Proposal's Abstract.

Text of the abstract of the proposal to industry.

When we consider the effects of the organizational structure moving towards the joint operating committee, it is evident what the benefits and advantages are. This final research report captures the recommendations from the preliminary report, and begins a discussion about them. This discussion reveals a new direction for the energy industry, one that could provide the industry with revolutionary increases in performance and innovativeness. It is time for the industry to capture this opportunity and make these possibilities real.

Although the joint operating committee provides real value to the industry, this final research report is a derivative work of the ideas published in 2004. Further value is revealed in this final research report and more derivative works will be developed over time. For now this should be considered a small sampling of the types of benefits the energy industry could realize from these ideas.

The oil and gas industry is faced with a dilemma. Financial and operational performance are at all time highs. In the past 10 years reserves of oil and gas have become progressively more challenging and valuable. The discovery of reserves and replacement of production have become the critical management issues. Future reserves may require an expanded level of effort, particularly from the scientific and engineering perspectives in order to attain commercial viability. In other words the industry is becoming decidedly more complex and risky.

This proposal is industries first step in approaching these complex and risky issues. What it is that I am suggesting is that to address these difficulties, industry should optimize their approach by reorganizing. This proposal commences the development of systems and markets that facilitate the reorganization around the joint operating committee, the natural form of organization in oil and gas.

Technorati Tags: proposal, genesys, abstract

Whom would Henry Ford hire?

I am adding the following text to the submission "Whom would Henry Ford hire?"

Therefore it is reasonable to ask whom would Henry Ford hire today, and what would these people do? This question is asked as a result of the impact that I anticipate will occur in moving to the joint operating committee. People will be far more receptive to the Petroleum Lease Market described elsewhere in this proposal. The ability to achieve breakthrough productivity metrics are assumed as a given in this discussion. Individuals faced with higher productivity or longer work hours will seek the choice requiring less effort. The history of this proposal also shows that many of the oil and gas producers will be able to ignore the results of any changes. Based on the theories of Giddens and Orlikowski's models the corporate organization is the odd man out in this trokia.

technorati tags: Proposal, Genesys,

Partnership Accounting.

More text for the proposal that is being written for the energy industry.

Traditionally the Chairman of the Joint Operating Committee operated the joint account much as a limited partner would. In the past the company that the Chairman represented would have built up the capability to manage the joint assets effectively with the help of a few key suppliers. As operator it was predominately up to them to implement the budget and programs which were agreed to amongst the other non-operating partners. Outside of the financial contribution, little would be asked or expected from the partners involved in the joint operating committee.

In the future, I believe, the engineering and geological expertise residing within all of the organizations represented by the joint operating committee will need to be called upon due to the complexity of the operation and advances in the sciences. An anticipated shortfall in human resources will be the secondary reason that each producer will actively participate. It has become progressively more difficult for a producer to have the internal capability to conduct all the operations they as operators of the joint operating committees are required to possess. This trend will continue for the foreseeable future. With the partners’ motivation being driven by their financial interest, sharing in the forms of learning and contributing in many other ways is a solution to the increased demands for engineering and earth scientists, the shortfall in human resources that all industries are facing, and the retirement of the workers in the next ten years. Will a more open and active sharing by the partnership expand as the exploration focus becomes more predominate in oil and gas? And will this provide indirect solutions to these human resource demand related issues?

It is also necessary to ask, is it worthwhile to have essentially duplicate, non-cooperating and non-collaborating technical capabilities developed to this level within each company? Would a looser coupling of qualified capabilities, assembled and disassembled in self-organizing teams for each specific technical task be possible? Where management is able to emulate the hierarchy’s command and control structure by use of the military command structure. Enabling management to maintain the focus and direction of the producer. What type of enterprise business oriented software would be required to support that type of team? That is the question that needs to be asked, and what follows is a description of the partnership accounting module that needs to be built to accommodate this scenario.

The key component of the system will be the ability to represent the understandings and operations of the engineering and geological team as they conduct those operations. I foresee that each producer will be able to subsequently account for the joint transactions based on their individual policies and standards. This includes the differing international accounting standards, FASB, SEC and other regulating bodies of the accounting world. This required capability is inherent in two of the underlying technologies of this proposal. The technologies are the relational models sharing of data and the Java programming environment.

I can attest that the ability to follow the business has been a traditionally difficult area of accounting. Geologists and engineers are very creative deal makers when left to their own devices. This has created accounting issues which caused problems for accountants in representing the business arrangement. The inexperience of the accounting staff to represent the deal within the constraints of the accounting system is the problem in my experience. I believe that self-organizing technical teams, and creative deal making are all part of an innovative producer, and the accounting system should accommodate that greater flexibility.

I also believe that anything that can be represented mathematically could and should be adopted within the accounting system. Additionally a system built exclusively by oil and gas people, for oil and gas people, to be used on oil and gas operations is something that has never before been undertaken. SAP was built to handle complex supply chains, primarily in manufacturing settings, and in my opinion it has no purpose in an oil and gas setting.

Revisiting partnership accounting.

Contributions made by the staff of a producer must be costed and added to the joint account. This has traditionally been done for the field staff, but what about the head office staff? I would suggest as opposed to overhead allowances, a means of capturing these costs in the charge out rates of the field and head office staff is a requirement of this system. With the increased load on the operator to conduct high levels of engineering and earth sciences, and in turn earn marginal overhead allowances is a conflict that is being raised here and suggested is an issue that will be resolved through the discussion of the solution. Would this also imply that the costs of capital be valued? Increased contributions by many of the producers that are traditionally designated as "non-operator". Non-operated partners becoming equally active and contributing their time, effort, intellectual property and capital, in disproportionate amounts compared to their earned interest.

Another point that I will make here is the issue of how freelance workers are recorded and compensated. Ideally the system should have a collaborative work order system to deal with the potentially large volumes of people that work within a joint account. For example, how many employees are currently active in each joint account today, 100's, 1,000's?
These people are the highly specialized engineers and geologists that I noted before. Referring to the fact that their specializations require them to work for a large number of producers, representing many joint operating committees. Adam Smith noted that specialization was a requirement to expand economies and I am suggesting that another substantial level of specialization is needed and possible in the oil and gas industry.

I want to raise one of the major problems that I see that Genesys seeks to solve. The issue, I think, is unique to the accounting for operations in the joint operating committee. The issue is the partnership or joint venture accounting, and focuses on the way the functionality and process is written. The way the system needs to be designed will use concepts that are not present in today's oil and gas accounting systems. I also assert that these issues could not be addressed in prior programming languages but that Java opens up many opportunities to handle and solve these types of problems, and I can see how it would be very effective and mandatory in solving this issue.

The current systems, SAP in particular, focus almost exclusively on the accounting of the company of interest. The joint account is cleared monthly to the appropriate working interest owners, and from that point, little if anything is done other then from an internal perspective. With the change in organizational focus to the joint operating committee, this internal focus is maintained, and, from an accountability point of view, increased. However the partnership focus begins to take on a more substantial component of the interests of the collective organizations as represented by the joint operating committee.

I have discussed that many of the participants of the JOC will be more active in the day to day of each JOC. Micro Specialization is something that will have to come about as a result of the demands for so much work to be done by the existing and possibly declining population of oil and gas workers. I have also detailed here the use of personnel from various participants will be called upon to conduct activities, whereas currently, the operator undertook most of these tasks.

This point will help to mitigate the redundant and unproductive duplication of capabilities of the competitive oil and gas marketplace today. As Dr. Giovanni Dosi has suggested, the capabilities and qualities of each individual producer are currently being mirrored and this mirroring is constraining the understanding of the advancement of the sciences and engineering and their application in innovative ways. A more cooperative mindset amongst the producer population is required to fulfill the markets demand for energy.

The issues involved in Partnership Accounting.

Currently the direction of data and information is from the operator to the non-operators. This by nature was a simple programming issue to overcome, and there will be some elements of this simple method in the Genesys system. The difficulty comes when all participants of the joint operating committee have each been contributing people, financial and technical resources, and direct costs on behalf of themselves, and / or, other members of the joint account. All the producers’ collective resources are pooled to attain the highest level of technical capability, management and tactical deployment available.

These costs and resources are being incurred on each producer’s behalf or, their own behalf and possibly not shared initially, but may be eligible to offset their obligations to other partners or need to be recognized irrespective of which producer incurred the cost. This is further complicated by the fact that many of the internal charges and overhead allowances that have been traditionally charged to the joint account also become redundant. These overhead style of costs are replaced by the specific costs and attributes that were directly incurred by each producer represented in the joint operating committee. The Genesys system will capture these components as they are incurred by the employee / worker / investor / consultant in an active job costing state as the user / worker is logged on.

Therefore what is required in order to determine the 100% costs attributable to the JOC is a "pooling" of all the eligible associated costs and revenues involved in the property by any and all partners. Once these costs have been aggregated from each producer, then and only then, can the appropriate costs of each producer be determined, recognized and billed.

To make things more complicated for the developers, this cost data should be compiled into its usable form at least daily and ideally on a live basis. The elimination of the month end process is one of the objectives of this system, and things need to be dealt with on a more current basis. Cash redistribution based on contributions would remain on a clearing basis at the end of the month or when reasonable.

When a cost is incurred, the system is required to be able to denote that transaction is an operated or non-operated cost and if it is eligible. These two attributes are telling the system that these costs are incurred on behalf of all of the participants of the joint operating committee, or on behalf of the producer itself and if it should be recognized in the joint account or not. This reflects that there may be unique costing components of each producer represented by the joint operating committee. Essentially involving an enhanced method of equalization, or capacity utilization to be calculated individually for each producer on a relatively frequent basis.

I want to expand the scope of the discussion to include a few characteristics that bring additional programming issues to be dealt with, and they are:

Penalties, Casing point elections, Before and after payout, (Points in time when the working interests of the producer changes, and therefore, imposition of an accounting cutoff), and accounting for the traditional concept of "accounting" month and "production" month. The number of possible scenarios that a property may have is unlimited. There are many established traditions and cultural influences in oil and gas that are systemic the world over. These relate not only to working interest owners but also to royalty interest owners and lease holders. When we combine the additional layer of complexity of the accounting for interests over top of the discussion in the previous paragraphs we begin to see another level of complexity. I want to reiterate the innovative producer will use more creative means to structure a deal and the need to have these complexities mirrored within the system adds a dimension that can not be accommodated within the systems that are available today.

Of course I would be remiss at this point if I did not state the numerous amendments to the recording of the actual data which may go through much iteration. These changes are created through a myriad of different justifications that are systemic through the industry and have to be addressed. Revised pricing, allocations, nominations and distributions are not uncommon.

What these two additional criteria for accounting in oil and gas do is complicate the calculation and reporting for this data. To model the possible outcomes of what may or may not happen in a specific property becomes conceptually difficult. The ability of the Java programming environment to deal with this level and style of complexity is possible. I believe that Java can model data in up to ten different dimensions, and therefore Java provides the capability to address these types of programming problems.

Additional issues involved in partnership accounting.

It is also necessary to raise the issue of currencies. The operation of a facility may be in a remote area of the globe and be owned by two or more producers located in other countries. This may be a likely scenario considering today's makeup of producers. For example, a producer in Texas may have partners from Canada and Great Britain involved in a large facility in the capital of Turkey. To represent the involvement of each partner in the currency they are regulated to report in is a new and difficult task in this era of large currency fluctuations.

Currency translations can take on two distinct characteristics depending on the type of account which are generally defined as balance sheet accounts and income statement accounts. This definition denotes a cumulative balance vs. a point in time transaction. The assets need to be reported at the lower of cost or market value. What is the impact on each producer if the currency in use by the partner is the U.S. and the Turkish dollar declines precipitously? What happens to some debt or obligation if your home currency declines and your debt is denominated in U.S. dollars? And the contra of this would be any values that had been collected through cash calls. The second type of currency translation involves revenue and expense type of accounts. These could also disrupt the makeup of the partnership accounting, particularly for example, if the U.S. dollar were to decline. Does this make the property present a disproportionate value to each one of the partners?

The purpose in raising these points in partnership accounting should be clear. The number and types of transactions are taking on a multitude of exceptions that need to be addressed. To make this system functional and useful in this environment will be a test of the technologies. Difficult at this point, but I am confident that given the right amount of time the Java developers will have made the system be able to accommodate all these various data elements. I therefore assign the technical risk of this system as low.

Daily and monthly volumes defining a period of time. Spec vs. raw, products and by-products. Processing and gathering fees based on (non) ownership. Imperial vs. metric reporting standards. Nominations, commingling of gas. Working interest owners earning different production values. I suggest that adding these requirements to an already elaborate Production Accounting algorithm is going to be a challenge for the entire information technology world. However, it is also something that can be done. The only impediment is money.

Some history of how the industry has developed and the influence that these historic attributes play is in order. Once an agreement has been put in place by the partners a general framework of understanding how the operation works is then established. These frameworks are legal agreements that are explicitly supported by the norms and culture of the oil and gas industry, both locally and internationally. These organizations in Canada include the Canadian Association of Petroleum Landman (CAPL) and the Petroleum Accountants Society (PAS).

Once these agreements and frameworks are in place, this is the precise point in time that real life conspires to make things complicated. These frameworks have also placed a number of processes in the hands of the companies to deal with these real life anomalies. Mail ballots, Construction, Ownership and Operation (CO&O) agreements define in detail what exactly the operation is. Company A will use Company B's gathering facilities for $4.50 / 103M3 etc. Sales agreements are defined between each individual producer with nominations being a process of balancing the sales and production processes. These also create unique accounting requirements for the property in the long run.

The influence of management here is significant. Each company has differing strategies for the area and each is attempting to optimize their assets. In other words, differing perspectives of the same data and information is an area where relational theory can help. The compromise and details of each partner in each issue creates the unique accounting requirements for each partner for each asset. This system is being built to accommodate these needs.

By way of an example, I as an operator in a major area have the desire to expand the throughput of my gas plant. This is done by drilling in other regions and zones and gathering of additional gas that may now be commercial. The land is held by another firm that has no facilities around the area and is beginning the process of searching for partners. A few years later our new partnership has made a significant gas find. The production is a rich gas stream that also happens to be sour. One company has an invested infrastructure to deal with their production, the other partner has only his production. These two firms will realize substantially different metrics regarding their investments in these properties. The partnership accounting for the joint operating committee has to consider these issues and attributes in a never ending evolution of the accounting requirements. Can you say Java?

What this Genesys system will do is provide the richest environment for managing these issues. In documentation regarding the Accountability Framework with SEC Chairman Christopher Cox it is noted that he is using XML to create a metadata standard for managing the accountability of companies reporting for SEC regulations. This is in essence using the power of the computers today to enforce compliance as opposed to the human influenced methods today.

If the facility needs to account for the literal chemical composition of its aggregate production, almost impossible in a large facility, then that could happen. Or alternatively the legal framework could override the requirements of the actual production, very common in large facilities and less so in small ones. Most likely, the joint operating committee (JOC) will need to select a hybrid solution from the Genesys systems two alternatives mentioned in order to deal with the unique strategies and production requirements of each producer represented at the JOC.

Technorati Tags: Proposal, Genesys, Partnership-Accounting

Calls to Action

More text that will make up the soon to be published proposal to industry.

There have been a variety of what I refer to as "Calls to Action" regarding the organizational structure of companies. Suggestions are made for companies of all sizes, but particularly for larger firms. These calls echo the message that I published in the preliminary research report "Plurality Should not be assumed without necessity."

Harvard Publishing

The expiration of the use and function of the organizational hierarchy is being discussed by members of the academic community. Harvard has published a book "Winning at Collaborative Commerce" (ISBN 0750678178) which addresses the need for organizations to use the collaborative tools currently available to eliminate the negative attributes of the hierarchy. Here is a summary written by a Harvard editor:

"More than ever, companies are sharing data, processes, and even employees with their customers and vendors to increase speed and efficiency. So what is collaborative commerce? The authors, who first introduce the concept in this book, suggest that just sharing information is not enough—new business models and organizational structures must be built around this open-door policy to reap maximum benefit."

Harvard's book is directly on topic with its introduction of what they define as "collaborative commerce". They note that the speed of innovation, and increased competitive advantages are at hand for the companies that implement these systems and procedures. they also note that collaborative commerce provides long term sustainable competitive advantage.

Harvard notes the need for:

"commitment and change across a number of areas: governance, strategy, process design, information technology infrastructure, people management, culture and change, and measurement."

The Harvard Book summary is available here. http://hbswk.hbs.edu/book-review.jhtml?t=organizations&id=5108&wkrss=y

McKinsey Consulting

McKinsey Consulting have published an article which is right on point with its focus on systems. Entitling the publication "The Next Revolution in Interactions" this ties into the "Enterprise 2.0" discussion which many people have branded the concept, and is consistent with Harvard's "Collaborative Commerce". Providing the entire article in a down loadable podcast was a good idea and I highly recommend listening.

On topic comments include:

"Technology and organizational strategies are inextricably conjoined in this new world of performance improvement."

"This shift toward tacit interactions upends everything we know about organizations. Since the days of Alfred Sloan, corporations have resembled pyramids, with a limited number of tacit employees (managers) on top coordinating a broad span of workers engaged in production and transactional labor. Hierarchical structures and strict performance metrics that tabulate inputs and outputs therefore lie at the heart of most organizations today."

"But the rise of the tacit workforce and the decline of the transformational and transactional ones demand new thinking about the organizational structures that could help companies make the best use of this shifting blend of talent. There is no road map to show them how to do so. Over time, innovations and experiments to raise the productivity of tacit employees (for instance, by helping them collaborate more effectively inside and outside their companies) and innovations involving loosely coupled teams will suggest new organizational structures."

These selected excerpts provide support for using the Joint Operating Committee as the organizational focus in oil and gas. The comments by McKinsey were written in December of 2005 and were the first to discuss these formerly taboo subjects. One interesting difference between what McKinsey writes about, and the oil and gas industry, is that the Joint Operating Committee can fulfill the objectives they note in this article. Unlike some industries that need to take a clean slate approach to the organizational construct, the oil and gas industry already has the joint operating committee to provide all of this value.

McKinsey - The next revolution in interactions. http://www.mckinseyquarterly.com/article_page.aspx?ar=1690&L2=18&L3=30&srid=17&gp=0

Massachusetts Institute of Technoloy

MIT Video records MIT's president Susan Hockfield as calling for this prestigious university to lead the charge to solve the global energy problems. This frames MIT's role as not dissimilar to what their role was during World War II. Stating that Energy has entered a "perfect storm" in which demand is rising, supply is constrained and environmental concerns continue as issues for the industry.

Although during the video there was a belief that generating sufficient supply of renewable or bio-fuels was part of the solution. the video’s focus is on sustaining the energy demands of the world throughout the 21st Century and ensuring that economies were able to source the volumes of energy demand. MIT is forming an Energy Research Council to guide the various faculties in their research.

Link: http://mitworld.mit.edu/stream/349/

The Oil and Gas Journal
The next call to action is from The Oil and Gas Journal. The article is entitled "Innovation lacking in high-tech world of oil: New technologies needed to develop unconventional resources." They have identified the demands of quarterly performance as the reason why the energy industry has not resumed its role in addressing supply and pricing issues. Nonetheless they are stating that the demands for more energy are significant and it is critical for the producers to innovate. I consider it a must read article.

On page six the authors summarize many of the areas they suspect that innovation will be of value. They also point to the potential of higher prices leading to a reduction in demand. Nonetheless the scope of the suggestions covers all areas of conventional and unconventional oil and gas. They effectively state what is needed, but are lacking in the article as to how it is to be provided.

It is necessary for the industry to re-organize themselves for this challenge. A revised organizational structure that addresses the performance of an innovative producer is needed. That is why selecting the joint operating committee as the key organizational construct around which systems are to be built. By joining the hierarchy’s accountability framework with the four frameworks of the joint operating committee, performance will increase. Software defines the organization, and changing the organization requires that software be built to define the new organization.

Link http://ogj.pennnet.com/Articles/Article_Display.cfm?Section=HOME&ARTICLE_ID=229822&VERSION_NUM=2&p=82
Oxford Analytica.

Their website reflects;

"Oxford Analytica is an international, independent consulting firm drawing on a network of over 1,000 senior faculty members at Oxford, and other major universities and research institutions around the world. Founded in 1975 by Dr. David R. Young, Oxford Analytica has built an international reputation for seasoned judgment on and analysis of the implications of national and international developments facing corporations, banks, governments and international institutions."

Oxford Analyticas explicit conclusion to this article is stated as:

"Technological lead will prove critical in the efficient exploitation of frontier oil provinces. Upgrading portfolios means majors will divest assets that provide material opportunities for small and medium-sized independents.

Link http://www.alacrastore.com/storecontent/oxford/DB126086

Securities and Exchange Commision.

The Wall Street Journal contained an excellent article regarding the accountability framework of the Securities and Exchange Commission (SEC). This article is about the relatively new SEC Commissioner Mr. Christopher Cox discussing a revised method of compliance to the SEC's accountability framework. By using XML (Extensible Markup Language) and specifically XBRL (Extensible Business Reporting Language) he is defining the meta data necessary for automation of the accountability framework.

The preliminary research report stated the purpose was to build software to manage the accountability framework. Then by using the Joint Operating Committee as the organizational construct, this would achieve an alignment with the financial, legal, operational decision making and cultural frameworks. The report noted that these four frameworks are defined and constrained by the Joint Operating Committee, and that when accountability and operational decision making were separate, administrative difficulties creep in. Therefore when accountability is in line with the financial, legal, cultural and particularly the operational decision making framework these administrative issues would subside and innovativeness would increase.

Chairman Christopher Cox is interested in doing the same for the entire world's financial trading markets, which as SEC commissioner is his responsibility. By making the types of comments that Commissioner Cox states in the WSJ article it is clear to me that he is not only on the right track but will resolve the largest administrative nightmare, that being Sarbanes-Oxley, of the public company reporting process.

It would generally be concurred that the legislation known as Sarbanes-Oxley is too onerous for companies to comply with. How this issue gets resolved from here is difficult due to the mixed messages any revisions would send. To make any major amendment to Sarbane's Oxley would make it appear as the framework has become unmanageable and invite the Ken Lay's and Jeffry Skillings back for more hollowing out of investor’s wealth.

How the Sarbanes-Oxley legislation, in addition to the other SEC requirements, are maintained and the difficulties are removed from the process is by eliminating the need for the 800 plus forms and replacing them with a handful of standard tags in the Extensible Business Reporting Language. I can only thank that the Commisionner understands the technological capabilities and can apply it to the SEC.

The demise of the bureaucracy is what the Commissioner is saying here. He is laying the groundwork and infrastructure of how investors will be able to manage their assets in the future. Genesys, through this research has adopted the SEC's XBRL tag library and therefore will be compliant with the SEC's regulations. In August 2006 the SEC has issued an RFP to build this system.

http://www.opinionjournal.com/editorial/feature.html?id=110008404

Mr. Olivier Appert, Chairman and CEO of IFP.

Mr. Appert has written a fine conclusion that leads me to a subsequent comment.

"In order to meet the world's needs and demands for energy, while simultaneously observing our current energy supply and protecting the environment, the oil and gas industry will have to solve many complex technological problems in the coming decades and continue to innovate as it has done since its inception."

"Recent scientific and technical advances, the fruits of collaboration between the worlds of research and industry, have led to a profusion of promising emerging technologies and represent key assets for preparing for the future, particularly in terms of managing the energy transition from oil and gas to new energy sources."

"In the face of increasingly fierce competition, it is imperative these new challenges become integral to our research and innovation strategies. Developments will play a crucial role in guaranteeing genuine sustainable development for the world."

It is imperitive that the oil and gas industry does not fail in this critical task. That new and more innovative organizational forms are required for the 21st century. The joint operating committee being the global cultural manner of the oil and gas industry, is also the financial, legal and operational decision making framework as well. As noted, SEC Chairman Christopher Cox understands that the way to redefine the accountability framework is through the Extensible Business Reporting Language, and the SEC's tag library. What the oil and gas industry therefore need to do, first and foremost, is build the software to define and support the joint operating committee as the natural form of organizational structure. Until we do this, these calls to action are only words that will soon fade in their meaning in the face of the angry energy consumer who wants to know why they can not drive their car or heat their home.

Link http://www.worldenergysource.com/articles%2Ftext%2Fappert_WE_v9n1.cfm

Mr. Murray Edwards

Mr. Edwards of Calgary, at 46 years of age he has amassed a fortune of several billion dollars and is currently holding down the following roles.

President, Edco Financial Holdings Ltd.Vice-Chair, Canadian Natural Resources Ltd.Chair, Ensign Energy Services Inc.Chair, Magellan Aerospace.Owner, Resort of the Canadian Rockies Inc.Co-Owner, Calgary Flames.Mr. Edwards is quoted in the May 2006 issue of Alberta Venture, in which he is the cover story "Who Cares About Respect"

"We're really big proponents of flat organizations where people have a sense of ownership."

The Calgary Herald

A further call to action was contained in an article in The Calgary Herald. The article states that the junior oil and gas producers and royalty trusts are having difficulty making money. Peter Knapp of Iradesso Communications states

"Everybody thought it was going to be easy to make a lot of money and that just isn't the case".

With natural gas prices down almost 50%, they are also finding their costs are too high. They also clearly and unanimously feel that the gas price will rise after June 2006.

So how is this a call to action? The suggestion is that a solution to this problem is to innovate and move with the science. Not that this hasn't or isn't being done, it is just that we have hit a critical period in which the science is changing quickly. The capital being generated from higher prices is a reallocation of societies’ resources to fuel innovation. In the future a profitable energy firm will collaborate with a greater population of all resources to determine the most effective ways and means of exploration and production.

This is the role and responsibility of the joint operating committee. And for the "business" end of the oil and gas business to continue to ignore the joint operating committee in its organizational structure and systems, the industry I suggest, will begin to fail in making money. A subsequent failure will also occur in that the industry will be unable to deliver the appropriate amount of oil and gas to the market.

Institute for International Economics

In an article entitled "Accelerating the globalization of America" the authors made two interesting comments in the Executive Summary.

"Innovations not implemented because resources cannot adjust forfeit some of the potential of the economy." p.xviii

"Two additional links between productivity and international trade are that trade in technologically sophisticated products is associated with higher productivity and the industries that have invested heavily in IT have a greater propensity to export." p. xxi

The bureaucracy is slowing us down, (a given) and innovations that would otherwise benefit the economy are now having their value forfeited. The market demands for energy continue to outstrip supply. Whether we are at the peak of production or not is not the question. The question should be, how much are we giving up economically by not proceeding with this Genesys Software development project?

I highly recommend downloading the entire document. It is a substantial work in terms of its findings.

Link: http://bookstore.iie.com/merchant.mvc?Screen=PROD&Product_Code=3900

Energy Secretary Samuel W. Bodman on MIT video.

This video is on MIT World and is at almost 60 minutes but is time well spent. Recall that MIT has declared that energy is the great challenge of the next 50 years and describes it in terms that are best summarized as a "perfect storm". MIT has arranged as part of their Energy Research Council, U.S. Energy Secretary Samuel W. Bodman to speak on "Our Energy Future: Why American Science and Technology Must Lead the way."

Many of the things that Dr. Bodman speaks of are directly pertinent to the topics and thoughts within this research. Quoting liberally from his speech:

"Science and Engineering can and should be used to advance the public good. To solve complex problems and to help our society and economy to adapt in a complicated global environment."

and

"A time for breaking down the walls that could limit our future economic growth. And in many cases the tools that we use to do this will be found in breakthroughs in science and engineering."

and

"At a time of increasingly aggressive global competition America must do what we have always done best. We have to take risks, we have to lead, we must invent, we must innovate."

That last quotation is directly in line with the justification for using the joint operating committee, and direct support for these software developments. Today science and technology are constrained by the organizational conflict and bureaucratic interference that limit speed and innovation.

Bodman notes that the majority of his funding for the scientific research and technology has been as a result of a reallocation of resources under the Presidents "American Competitive Initiative"(ACI). He goes on to state that the:

"scientific disciplines are increasingly being linked."

And that the effort of the energy department and the ACI go to the

"future economic well being and security of our country".

Also noting that he is expecting more than just the development of new knowledge from these government funded research programs.

Although the research that he mentions in his "Advanced Energy Initiative" is on ethanol, hybrids, fuel cell, solar, wind, nuclear and clean coal. It is fair to assume that he is fully aware of the demand of the U.S. for gas and oil is, and will remain high. His approach currently seems to be limited to establishing some of the alternatives as viable enhancements for the long run in the U.S. and he noted as such the expectations of the market makeup of energy sources.

"Science and Technology must lead the challenge to provide good, clean and abundant energy."

Some noted targets, facts and objectives: Ethanol production = 5% of the current U.S. supply and uses 14% of the U.S. corn crop. The department of energy expects that Ethanol supply will grow to 5 million barrels / day in 20 years. Needless to say based on these projections the expectation of the US is to continue to use fossil fuels as its primary source of energy. Secretary Bodman sees the parallel between these energy related difficulties as similar to those in the cold war inspired space race. Having the Secretary of Energy making these types of comments adds some real urgency to the issues at hand.

Link: http://mitworld.mit.edu/video/364/

Energy Secretary Samuel Bodman in Calgary.

U.S. Energy Secretary Samuel Bodman was in Calgary recently. After a quick tour of the heavy oil facilities in Fort McMurray Secretary Bodman stated that;

"The U.S. is ready to work with Canada to remove roadblocks facing Alberta's oil sands sector."

and

"Suppliers of oil in the world have really lost control of the market."

The question that seems to be answered by Secretary Bodman's visit is that the oil sands are a critical part of the U.S. energy security. Declaring the oil sands a "world resource" certainly puts the energy issues into context, and puts their development on a higher priority.

If it was only so easy. The problem comes in the area of infrastructure. There are not the basic necessities to support the current $100 billion in investment being made in Fort McMurray. The mayor of Fort McMurray has stated that the ability to sustain the current pace of development is in jeopardy. There are not enough people, 75,000 in Fort McMurray, to assess as a tax base to begin to even address the current issues, let alone the future oil sands developments. By all measures this is a pretty serious situation for any city to handle.

What we need from Secretary Bodman is help with our problems here. There were indications that the kind of help that may be provided from the U.S. was the U.S. based refineries and pipelines be upgraded to handle the oil sands output. First, that is not the problem, and secondly Alberta, irrespective of our leaders opinions of the situation, is not a hewer of wood and drawer of water. Now is not the time for our leaders to suggest that foreign groups develop the infrastructure necessary for heavy oil development. Invest here in Alberta where the problems exist. Don't move the raw material into the final market, essentially ignoring Alberta as a second class citizen.

The areas that we need help in are in the development of the appropriate civic infrastructure in Fort McMurray. What we need is engineering and knowledge on how to build the super refineries, pipelines and associated infrastructure for full development. Let’s work together to solve the energy needs of the continent. That is what is possible and that is what we are ready to do with our very good friends, the U.S., however, we will not limit the market for our production to the North American continent exclusively, why would we?

Sir John Browne Group Chief Executive BP p.l.c. on MIT video

Another MIT video, this one of Sir John Browne, Group Chief Executive BP p.l.c. An excellent speech entitled "The Purpose of Business".

Sir Browne developed his meaning or purpose of business as:

"We are fulfilling our purpose by supplying goods and services at a price people can afford and in a manner in which makes the activity sustainable."

In his speech Sir Browne documents the long lead times in oil and gas operations. In Azerbaijan BP has spent $15 billion and over 15 years to bring on production. Although it took this long to develop these assets in Azerbaijan, BP probably would not have been able to accomplish what they did in Azerbaijan in North America any sooner! The scope and scale of this business is such that the lead times are ridiculously long.

Sir Browne talks at length about the time in which BP went into Azerbaijan in the early 1990's and developed their offshore resources. These Offshore resources probably would have still been untapped if it wasn't for the perseverance of Sir Browne and BP. To invest $15 billion over 15 years without seeing any revenue, and to have the investment risked due to the political instability of the region shows the lengths that producers have taken in order to access the commercial fields. As he notes, supplies of oil and gas are concentrated in Russia, The Middle East and Africa.

Sir Browne talks about the things that he has to do for the future.

"And perhaps most important of all we need new ideas and knowledge, we need the advances in sciences which we as engineers can apply."

Again comments that are consistent with the objectives of this research, and the use of the joint operating committee as the organizational focus. How can it be expected that the bureaucracies will be able to keep up to the demands of the changes in sciences. Layer on the political risks and operational difficulties and one can see the complexity of the business is systemic in all areas of operation. The bureaucracies are doing the job today, but at what speed? Is it fast enough to provide the market with their demands for energy?

Link: http://mitworld.mit.edu/stream/363/

John Hagel III and John Seely Brown

I was able to incorporate much of Brown and Hagel's research within the preliminary research report. This was the culmination of much of Hagel and Brown's work up to the time of the preliminary research publication. Since then they have compiled further work that helps establish their leadership position in the business impacts, opportunities and issues of technology. Dealing with the "edge," both are asking some particularly challenging questions of management. Such as this from Seely Brown's website.

"It is not just corporate training that is important but rather rich participation with partners who are at the edge. Ask: how do you learn as much from a partner as you learn from creating something yourself? How does distributed collaboration around the world become a critical strategy for survival? What are the most effective ways to convert your existing global supplier networks into new nodes of innovation?"

Today they have published one concept that I want to mention here as a call to action. The idea addresses the three types of businesses that fall within this new classification system of theirs.

• Infrastructure Management Businesses.
• Customer Management Businesses.
• Product Innovation Businesses.

How I foresee the future application of this thinking in oil and gas is: companies such as this software development proposal will fulfill the role of “Infrastructure provider business”. Secondly, the "Customer "Management Business will fulfill the requirements of the downstream marketing and refining businesses. And finally the traditional oil and gas industry will be seen as the "Product Innovation business". A business that is something that the traditional upstream oil and gas industry needs to and eventually will fulfill.

Links to John Hagel http://www.johnhagel.com/index.shtml
Links to John Seely Brown http://www.johnseelybrown.com/

Newt Gingrich in the Wall Street Journal.

The Wall Street Journal published an editorial written by Newt Gingrich entitled "Bush and Lincoln". An article that parallels the strategic mistakes that both presidents appear to be making regarding the war's they were dragged into.

The particular points in the article that I see as a call to action are these quotations:

"The president should insist upon creating new aggressive entrepreneurial national security systems that replace (rather than reform) the current failing bureaucracies. For example, the Agency for International Development has been a disaster in both Afghanistan and Iraq. The president should issue new regulations where possible and propose new legislation where necessary. The old systems cannot be allowed to continue to fail without consequence. Those within the bureaucracies who cannot follow the president's directives should be compelled to leave."

"We see these first two factions today. The Kerry-Gore-Pelosi-Lamont bloc declares the war too hard, the world too dangerous. They try to find some explainable way to avoid reality while advocating return to "normalcy," and promoting a policy of weakness and withdrawal abroad."

"Most government officials constitute the second wing, which argues the system is doing the best it can and that we have to "stay the course"-- no matter how unproductive. But, after being exposed in the failed response to Hurricane Katrina, it will become increasingly difficult for this wing to keep explaining the continuing failures of the system."

and,

"The first and greatest lesson of the last five years parallels what Lincoln came to understand. The dangers are greater, the enemy is more determined, and victory will be substantially harder than we had expected in the early days after the initial attack. Despite how painful it would prove to be, Lincoln chose the road to victory. President Bush today find himself in precisely the same dilemma Lincoln faced 144 years ago. With American survival at stake, he also must choose. His strategies are not wrong, but they are failing. And they are failing for three reasons. "

"We have to be honest about how big this problem is and then design new, bolder and more profound strategies to secure American national security in a very dangerous 21st century. Unless we, like Lincoln, think anew, we cannot set the nation on a course for victory. Here are some initial steps:"

System failures, bureaucracies that need to cease, muddling along as a strategy. These points are all music to my ears. It strikes me as odd is that here is a candidate to be the next president of the United States expecting the bureaucracies to do the honorable thing and fall on their sword. If the U.S. government is actively debating these points, the time for the energy industry to act surely must be at hand.

http://www.opinionjournal.com/editorial/feature.html?id=110008905

Summarizing these calls to action.

These calls are coming from a variety of academic, business, government and other voices. These voices have now been heard. The time for action in dealing with these issues and opportunities is now. This proposal makes the first in many steps that the industry needs to take to approach the tasks and difficulties ahead. The only thing that is missing, in my opinion, is the industries sense of urgency about these points.

In the Wall Street Journal article of Newt Gingrich's, he noted the three possible avenues that can be taken to solve a problem.

1. To cower from the effort necessary to achieve victory.
2. Muddle along and get through it.
3. Approach the problems with new thinking.

Muddling along is not an option, as it appears to me that this is the strategy that the energy industry has employed. It is time to start anew with fresh thinking about the problems that the industry faces.

Technorati Tags: Calls-to-Action, Genesys, Proposal

Newt Gingrich's call to action.

The Wall Street Journal today published an editorial written by Newt Gingrich entitled "Bush and Lincoln". An article that parallels the strategic mistakes that both presidents appear to be making regarding the war's they were dragged into. An excellent article that can be sourced by clicking on the title of this entry.

The particular point in the article that I see as a call to action is this quotation:

"The president should insist upon creating new aggressive entrepreneurial national security systems that replace (rather than reform) the current failing bureaucracies. For example, the Agency for International Development has been a disaster in both Afghanistan and Iraq. The president should issue new regulations where possible and propose new legislation where necessary. The old systems cannot be allowed to continue to fail without consequence. Those within the bureaucracies who cannot follow the president's directives should be compelled to leave."

It strikes me as odd is that here is a candidate to be the next president of the United States expecting the bureaucracies to do the honorable thing and fall on their sword. Maybe I wasn't as crazy as I thought I was when I proposed the same to the oil and gas industry in May 2004.

Technorati Tags: Bureaucracy, Genesys, Gingrich,

Executive Summary

It was in May 2004 that I published the preliminary research report entitled “Plurality should not be assumed without necessity”. (Readers are encouraged to revisit the preliminary report to assist in the context of this report.) The main thrusts of that document were its two primary research findings. The first finding was that the key organizational construct of the oil and gas industry is the joint operating committee. The joint operating committee is the legal, financial, cultural and operational decision-making framework of the industry. If the industry were to move the accountability framework in line with the four frameworks of the joint operating committee it would achieve greater organizational speed and innovativeness. The other research finding was that the software the firm uses defines the organization. Noting “SAP is the bureaucracy” it is apparent that to change the organizational construct requires that systems be developed to support the proposed organizational change.

The preliminary report also contained a project management proposal to build these systems around the joint operating committee. This budget was in the $70 – 85 million range and would require four years to complete. The budget of that system may remain within that scope; however, this final research report recommends that the industry pursue a proof of concept. This proof of concept is to build a Petroleum Lease Market application to start the organizational transition to the joint operating committee. This application’s scope has been budgeted at $2.6 to $3.5 million.

The four cornerstones of a technical vision.
Critical to the success of any prospective software development would be the impact of any future Information Technologies (IT). I am including a technical vision consisting of four key technologies, and describe how the future may be affected by these technical changes.

IPv6 (2 to the power of 128 in terms of addressing space.) enables the elimination of the technological model known as client – server. Replacing it with static IP addresses that can identify anything and everything. Enabling any electronic device that is connected to the Internet to be monitorable and controllable. I believe the engineers and geologists can and will do with this level of static addressing is unlimited.

The second element of the vision involves Java and the incremental nature of typed, object oriented programming languages. Where the predictability and control of systems is achieved through the strong implementation of strict typing.

Java is also enabling the exception handling capabilities and asynchronous process management that is critical to handling intra-partner transactions and interactions.

And finally wireless Internet through Wifi and soon Wimax, enabling electronic devices to be connected at low costs and high speed and in turn eliminating the “last mile” issues of technological access.

These four technologies will be revolutionary when applied over the joint operating committee as the organizational focus. This technical vision provides the industry with the organizational capability to facilitate rapid innovation in a controlled and managed environment.

Partnership Accounting.
I will then go on to discuss "Partnership Accounting" and how an algorithm can capture the unique and demanding accounting and reporting needs of the producers represented in the joint operating committee.

A new accounting dynamic is introduced by using the joint operating committee. This accounting dynamic enables the interactions to be quantified in an algorithm that although complex, addresses the accounting related issues that traditional ERP systems can’t handle.

The Partnership Accounting difficulty comes when all participants of the joint operating committee have been contributing people, financial and technical resources, and direct costs on behalf of themselves, and / or, with other members of the joint account. Through the JOC each producer’s collective resources are pooled to attain the highest level of technical capability, management and tactical deployment, which is sourced from the partner companies.

These costs and resources are being incurred on each producer’s behalf and may not be shared, but may be eligible to offset their obligations to other partners, be distributed equally among the producers interests, or need to be recognized by the joint operating committee irrespective of their source and nature. This is further complicated by the fact that many of the internal charges and overhead allowances that have traditionally been charged to the joint account also become redundant. These overhead styles of costs are replaced by the specific costs that were directly incurred by the producer, as represented in the joint operating committee. The system will capture these components as they are incurred by the employee / worker / investor / consultant / producer in an active job costing state as the user is logged on.

The nature of the oil and gas business is unique in many ways and this Partnership Accounting discussion will capture many of the issues that an oil and gas system needs to address. For example:

• Daily and monthly production volumes.
• Differing currencies of producers.
• Differing currencies of operations.
• Currencies that relate different accounting issues based on the criteria of one being balance sheet vs. income statement accounts.
• Spec vs. raw products and by-products.
• Processing and gathering fees based on (non) ownership,
• Imperial vs. metric reporting standards.
• Nominations and or commingling of gas.

Providing an unlimited set of possible reporting scenarios for each working interest owner. The partnership Accounting module’s algorithm needs to capture and deal with these nuances within this system.

Military Command.
I then by way of analogy, will note the traditional military command structure of corporals to generals as a replacement to the regular hierarchy. It is foolhardy to eliminate the hierarchy and lose some of the attributes of a control structure. I discuss how a similar military command type of structure can be used to enhance and augment the managements’ control apparatus. This also allows the human resources to be deployed in a greater diversity of situations, and have their tasks outlined and issued from a variety of producers as represented by the JOC as their employers.

This military command structure will draw a parallel to the interactions of various military groups interacting under NATO. Where an army major of a branch of the U.S. military may have Canadian, French and / or British soldiers under his direct command. With these military personnel changes happening in a fluid, dynamic and ad-hoc basis.

Linear historical perceptions vs. the logarithmic and exponential future possibilities.
Stanford University Economist Dr. Paul Romer has captured what the future economical progress can be. In a world of limited resources it need not be a zero sum gain. The use of ideas has potentially logarithmic or exponential value creating capabilities. Progress and growth can be better attained through application of intellectual property within an industry.

Innovation is the beginning of this process. And to attain the highest level of innovativeness, the Joint Operating Committee has been proven by this research to be the ideal organizational model for the producers. This will not happen however, until such time as the systems are developed and in place, and the system developers’ capability becomes an inherent part of the capability of the industry.

Genesys value proposition.
In addition to all of these topics of discussion I will reiterate the Genesys value proposition. A value proposition that is similar to Google's, where the costs of development are allocated over a larger base of users. Each user benefiting from the collective users purchasing power, demands and capabilities.

Google is proving this is the nature of software. The value of this proposition is something that I don't believe has been fully implemented or realized by the producers. It is my supposition here that the Oracles and SAPs realize this latent value. It is therefore my assertion that the oil and gas industries overall costs of systems development would decline under this proposed model.

Who would Henry Ford hire?
I also want to ask a question of the people who work within the oil and gas industry. That question is, whom today, would Henry Ford hire? A question that is just as pertinent today as it was 100 years ago.

Just as Ford needed a new "type" of worker for his assembly line invention, so will the prospective oil and gas producer. What type of employee will the producers need in this dynamic networked environment? What type of skills and capabilities should the oil and gas worker obtain to be optimally deployed in the future oil and gas industry?

Calls to action.
Last if not least this proposal will note and discuss the numerous calls to action from:

• Oxford Analytica.
• Harvard University.
• MIT.
• Energy Secretary Bodman.
• McKinsey Consulting.
• SEC Chairman Christopher Cox.
• Sir John Browne of BP.
• John Hagel III and John Seely Brown
• and many others.

These have become predictable in their message and their frequency. Many of these messages noting the time to act is now. And that is this proposal's message to industry.

This proposal is a clean slate proposal. There are no constraints in terms of existing code or client base to deter from the focus of these developments. The attainment of this type of software and software development capability must be built from the start. It is therefore expected that this proposal will be accepted and funded as required.
Technorati Tags: Executive-Summary, genesys, research

A technological vision.

More text back from the editor.

A lot has happened in the past decade. Information technology has had its ups and downs and has provided some significant changes in the manner in which business is conducted. This research report is dedicated to the changes that information technologies are having on the business landscape in the energy industry. The level of change within IT is accelerating at an unprecedented rate. More fundamental change is around the corner which involves a handful of technologies that will be revolutionary to those that embrace them.

The oil and gas industry has the opportunity to benefit from the prospective changes. And I would suggest the way these IT changes impact oil and gas maybe the most dramatic to date. The 4 major components of the Genesys technical vision are of significant simplicity, are currently being implemented globally, and are only waiting for a final integration to occur. Many technologies need to be learned first hand before they are understood. These technologies share what I suspect may be the largest impact by building and leveraging onto the comprehensive architecture of the technological environment that exists today.

The four components are as follows:

1. IPv6.
2. Object Oriented Programming (OOP) with particular emphasis and focus on Java.
3. Asynchronous Process management.
4. WiMax.


IPv6 Internet Protocol Version 6

IPv6 is a key and enabling component of the four elements of the vision. IPv6 will replace IPv4, which is in use today. The key difference is that IPv4 is 2 to the power of 32 vs. IPv6 being 2 to the power of 128. IPv4 provides 4.3 billion unique addresses; IPv6 provides 3.4 trillion, trillion, trillion, trillion (340 undecillion) unique addresses.

IPv6 will enable anything of importance or value to be monitored and controlled, anything and everything. The ability to have unlimited static IP addressing eliminates the client / server model of computing. In oil and gas, I foresee a variety of devices that will be installed at production facilities to monitor and control activities at the finest levels of detail. Considering the oil and gas industry is primarily chemically driven, heat and pressure are two aspects of what engineers and earth scientists concern themselves with. In other words application of IPv6 opens up the entire spectrum of the sciences for exploitation.

Currently Korea and China have implemented IPv6 as their network infrastructure. Most cellular phones use IPv6 addressing. Computers from Apple and Sun have been IPv6 capable for many years. It is therefore only a matter of time before the world can and will switch.

In Formula One the cars have 1,000's of sensors actively collecting data at all times. This data was then able to make modifications to the vehicle while racing. Although the ability to change settings was eventually banned during racing, the information collected was able to eliminate most engine failures. Engineers that have data and control can begin to solve larger and more complex problems with greater insight.

The ability to function in this environment is going to require some unique technological skills on behalf of the average users. The point I want to make is that the tidal wave of information is going to saturate workers, exponentially more so than today. Therefore each user needs to better understand the information technologies and how best to manage them. The challenge for users is to realize the unlimited application of their imaginations. These technologies are quickly providing firms with the ability to monitor and control their assets and resources. Nothing that we currently experience in today’s client server model comes close to the impact of this technology.

In many ways the roll out of IPv6 networks is the culmination of all the Internet technologies to date. It is the culmination of what networks were designed to do from the beginning.

IPv6 can be implemented today. In "Command Information," a web site that is designed to "leverage the change" to IPv6, the use of the protocol is now available in North America. This is significant news to this research’s development in that there is now no technology, of the Genesys technical vision, that is not available today. The market for technology is moving so fast that these software developments are now possible with today's commercial technologies.

According to this website (downloading the two .pdf's is very valuable) President George W. Bush in his state of the union address on January 26, 2006 launched the American Competitiveness Initiative. Within this initiative it was noted that the majority of the east Asian countries have already implemented IPv6 in their network backbones. For America to compete it will require the rapid implementation of IPv6 in their networks.

This paper emphasizes that American organizations must adopt IPv6 today. The paper describes what value IPv6 provides as:

• Accommodating more devices.
• Faster speeds.
• Greater mobility.
• Enhanced connectivity.
• Integrated security.
• Enforceable privacy.
• Easier management.

The .pdf's files also provide an understanding of the key impact areas such as:

• Mobility. Maintaining constant fixed point (static IP address) no matter where you are or move to.
• Security from better architecture and limited ability for viruses.
• Real time / peer to peer, or as I call it "the elimination of the client server model".
• Providing a faster broadband with less cost by removing the need for NAT boxes. (Network Address Translation).

IPv6 is available in operating systems from Apple, Microsoft, CISCO, HP and Sun. Your ISP will be linking to root servers this summer. The good news is that the entire IPv6 infrastructure is available today. Genesys only needs to purchase Internet service from a tier 1 telecom provider in order to begin developments and operational use of IPv6 within its software developments for oil and gas.

The author of this .pdf, Tom Patterson, refers to a recent government report that states the move to IPv6 will cost $1 billion per year for the next 25 years. The returns will be over $10 billion / year in savings. The costs are mostly borne by software developers, such as Genesys, in reprogramming to use the enhanced feature and capabilities.

Is IPv6 big? Bill Gates thinks so. He is quoted in the article that "Enterprise Applications will be the "Killer Application" that makes IPv6 necessary."

Object Oriented Programming (OOP) and particularly Java.

Java is the second component of the Genesys technical vision. I would encourage most people to begin learning to understand the concepts in the Java programming language. The ability to function in the work environment may require a strong understanding of the underlying concepts and technologies. Just as Microsoft Office is mandatory today, Java may become mandatory in the near future.

As I indicated previously essentially what the technical vision points to is the elimination of the client server model Which is the standard model that is the foundation of the Internet today. With IPv6 replacing client server, the ability to manage and control any and all electronic devices becomes possible. So what this element of the Genesys technical vision, Java, provides is a "programming language" to deal with this new prospective world. And when we think of Java it is best to frame it in the context of a "programming environment".

Several of the critical components of Java are well known. The ability to write once and deploy anywhere is largely in place. What may not be fully appreciated is Java's strict typing, polymorphism, inheritance and object implementation. Simply Google “Dick Baldwin's online tutorials” on how these components can be used to make such a difference. I highly recommend reviewing his site. Dick Baldwin operates one of the better websites providing quality Java development education.

At this point in time the introduction of these four elements of Java are all that need to be introduced. What I want to achieve in this summary is to bring together why Java, wireless, IPv6 and Asynchronous Process Management are so very important in the very near future.

Imagine a world where everything electronic is reporting, being monitored and controlled, in a wireless environment. Imagine how things don't need to get confused as to which device is which. Sudden system failure due to unseen events is a common theme in Hollywood and systems in general. This problem is what Java sets out to solve by requiring the typing of language so precisely. I see Java as providing the ability to make an environment where any and all devices are operating, and predictable. There is no area for ambiguity in many of these systems. How do you know you used the correct encryption algorithm to decode the production volume, from the right well? Java typing can differentiate anything and everything and that is why it is included in this technical vision. No other language is as strict in its interpretation of typing as Java.

Lastly I will note the value of inheritance in Java. Inheritance is the ability to build off many other excellent frameworks and works of others. An excellent example of this is the GlassFish server Genesys is using as its base, or Java Enterprise Server (v. 5.0). Testing and development was done from many different perspectives, and although it has little to do with oil and gas or accounting, it covers off many of the basic services that must be provided first. Once we write to a specification and achieve certification, then the evolution of the application will be managed with fewer glitches.


Wireless Internet connections through Wifi and WiMax

The third element of the Genesys technical vision is the wireless connectivity that is available today. The simple loss of wiring has a liberating effect on the entire information technology architecture. The ability to broadcast and receive a signal to the Internet at anytime and anywhere has a liberating capability. If we think back it wasn't too long ago that we just started using the Internet on an "always on" basis. What this technical vision attempts to point out is the ability for communication between devices that are statically addressed, mobile and presents a fundamentally new paradigm to the business environment.

Wireless is a fairly straightforward technology that exists today. A broader scope of reception (WiMax) will bring wireless into being more of a common and necessary tool for the people who work in oil and gas. It is my assumption here that wireless will enable working from anywhere at anytime. This will increase the time requirements of the average worker in oil and gas to 24 hours of being on call. Some of the personal benefits include reducing the demands for time and fuel by the average commuter who only needs to go to the office occasionally. This enables the employee to more effectively manage their day to meet their needs.

The primary advantage, however, of having an always-on work environment is the ability to do the work when the individual can. Although the user will be available 24 hours a day, the "other" activities in their life can take priority in terms of being addressed. Work is more a natural outflow of the day-to-day activities. The work being predominately asynchronous in nature enables the individual to address the issue after careful thought and interaction based on the user's time and availability.

These comments reflect on the "how" this system will operate in a wireless environment. The "what" that the user accesses wirelessly is all manner of reports, accounting information, journal entries, ledgers and financial statements. These reports are prepared for the monthly accounting of the joint operating committees to which the employees are affiliated. The overall scope of information would also include the engineering and geological data that the producer’s staff would need.

A method to deal with the tidal wave of information is needed today. The four cornerstones of the technical vision provide an understanding of “what” and “how” these issues can be addressed today.


Asynchronous Process Management, or how the real world works.

Asynchronous vs. Synchronous communications can best be reflected in the differences between a letter vs. a telephone conversation. Synchronous communications and activities have an unpredictable nature to them. They are able to accommodate the unpredictability of the situation by both parties being there to rectify issues as they happen.

Asynchronous communications and actions have the tendency of not being predictable due to the nature of things never going like they should, or that the reply / response isn't necessarily what was expected.

Here is where the Java language can implement the asynchronous communications and actions with the objects so that they can deal with life's little problems. Asynchronous actions can be replicated in the Java language and over time acquire any and all possible characteristics or behaviors. This is through the developer’s ability to write methods of exception handling and explicitly in an asynchronous manner.

Looking forward it is fair to assume the volumes of data that an individual will be exposed to on a daily basis will increase relentlessly in volume and importance. The manner of dealing with data overload by safely ignoring it will soon be over. Whether it is because of your competitor, litigation or a failure that is a direct result of "missing" some data, the ability to "miss" data and proceed safely is a luxury that is expiring as we speak.

In the asynchronous environment, the speed and ability to deal with all the processes of one individual will require significant automation. Automation that is necessary in order to fulfill the requirements of employee’s jobs. Those that expect to respond on a one to one basis will have difficulty in co-ordination of the resources necessary to complete their responsibilities. Having employees that were productive generating $4 million per year in revenue will lose their competitive advantages to employees that are capable at $20 - 30 million per year.

For example, how much time is wasted in preparing for, arranging and attending meetings? In addition to the waste, there is the "lag time". I define the lag time as the period of time that is consumed in order that everyone schedules the something "urgent" meeting for next week. It is the "lag time" that provides the asynchronous worker with their time frame for completion. The ability to discuss things asynchronously is augmented by video to mitigate the time losses and lags. When transactional processing is included as we have discussed, the complexity of the system increases in risk and exposure.

This technical vision is provided as a means to understand the underlying changes that are available and being implemented.
Technorati Tags: Technology-Vision, Genesys, IPv6, Java, Asynchronous, Wireless

Military Command.

Again more text of the proposal.

This proposal is dedicated to ensuring that the optimal organizational structure is provided for the oil and gas industry. In the May 2004 Plurality preliminary research report I noted, naively, that by using the joint operating committee the hierarchy would be redundant. Naïve - in that the organization begs for a replacement to the traditional command and control structure. It is recommended in this final research report that a military command type or style of structure is necessary to replace the hierarchy.

One critical area that was not discussed in the preliminary research report was how organizational command and control is achieved. This is a particularly important framework, and one that touches on each of the five other frameworks namely legal, financial, operational decision making, cultural and accountability that were noted in the preliminary report.

Without the hierarchy to define who is responsible, accountable and authorized, little if anything will or can be achieved. Individuals are how organizations achieve their tasks. The question of who represents the organization, their validity, security and authorization can all be encapsulated in the software. But how do the people organize themselves?

Military styled command and control is the alternate method proposed in this final research report. By layering a matrix of military structure over the joint operating committee, the how and who that is sourced, tasked and monitored is achieved.

Military Command vs. Project Management.

Project management fares poorly in comparison to the global scope of accomplishment of military command and control. This military analogy and metaphor needs to be implemented within oil and gas in order to facilitate a method and a means of getting things accomplished. Since, as we have discussed, software defines the organizational constructs, this command styled implementation is an element of this Genesys system, and specifically the technology will be built to superimpose the military command and control framework on to the joint operating committee structure.

Project management is limited in its application as a means of operating a going concern. Project management violates its basic premise, which is that it is temporary. We are discussing the viable going concern of a joint operating committee. Other problems in attempting to retrofit a project management structure to manage oil and gas assets include the diversity, depth and scope of communications.

The implementation here is not dissimilar to the military metaphor, with "orders" being simply replaced in the "work order" system within Genesys. All tasks, equipment, human and other resources are to be managed through the system to provide a means to assert command and control ensuring tasks are accomplished and objectives are attained. This system will also be built to provide the encryption, authentication and authority of each transaction. Since we are talking about the commercial elements of an oil and gas concern then "role" and "rank" of the human resources also need to be implemented to provide a seamless manner ensuring work will be accomplished.

Project Management teams do not have the diversity of resources necessary to effectively manage assets. Consider for a moment how many people it takes to drill a well. I am talking about the billing clerk at the water trucking company to the chairman of the joint operating committee. Project management cannot facilitate the scope and diversity of the 100's and possibly thousands of people that are involved in getting tasks completed.

Another area where Project management is deficient is in its depth of resources. In oil and gas it is generally considered, as it is with anything complex, that the quality of the well drilled will be as good as the least experienced individual on the platform. Mistakes happen and the reduction of mistakes takes on a greater role than risk management. The active participation of several producers’ representatives in activities can broaden the scope of the problem solving capability. It is my belief that the more eyeballs that reviews a situation the better. The virtual environment can marshal more resources in this fashion than the physical world can.

The last deficiency of project management that I will point out is that it is generally limited to human resources. I have noted and discussed the types of communication being asynchronous and synchronous. We have also discussed the four methods of those communications being person to person, person to process, process to person and process-to-process. We cannot limit the scope of the organizational construct of the joint operating committee to just human resources. The physical assets and capabilities of vendors, suppliers, or anyone and anything involved in oil and gas must be managed with the utmost efficiency. If we preclude certain resources at this point then we preclude the holistic solution this system will be. And if we preclude the methods and modes of communication (asynchronous vs. synchronous and Person to person etc.) then we will certainly have limited the potential for this new way of working.

Military command as a metaphor.

In using the military command metaphor “Allies = other producers”, or members of the joint operating committee, or service based organizations. Each army can be parsed into further classifications such as Navy, Marine, Army and Air Force. Each participant in the joint operating committee may have several roles, several tasks and several "superiors" and / or underlings reporting to them from various organizations. Many military commands expand beyond the scope of the current army. In WWII the entire allied forces were under the command of General Eisenhower. The English and Canadian militaries, although separate from the Americans, were engaged in similar exercises and were coordinated as one. This is the type of application that I think is needed to solve the current and prospective energy issues. While working for a company you may be seconded to work for several different joint operating committees that your company has an interest in. This military analogy is only a more formal method of recognizing the loosely coupled nature of the missions, tasks, physical resources, and personnel.

Secondly separate tasks or specialty roles are segregated between certain military disciplines. In this analogy the Navy, Air force, Marines and Army are replaced by the Geological, Engineering, Administrative and Field disciplines. As with the individual disciplines the military chain of command remains in tact through the various disciplines. As an Army Captain would have superior rank to a Navy Private, the Senior Geologist would also have a recognized authority and superior rank over a junior Engineer.

Each worker within the oil and gas industry is therefore tasked in many different situations with different ranks and roles. The producer that is his / her employer will have the opportunity and latitude to second each individual to work in any capacity and area that they are authorized in. Each worker in turn may have several different producers, which is almost a given, to be assigned tasks from.

The analogy to the military has unfortunate connotations. However, it is by far the best manner of layering a component of command and control over the joint operating committee. The systems that we develop here are best suited for these interactions. So much of what we discussed here would be transparent and seamless to the user.
Technorati Tags: Research, Final+Report, Genesys, Military+Command

Who would Henry Ford hire?

As copy is returned from my editor I will publish it here first. I would expect that the remaining entries for the rest of August will consist of edited copy that will form the proposal in September.

One topic of discussion is the effect that information technology and innovation have on the various roles of society, organizations and people. According to Dr. Anthony Giddens Structuration theory, society, organizations and people all move in lock step with one another. Any distortion in the progress of one over the others will lead to a failure. Dr. Wanda Orlikowski further advanced this theory with her application of Structuration to information technologies whereby she noted that technology was an element of society.

The progress of society, based on the influence of information technologies, will be faster than organizations or people. However, I think the progress of society, as dictated by the various technologies will not exceed the speed at which the people can accept it. The critical motivating force in people accepting technology will be the demands of their employer. The hours worked and the productivity of "some" countries is creating pressure on people to respond and thus require technology to keep pace. This leaves the organization as the odd man out in the troika that Giddens and Orlikowski have defined.

This research report is dedicated to innovation and the application of technology in support of the oil and gas industry standard Joint Operating Committee. Today organizations such as Harvard University and McKinsey Consulting have joined the debate regarding organizational structure. They state that collaborative tools are available to eliminate the hierarchy, (my interpretation of their words) and that these technologies need to be used in order to sustain any competitive advantage large organizations have, which is the final evidence needed to prove this application of Giddens theory of Structuration.

With this preamble regarding Structuration, I want to ask, what effect did Henry Ford have on society, organizations and people? Clearly the type of worker that Ford employed after the invention of the assembly line was fundamentally different than what he needed before. The role of the organization was changed with such explicit and radical thinking as paying his workers better wages, which increased the number of people that were capable of purchasing a car.

The optimization of work around the assembly line took the better part of the last century to unfold. A century to develop information technology related innovations would seem like a luxury today as the pace of change accelerates and a century of innovations are likely to be compressed into what I suspect would be a decade.

What kind of worker is needed in this networked, virtual world of information technology and innovation? Ideas are not 9 to 5. Just as Ford today is challenged by its competitors’ more effective use of the assembly line, and is in jeopardy of facing its own demise, what roles need to change, and how will people act and react?

Therefore it is reasonable to ask whom would Henry Ford hire today, and what would these people do?
Technorati Tags: Research, Final+Report, Genesys, Henry+Ford

Plurality Subtle implications of technology

Note to Reader. I am publishing the "Plurality" document I frequently refer to in this blog. This will enable searching based on the text within the entire document. The word count is approximately 35,000 words and is provided as background for the discussions.

A number of technology changes have occured since it was originally published in 2004. IBM has chosen not to support this effort, and as a result I am replacing the components of the technology architecture as the opportunities and needs require. We are moving to the Sun strictly for their support of Java, and the synergies of the visions. As I recently noted, Ingress would be the database that we will use. Other then that, I have chosen to host the entire development and operating environment on Sun's Grid and as funds become available we will secure those resources.

References are to the literature noted in the bibliography. So here it is, warts and all. I hope you enjoy it, any and all comments are welcomed and appreciated.


Thank you


Paul Cox


Today we need to better understand the subtlety of the implications of technology. Organizations are entering a time period where technology is providing a level of infrastructure that permits its proliferation and adoption that is firstly insidious, ubiquitous and with possible or probable implications that are not fully understood? Three generic examples are cited to show the cause and effect of technologies on an unsuspecting audience of users and businesses.

They are, the downloading of MP3's and Apple's iTunes, PowerPoint as a presentation tool and SourceForge.net. The first two, MP3's and PowerPoint contain warnings of not fully understanding the impact the technologies will have, with the third example expressing the threat that self organizing teams present as an organizational alternative to the comparatively inefficient hierarchical based organization.

All these examples share the same symptomatic cause and effect that the user is attempting to achieve, that is, to acquire what they want through the path of least resistance. The other major new thinking that may develop is that intellectual property and knowledge management are by far the most important aspect of a firms assets, and that they are very temporary as an advantage, aging in quarters, not years. Included within these intellectual property attributes are the organizational innovative capability, or appropriability and IT resources. I am citing this point to reflect that the competitive nature in business today is rapidly changing on all fronts.

MP3's and Apple's iTunes.

The following is a good example of how technology can become disruptive to a well-entrenched business model. Downloading of MP3’s and the effect it has had on the music industry should be well known at this point. The phenomenon of least resistance showed itself through otherwise very honest and hardworking individuals, knowingly breaking the law. These thefts were justified in the users minds by a variety of excuses, and with all that has happened to mitigate the effects, little if anything has been done to stem the waning tide in the revenue of the musicians and music companies. This is also not a recent phenomenon, copying records onto cassette tape was a concern in the 1970’s with the development of the cassette recorder. The downloading issue has been raised as a result of the selection of music made available through the networked user seeking the path of least resistance.
Initial attempts to shut down the vehicles (Napster) proved fruitless as the website's were only replicated quickly, and in far greater numbers, effectively providing users with more outlets in which to acquire their music.

Apple iTunes has provided a strong business model that appeals to the user and provides them with the ability to use their music in the fashion that they have always wanted. This is currently working effectively, with the full support of the law and under contract with the music distribution companies. In hindsight the record companies, in seeking Apple's help, might soon realize they invited a Trojan horse into their camp.

iTunes appears to be the application that users and musicians need as a portal for their communications and distribution of their products. This enabling an alternate solution for communication and distribution of music, which might eliminate the “music business” as represented by Time Warner, Universal and Sony.

All of the machination's conducted by the music industry to control the intellectual property of their distribution copyright, has only provided the music user and musicians with the ammunition and motivation to further eliminate any goodwill towards the music industry. Which musician will be the first to distribute their new music to their fans via iTunes, and how much less will they be asking? ITunes is the only system that maintains the musicians rights of intellectual property, which is another aspect that the competition does not appear to understand. Disintermediation of the music industry will most certainly be the result of these activities.

NASA's comments regarding the dangers of PowerPoint.

We have witnessed the recent NASA comments regarding PowerPoint presentations that place that product in the category of the real “killer app”. I interpret NASA's comments not so much as blaming PowerPoint for the failure of the space shuttle, but more for the phenomenon that users would seek the path of least resistance in getting their message across. We all inherently understand the point that NASA is attempting to make.

The ubiquity of PowerPoint presentations is as a result of their inherent ease of use and effectiveness at selling a message. Any attempt to eliminate the product from within an organization would be devastating to its internal communicative capability. The product works effectively for the reasons that it is used for.

The future implications are that any attempts to eliminate PowerPoint would be more negative than positive, the PowerPoint presenter and viewers need to be cognizant of the limitations of the application, which unfortunately they now are.

SourceForge.net

SourceForge is not a name that many people would have heard of before. And many will not hear of in the future. This is good example of how minor changes in a business model or technology could have significant implications on how the organization of commercial enterprises becomes redundant and therefore effectively disrupted.

Sourceforge.net is the open source vehicle used to download and manage the open source code that a user wants. It is also the forum where like-minded developers organize and work to build the better, and “free” code that is provided to anyone who wants it. This is strictly on a volunteer basis with the altruistic objective of building better software and is not guided in any form or fashion as a result of anyone’s policies. The Linux, MySQL, Darwin, and other software are being developed through this medium. Self-organizing groups of developers, motivated by similar causes, located throughout the world are tied together through CVS (Concurrent Version Systems) to produce the code they seek. Most never meet the other developers, ever.

This environment has developed over the last few years from a small community to a reasonably moderate size of 800,000 developers working on 80,000 different projects. Mostly organized in an ad-hoc and informal manner, these developers have produced software of the quality that Linux is now the alternative operating system used by IBM, Sun and other vendors, and is beginning to be the preferred system for many corporate servers and considered for the desktop.

SourceForge.net is so significant that it may render the corporate IT infrastructure unworkable in the short to mid-term. This is a pretty bold statement regarding a completely irrelevant and mostly unknown organization. The announcement and an explanation of how this might occur is as follows.
On December 16, 2003 SourceForge.net distributed the following announcement to their membership through their site wide mailing list. The announcement had three components of the same theme.

These were:

• Donations could be made to the overall SourceForge.net organization.
• Donations could be made directly to the project of your choice.
• Donations could be made to the specific developer of your choice.

This one change in the business model of SourceForge.net will provide the economic means for the developer to live in what he may have always considered to be his career objective of full independence, freedom and a means of financial independence. This will provide developers with the confidence and capability, and who may have been moonlighting through SourceForge.net as a means to hone his / her craft, with the motivation to commence drafting that resignation from their day job and securing their long term intellectual property value.

This, of course, won't be all of the corporate IT staff, just the ones that have achieved the level of sophistication and capability that can and usually is measured in the quantum's of 10, 20 and 30 fold to the standard. The technical workers that preferred to work on building their craft outside the organization they work for.

Although the losses may be limited to a handful, they are the critical ones who are known for their capability and will be able to make significantly more money through SourceForge.net than through any other means they could have imagined. They will be further motivated by the fact that their previous employer may become their greatest supporter. Which opens the other side of this threat, namely the opportunity for the companies to acquire several of these high quality developers through

SourceForge.net.

Recently SourceForge.net started a company that provides software tools for corporations to hire and manage the source code through SourceForge.net. The following two url’s are to that company, VA Software and provide the information necessary to understand this opportunity. Of particular interest are the members of the board of directors. (http://vasoftware.com/)

Corporations may look back on their decision to use Linux and other open source code as their biggest error. After all what were they thinking, you don't get anything for “free”!

IBM WebSphere technology’s introduction in oil and gas.

There is a need to look at the past ten years in a different perspective in order to fully appreciate the scope of the concern that this research has for the hierarchical organization. This research is asserting the impediment to further progress is the hierarchical organizational structure or bureaucracy. And by invoking Dr. Anthony Giddens Structuration theory, which states society, individuals and organizations need to move forward together, or not at all, any disparity in the pace of change in one has to match the others, or failure occurs. Dr. Orlikowski’s model of technology structuration also becomes progressively more important during this discussion.

It is implicit in this thesis’ hypothesis that at this time, society and individuals are or have moved on, and the organization, as represented in the hierarchical corporate organization is impeding further progress and performance. Alternate organizations are forming, or can be formed quickly and efficiently to eliminate the need for the organization in its hierarchical form.

The hierarchical organization is directly supported through many tacit and explicit support structures. Key among them is the ERP system that represents the largest single IT investment of an organization. Support systems that provide the hierarchical capability, and specifically the ERP system, are now under direct threat of an insidious and contagious technology. This technology accelerates the organization’s performance to that which is matched by the performance attributes and expectations of society and people. Or as Dr. Dosi (1988) states, “technical progress generally exhibits strong irreversibility features.” This “progress”, as demonstrated in the prior technology examples is impossible to stop and needs to be fully understood and embraced as the only tactical and strategic method of dealing with it. (p. 1144)

There has been much debate in the past few years as to whether technology was evolutionary or revolutionary. These past years have provided cold comfort to those who believed the best days of technology are behind us and that will be the end of the bubble, and the geeks. I am asserting that the technology revolution sustained a serious blow to its credibility and capability during the past four years. The only requirement for the technical revolution to continue is for the coup to trigger the signal. Metaphorically speaking, of course.

I perceive these technologies to be a threat to the status quo of an organization because of the inherent ability of the technology to reproduce itself quickly. A good analogy would be the differences between a user that is networked and a user that is not. Contrast the abilities and productivity of a worker in the networked world with one of 10 years ago, where no public network, applications or communications occurred, compared to the ubiquity of today. No one would deny the impact that the Internet has had on an individual’s productivity. The easy access to abundant and inexpensive data and information, communication and new applications has provided a base of infrastructure that has facilitated innovation in all forms. This analogy is strengthened giving the significant impact that Dr. Dosi’s work on innovation will have in the future.

The analogy of the worker over the past ten years is directly applicable in this instance. The difference being the individual is replaced for the purpose of the analogy, and represented by the organization. As opposed to having independent and unconnected islands of information and capability, there is a collective and co-operative interconnection between trading partners where more of everything is shared and learned through the enhanced collaboration of internal and external, self-organizing teams.

Today many individuals have sought refuge in the collapse of the dot-com bubble to justify their refusal and incapability to fully exploit the technology resources that they have been provided. An inherent inability to learn the technology is a phenomenon associated with older generations that have a complacency or satisfaction with the status quo. This is leading them to be functionally illiterate in the working world of today, with only a vested pension, years of service or rapidly depreciating tacit knowledge that enables them to maintain their illusion of technology. Ultimately this will be at significant cost to those individuals.

This scenario is not an alternative for the organization. Failure will occur swiftly to those organizations that cannot compete against the swiftness and productivity of self-organizing teams.
Revisiting the earlier comments about SourceForge.net reflects few organizations could be organized with 850,000 developers working on 80,000 projects. The key is not so much the volume, but the associated quality of the products. Linux is unquestionably the champion in comparison to the Microsoft Windows alternative as are many of the open source products. To now transform the organization into a method for developers to earn their living may be the most productive and effective means of deploying those resources. The benefits derived from this organization can be distributed over larger populations of users and in collaboration with like-minded individuals or organizations.

Like many of the individuals that refuse to understand, learn and exploit the technologies of today, some corporations may decide to ignore the opportunity and focus on the threats that are introduced through these technologies or reflect that it is not particularly relevant. However, unlike the individuals described as rejecting technology, through the competitive marketplace corporations will be rendered ineffective and inefficient far quicker than their human counterparts.

Application of this point regarding oil and gas is particularly revealing. Through the process of this research it is apparent that the susceptibility of the industry to this risk is high. The saying that to be forewarned is to be forearmed might be pertinent and should be heeded by industry.

One point that this research has noted, is that this issue has created a polarizing effect between members of the companies. The scope of change crosses all boundaries within an organization.
The senior IT managers are almost unanimously concerned about the possibility of the toolset rendering the technical infrastructure ineffective. Their efforts to have an ERP system function effectively as required in these large organizations has been tremendously difficult and is not something that should be experimented with. Some of the comments regarding the research are:

• We have that all operating in our company now.
• This is too significant a change to be contemplated by anyone other then the CEO, CFO and CIO.
• Unwilling to support or sponsor the research. Emphatically unwillingly.

In many ways they have worked to fulfill their obligations to the company and now are subjected to serious threats that are beyond what they have the authority to consider. They are the managers, not the change agents.

The following is a direct response to the issue of management push back just described, and was cut from a .pdf document and is quoted verbatim.

“Web services are programs that allow systems to interact with each other over a network. They leverage open standards and the power of the Internet to allow businesses to interact with each other more easily than ever before. Because businesses have a rapidly growing need to work more closely together, the ability of Web services to support that activity in a standard, well-defined manner, have generated an enormous amount of interest and activity in the Web services arena.”

“Of course, along with all the excitement comes a great deal of buzz, which can easily make you think that Web services are just another over-hyped technology. Although there is hype surrounding some aspects of Web services, Web services and the underlying XML technologies really do have tremendous value for today's enterprise.”

“In this tutorial series we will show that Web services, while not a silver bullet, may change forever the way you integrate business processes. This applies to integrating with other companies' processes or with your own internal processes. They are the next logical step in the evolution of the Web. With Web services, we are moving to a new stage of e-business where businesses can exchange services and integrate business processes with one another.”

“This brings the issue of Enterprise Application Integration (EAI) to another level, where you can incorporate multiple companies into a single business process, as well as more easily incorporate multiple business processes from one company into a single process.”

“Driven by these important business needs, the Web services world is evolving rapidly and there is a great deal of innovation, clarification, and specification occurring. Among the important developments are the following:”

These direct quotations are from an IBM document, the italics were added to highlight the parallel comments to the warning contained within this research report. It concludes the introduction by stating

“In short, IBM’s “WSDK” provides an entry-level platform and supporting toolset that make it simple and straightforward to create Web service-based systems. It will let you explore this emerging world of Web services and see what all the excitement is about.”

Source is page 2 of “ws-intwsdk51ltr.pdf from IBM.

This comment is written by IBM and reflects a similar message to the one being presented. The message is that IBM is providing this infrastructure; along with their Eclipse development environment to developers for free, which reflects two further points that I impute from this and other observations. The customers in many industries are resisting the changes that these toolset and technologies introduce, and IBM is moving the product into the hands of the developer in order to ensure that IBM earns a substantial position in the marketplace of web services and get the ball rolling in a difficult technology politically and conceptually, but not technically.

In reviewing both Giddens and Orlikowski’s theories of structuration (and understanding the time frame of the late 1980’s and early 1990’s in which they were written) one recognizes the absolute brilliance and value of these individuals’ work. A comprehensive review of their models is highly recommended. However their brilliance may be overshadowed by the efforts of IBM to deal with specific issues regarding the technology inherent in Domino and Notes over the past two years. In retrospect I believe there is a tacit understanding of Orlikowski’s theories represented by IBM “middleware” product strategies. IBM’s inability to penetrate the marketplace with Lotus Notes as envisioned has been a frustration to its advanced users and developers as well as, we assume, IBM.

Overcoming these problems and applying Orlikowski’s model is clearly the strategy that is being employed very effectively by IBM. It is also not surprising that much of Orlikowski’s consulting work has been in the area of the deficiencies that organizations experienced in integrating Lotus Notes.
IBM has as much to lose from Web Services as they do to gain, as they operate in a very competitive marketplace. IBM poorly handled Microsoft and the changes due to the introduction of the PC in the 1980’s. This lead to a significant decline in their organization and in the early 1990’s, recall they were barely able to register mention to the “might” of Microsoft and Intel. This paper would assert that IBM came too close to meeting its demise and has learned substantially from that lesson. Applying the velvet glove and reacting to market changes is no longer their modus operandi. They are aggressively changing the market landscape in their favor to ensure their competition remains behind.

It is critical to understand that Giddens structuration suggests that power be asserted to create new capabilities for the changes in organizations to occur. Through IBM this power has been exercised and the capability exists. The only requirement remaining at this point is for the organizational change to occur. On the basis of this theory these changes will occur with or without management support.
During her consulting Dr. Orlikowski frequently referred to the work of Thomas H. Davenport. This work documents that collaborative computing does not lead to collaborative work environments. Policies and procedures need to be set by management to facilitate collaboration. Key to the policies is the need for alignment of collaborative incentives, training and organizational culture is consistent with the toolset.

Organizations may believe their ability to control technology introduction is through the restriction of financial resources necessary for users to acquire the license to Workplace. This also has been considered and dealt with at IBM in the following manner. One form of the license that is available to developers is an "Extranet Server License" that provides the ability to license it to as many “outside users” as possible. This, of course, is at no cost which immediately waives the token $93 charge for the license. Therefore if I as the president of Genesys® deem someone a consultant of Genesys®, and provide them with a fully paid user license, this provides them with further unlimited use of the server and software and allows them to distribute the Workplace software to anyone, anywhere and for whatever reason. Or alternatively, this author could send certain staff an URL to Genesys®, server that permits them to use the product as they see fit, and this could in turn, in a very short period of time, enable Genesys® to have each and every staff member in your organization working off this product at the total cost to Genesys® of $93 and your organization $0.00. Astute technical readers will learn that this entire process can be conducted initially through port 80 (Web Browsing). This is, in my opinion, a reflection on the importance and value that IBM has placed on Web Services as their future and a very well executed and implemented product strategy.

To further exacerbate these issues, Workplace provided upwards of 80% reductions in phone calls, phone messages and conventional internal emails. This is mentioned on IBM’s website demos. This is certainly a significant advantage and provides a capability to concentrate the overuse of those channels of communication. However, it should be evident that Workplace provides a far more efficient mode of communications then the other channels. This creates an even greater issue with respect to the impact that Workplace could have on an unsuspecting producer. Understanding the user’s propensity to seek the path of least resistance, Workplace has the potential to revolutionize the organization’s communications as well. This is one of the key aspects of the ability of the “other” participants on the joint operating committee to be able to use another producer’s capability if introduced to this facility. The ease of extending the collaborations between committee participants will enable the acceptance and use of the toolset.

Of particular interest will be the management discussions that are carried out during their various meetings. To now conduct these meetings asynchronously codifies the understanding and reflects the ability to have individuals that would otherwise not be able to participate learn and contribute to the discussions. A further capability is the ability to reduce managements time to the salient points that need to be addressed, and eliminate the management time required for physical attendance, the logistics of attendance and the unnecessary time lost in scheduling.

This tool’s power is unmatched in this author’s opinion. With this power comes significant gains in competitive advantages to those that are able to implement the technologies effectively, and disaster to those companies that are unable to pro-actively deal with this threat.

Resistance is futile. The cause of current resistance is clearly understood. Companies have struggled for several years, and maybe for a decade to have the promise of ERP systems operational and functioning within their organization. From what I have seen in a few instances the results have been very successful. Web Services now challenges the entire infrastructure of the installed base of applications, communications and systems infrastructure that are otherwise in excellent condition and in many instances at the beginning of their useful life.

The challenge that Web Services presents is two fold. The managers are not interested in tearing down what is operationally efficient. Why would they? Secondly, the infrastructure is under attack by an insidious technology that is impossible to ignore, yet has the potential, if not managed pro-actively, to create serious issues for the current software infrastructure and organizational structure. What purpose will there be for a structured hierarchy with its associated bureaucracy when self-organizing teams are able to perform more efficiently and effectively? An ERP system designed for facilitating the hierarchy is just as redundant.

The moment in time that an organization realizes this technology was introduced somewhere in their organization, and as a result of the manner of its use, the questioning of the integrity of the organization’s data begins, or not. It should be asked as well, how many developers have downloaded these technologies from IBM and conducted the Web Services training that is being offered for free?
This scenario may occur in a short period of time, or not. It should be asked where within the organization will this first appear? Will it be in the scientific areas, or the financial? The purpose of this research is to plan a proactive change management and knowledge management procedure to install the Workplace and IBM infrastructure toolset within the organization. Ensure that it meets the criteria of the management’s policies, that those policies in turn are designed to support the exploitation of the technology. These planning components are contained within Genesys® Software Corporation’s February 2003 ERP proposal’s recommendation of the “study period”.

In Dr. Noel Tichy’s book, he references Kaplan (1964), which states. “I have found that if you give a little boy a hammer, he will find that everything needs pounding.” (p. 291) However, this comment also adds significant credence to the issues discussed in this document namely that IBM’s workplace tool may be picked up by individuals seeking the alleged path of least resistance. And just as the little boy hammered everything, individuals will find the tool effective in many applications affecting their work, further exacerbating the issues regarding the ability of organizations to deal with these problems without the appropriate planning and strategy formulation.

It is this author’s opinion that much of the change management initiatives that are driven by SAP integration are to facilitate the tools use. I believe this to be symptomatic of the Theory X method of management in that people need to be monitored and controlled in order to be productive. The Theory Y implementation would assume that people want to work and only need to be supported to do that work. Theory Y is consistent with what Dr. Dosi has asserted as required for innovation.

In the previous analogy of the boy with the hammer, if the staff where to find the “hammer” or in this instance, the Workplace tool, would they soon learn that that a square peg will never fit into a round hole? (The SAP application?) I frequently refer to the behavior of groups as that which is consistent with how the Buffalo were almost rendered extinct. That the analogy of the abuse of the Buffalo is not dissimilar from the current expectations of consumers regarding energy. When the individual sees the Buffalo analogy they begin to appreciate the industry clearer, at which time I point out why the analogy is not valid. The analogy is rendered invalid when it is explained that the Buffalo were a renewable resource, had abundant alternatives readily available, and the economy did not live or die with or without its existence. These two analogies combined reflect another odd behavior. The behavior was the North American Natives effectiveness in killing Buffalo by running them off a cliff. It somehow draws the conclusion that SAP’s behavior appears consistent with the Native Americans. My point is this, it begs the question, what would have happened to the Buffalo if they just stopped running? Today companies have to stop the SAP styled Buffalo jump and consider other alternatives.

Overall there is some good news. There is actually very good news in that Web Services are able to interface with legacy ERP systems in a very progressive manner. This technology can be managed in an effective manner to initially build off the legacy ERP and provide a direct transition over a reasonable period of time to accommodate the organizational and incremental technical change. This requires proactive management in the form of the appropriate change management initiatives that facilitate the innovations that provide the future sustained competitive advantages of the firm. These change management initiatives need to be orchestrated by management through the appropriate “change agents” (Genesys®) providing the counter management thinking to achieve the drive to change, and technology development.

Being the “Change agent” is where Genesys Software Corporation has positioned itself in order to offer these software development and research services as a web services integrator to oil and gas producers. Please review the Genesys Software Corporation strategy summary provided in the February 2003 ERP proposal. It is also explicitly stated in Genesys®, February 2003 that these technologies need to be studied and adopted. The value proposition and overall strategy remain as they were documented in February last year, only the urgency in which firms should act is being revised. Genesys® has developed a full service solution to this issue, and is prepared to provide those potential clients that express an interest through the distribution of this research report.

Technorati Tags: Plurality, Technical Vision, Thesis