statistics Module

Joint Operating Committee Modules

Knowledge & Learning Module
Performance Evaluation Module

People, Ideas & Objects provide the producers with the applications on a cost plus basis. The one time development costs are amortized over the entire industry. Our business is to provide the producer with a software development capability that accommodates the changes in their business. Changes from today and for many decades to come. I will highlight the analysis and decisions that were made in coming to this model over the next few weeks.

Oracle's business model has not changed. Selling the entire application suite to each company is the only way that they can begin to amortize the capital costs they have spent to date. Now whether Oracle will consider those investments as a sunk cost or not is something for them to figure out. But this is not something that is going to be resolved quickly.

Another aspect of these high capital costs, is that Oracle hasn't garnered any competitive advantage in the oil and gas business. Large additional capital costs will still be needed by the purchaser of the Oracle Fusion application suite. I believe the costs associated to customize Oracle Fusion to the producers needs will be substantially greater then the total People, Ideas & Objects costs.

A critical and important characteristic of the People, Ideas & Objects application is being revealed by comparing Oracle's business model. All of the Joint Operating Committee participants are being accommodated by our application. There will be no need to coordinate the interactions with each and every participant, with each and every Joint Operating Committee. The problem in systems in oil and gas is that the interactions beyond the corporate reach cause the firms to expend significant effort in making these interactions work. People, Ideas & Objects is looking at the costs from the JOC point of view, therefore the interactions are handled at the point of origin. The costs associated with defining these interactions in the Oracle Fusion product will be incremental to the costs of People, Ideas & Objects.

If it is not clearly evident to the oil and gas producers that their is a need for new systems in oil and gas, it should be. And that the least constrained, conflicted and confused option is an advantage. This start up with a compelling vision provides real value to the oil and gas producer in comparison to these costly behemoths. How many years before Oracle and SAP come up with a compelling vision of how the oil and gas industry is able to move to the greater demands expected of each producer.  Now is the time to decide where the future of your companies systems come from. Everybody get on board and join me here, the train is leaving the station.

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