Showing posts with label Policies. Show all posts
Showing posts with label Policies. Show all posts

Monday, December 06, 2010

Free Riders and the Participation Bonus.

Free riders have been defined in wikipedia as

In economics, collective bargaining, psychology, and political science, "free riders" are those who consume more than their fair share of a public resource, or shoulder less than a fair share of the costs of its production. Free riding is usually considered to be an economic "problem" only when it leads to the non-production or under-production of a public good (and thus to Pareto inefficiency), or when it leads to the excessive use of a common property resource. The free rider problem is the question of how to limit free riding (or its negative effects) in these situations.
For the purpose of People, Ideas & Objects “free riders” is a serious problem that we have chosen to deal with in our Revenue Model. Simply our free rider problem is that many producer firms would feel their best approach to supporting People, Ideas & Objects would be to abstain from actively participating, particularly financially, and leave the burden to other producers to carry the weight of building the application without their direct participation. Applications such as People, Ideas & Objects can not be built with that method of participation.

The manner in which we solve this free rider problem is by assessing a late fee of 300% on top of our annual subscription fee. The annual subscription fees are due and payable on January 1 of the current year and need to be paid in full prior to the participation in the communities or prospective use of any software. Late fees are assessed on any outstanding annual subscription fees as of March 31, of the calendar year in which the fees were assessed. 2010 subscription fees were assessed at $1.00. 2011 subscription fees will also be assessed at $1.00. All fees, subscription and late, for all years, 2010 forward are to be paid before participation in communities can commence or prospectively use any software. Fees are assessed on the producers annual barrel of oil per equivalent production. (Eg. a producer currently producing 1 million boe / day would owe $1 million 2010 subscription fees and $3 million late fees, and $1 million 2011 subscription fees.)

The participation bonus is related to the late fee in that as firms that may have chosen to wait or hold back their participation in developing People, Ideas & Objects applications. That may have subsequently decide to join the development or begin using the application. Are then required to pay the subscription and late fees back to 2010 to the current date. As these lump sum payments are received by People, Ideas & Objects they offset the current years budgetary revenue requirements of the firm, therefore reducing the current years budget subscription fee value and therefore reducing those subscribing producers annual subscription fees for the subsequent subscription year. That’s the participation bonus.

It’s necessary that a project such as this deals with the free rider problem and at the same time reward those producers that participate early. For the industry to successfully provide for the consumers energy demands, it’s necessary to build the systems that identify and support the Joint Operating Committee. Building the Preliminary Specification is the focus of People, Ideas & Objects. Producers are encouraged to contact me in order to support our Revenue Model and begin their participation in these communities. Those individuals that are interested in joining People, Ideas & Objects can join me here and begin building the software necessary for the successful and innovative oil and gas industry.

Tuesday, July 27, 2010

Our Revenue Model Part I

When looking for the revenues for People, Ideas & Objects and its associated user communities, all paths lead to the oil and gas producers. This is the logical choice as they are also the primary benefactor from the use of the applications and communities development. In latter posts we will document that society and individuals also derive benefits. However, oil and gas is a primary industry that generates over $3 trillion in annual revenues. It is the source of value generation for itself and a variety of industries that provide it with products and services. It is therefore logical and appropriate that we focus on producers to generate the revenues for these communities. So how is it that People, Ideas & Objects and these communities raise the funds for these software products and associated services. The answer to this and other questions is what will be defined as our “Revenue Model” in this and subsequent blog posts.  


With these points in mind it is important to restate our value proposition. People, Ideas & Objects provides the oil and gas producer with a user focused software development capability. The costs incurred in developing and hosting the software application are charged to the industry once. Providing a value proposition that is substantially more competitive then any other ERP vendor. To cover the development and associated user community costs, use of the software by the producer requires payment of all of the fees retroactively to January 1, 2010. For 2010 these fees were determined to be $1 per barrel of oil equivalent production per day. Based on these factors, a producer that produces 50,000 barrels of oil per day ($1.4 billion in annual revenues.) would be assessed $50,000.00 for the 2010 calendar year. Motivation to participate in a timely fashion is provided by assessing 300% penalties for any payments that remain outstanding after March 31 of the billing year. All fees and penalties from 2010 forward are to be paid prior to the producers use of the software. These revenues will be used to offset the costs of developing the software. Users are not charged for their use of the software.

The $1.00 fee that is assessed on each barrel of oil equivalent could theoretically generate $120 million during 2010 for People, Ideas & Objects. Our motivation is to expand the volume of energy that the fee is assessed upon. Raising the rate assessed per barrel would also increase our revenue, however, increasing the volume of energy production represented in our assessment base provides a stronger value proposition for all concerned. It is critical to recall that the costs associated with the second copy of the software is zero. Therefore the costs of development are allocated over the entire subscribing producer base. The producer firm receives, just in the first year, a potentially $120 million software application for a small portion of the actual costs.  


At an average price of $77.00 per barrel of oil. The percentage costs of the People, Ideas & Objects fee for 2010 equals 1 / 28,105 = 0.0035%. Determination of the annual fee is based on the projected costs of the software development and communities plus an element of profit for People, Ideas & Objects. Inherent in this pricing is the belief that the applications are never considered static, but are in perpetual development, therefore the firm remains profitable and motivated to continuously improve the applications.


Society is put in peril when world oil production declines. There is evidence that the world's oil production has declined. Therefore the world needs to have the energy industry expand its production. To do so requires that we reorganize to enhance the division of labor and specialization within the industry. As economic development has proven, this reorganization would achieve far greater oil and gas production. Management of the industry is conflicted in expanding the output of the industry. The less they do, the higher the oil and gas prices and the better they appear to perform. This managerial conflict must be addressed and the performance of the industry unleashed. To do so requires the current management of the industry to fund People, Ideas & Objects and build the systems as defined in the Draft Specification. Please join me here.

Technorati Tags:

Wednesday, June 16, 2010

The CISP is a marketplace.

If we were to have name tags on each of the birds in this picture. The mother bird of course would be the oil and gas industry. And the others would be PriceWaterhouse Coopers, IBM, Delloitte & Touche, EDS, Accenture, CapGemini etc. To sustain this type of "environment" would not be in the best interests of the innovative oil and gas producers. I see many of the types of services that are provided by these vendors to be in direct conflict with the members of the Community of Independent Service Providers. It is in our best interest to ensure that we don't replicate this relationship in the future. This post explains how the CISP will replace these service providers with value adding services to the innovative oil and gas producers.

Please note that I see the CISP providing much more then the services that are provided by just these firms. Recall some of the key areas where members of the CISP will be providing value include software definition and development with People, Ideas & Objects developers, software installation and integration using Oracle Application Integration Architecture, Accounting Service Provider, Representatives of user group, and conference planner to name just a few. To detail the list of services that are provided by the CISP runs the risk of limiting the imagination of what they can provide the innovative oil and gas producers.

What we are creating in the CISP is a market of self organizing individuals, groups and firms. Participation within the CISP is not limited to anyone, and is open to whomever wants to join. The only requirement is to follow this procedure. Once the license is signed and the summaries are posted, then the individual is free to develop their firm in the best interests of the People, Ideas & Objects software and the innovative oil and gas producer. This membership process would also be open to the named groups at the beginning of this post, if they desired to and believed they could make some money at it.

To eliminate the possibility that the CISP or market of self organizing individuals, groups or firms are precluded from the oil and gas firms business. (As reflected in the above picture.) People, Ideas & Objects needs to implement a policy change in the license that is granted to those licensees of the CISP . That change is to assess a royalty of 40% on any revenues in excess of $5 million to be payable to People, Ideas & Objects. Revenues that are subject to this royalty calculation are those that are derived from working with the People, Ideas & Objects developers and the associated CISP client producer firm.

We are doing this to provide any member of the CISP with an unconstrained $5 million revenue stream. Companies such as those named above, far exceed that threshold and therefore would find the royalty too onerous to be able to compete. This royalty is being implemented to ensure that the members of the CISP remain a market of self organizing individuals, groups or firms.

We have seen the level of innovation and ideas being generated from those named at the beginning of this post. Little if nothing has been generated in terms of implementing new and value adding ideas or technology to the oil and gas industry. Having a market of providers, that is unlimited in terms of who can participate, and financially penalizes the large firms is in the best interest of the innovative oil and gas producers.

Firms that are generating $5 to $10 million in gross revenues (net revenues of $5 to $8 million)  will still be able to generate significant value for their owners. That assumes they are able to build value for their clients, the innovative oil and gas producers. Instead of focusing on quantity, they can focus on the quality of the services they provide and continue to accelerate the specialization of the services provided and the industry division of labor.

Our policies are designed to motivate the members of the CISP to enter and prosper in building value for the innovative oil and gas producer. To develop this resource it is necessary to ensure that these people are free to pursue their business without the risk that they will be eliminated from the market by those mechanisms that are in play in the picture that is reflected above.

Society is put in peril when world oil production declines. There is evidence that the worlds oil production has declined. Therefore the world needs to have the energy industry expand its production. To do so requires that we reorganize to enhance the division of labor and specialization within the industry. As has been proven, this reorganization could achieve far greater oil and gas production. Management of the industry are conflicted in expanding the output of the industry. The less they do, the higher the oil and gas prices and the better they appear to perform. This managerial conflict must be addressed and the performance of the industry unleashed. To do so requires the current management of the industry to fund People, Ideas & Objects and build the systems as defined in the Draft Specification. Please join me here.

Technorati Tags:
 

Saturday, April 17, 2010

Oracle Stack - Oracle Consulting

We continue on our review of the Oracle product and servicing offerings that will comprise the People, Ideas & Objects application offerings and infrastructure. This post deals with the services that Oracle Consulting provides, and as such we may need to access from time to time. The key point that I want to make in this post is the potential for conflict between the use of Oracle Consulting and services that are, or may be provided by members of the Community of Independent Service Providers (CISP).

People, Ideas & Objects strategy with regard to our use of Oracle Consulting services is of a critical nature. The need to establish the policy that if anything is in conflict between the use of Oracle Consulting and the CISP, the Oracle Consulting conflict will be removed. This policy is to establish the Community of Independent Service Providers as the key resource of People, Ideas & Objects. And as our review of Lazonick's paper "The Chandlerian corporation and the theory of innovative enterprise" has noted, the CISP are a critical resource of the innovative oil and gas producer. People, Ideas & Objects, of all the various communities should lead by example and respect the importance of developing this resource.

The one area that I foresee this conflict policy not having an effect is in the area of the Fusion Application stack itself. Our developers have the opportunity to leverage off of the work done by Oracle and this can only be done in a substantial way by engaging them directly through Oracle Consulting. The same can be said for the support of the hardware at our proposed Cloud Computing facility. Oracle, now with Sun hardware, are unique in providing service and support to their hardware and software offerings.

The area that I see the CISP providing the unique services is in the understanding of the user. This is carried forward by bringing that understanding in defined enhancements to the People, Ideas & Objects application modules. Defining the software and providing the services to support the innovative oil and gas producer. 

Our appeal should be based on these eight "Focused on" priorities and values of how better the oil and gas industry and its operations could be handled. They may not initially be the right way to go, but we are committed to working with the various communities to discover and ensure the right ones are. If your an enlightened producer, an oil and gas director, investor or shareholder, who would be interested in funding these software developments and communities, please follow our Funding Policies & Procedures, and our Hardware Policies & Procedures. If your a government that collects royalties from oil and gas producers, and are concerned about the accuracy of your royalty income, please review our Royalty Policies & Procedures and email me. And if your a potential user of this software, and possibly as a member of the Community of Independent Service Providers, please join us here.

Technorati Tags:
 

Sunday, March 07, 2010

Designed to hit a moving target

People, Ideas & Objects is an Agile software development developer. I've come upon a slide presentation that documents many of the key attributes of the Agile software development methodology. It's a 47 minute presentation that provides people with an understanding why the Agile processes are superior to past software development methodologies. The title of this entry captures accurately why Agile works.

Instead of repeating what is stated in the presentation, it would be better to explain how the Agile process will be implemented in People, Ideas & Objects. A key difference is the collocation of the teams for development. People, Ideas & Objects have the following policies regarding collocation.

Physical location is irrelevant. Particularly as Integrated Development Environments (IDE's) like NetBeans and Eclipse have tools to aid in developer communications. This collaborative area of IDE development has only begun and I expect to see many tools for the Agile teams collaborations to develop.

To access the full scope of the applications user community will require people to be involved from many different regions, many different firms and many different disciplines. If we were to attempt to put everyone under the same roof, we wouldn't get anything done. With the volume of anticipated teams being 20, having 200 developers within one region would be counter-productive from the point of view of user input. Working virtually is key to the success of this project.

Generally, it should be considered that a team be within the same time zones. Are dedicated full time to the development of their People, Ideas & Objects modules, and have access to users. Exceptions to this will occur, particularly as we wish to access teams in India and other regions. If collocation becomes an issue to the performance of the team, then we can "tune" the team by bringing them to one location for a two week period to work out the performance related issues.

Access to developers. To developers the tools they use are the same irrespective of where they are. If they are collocated within the same offices as the other team members, or across the country, it does not matter, in my opinion. What does matter is access to quality developers. If we were limited to acquiring the developers from just one city, it would constrain us in terms of our demands for quality software. The energy industry has traditionally not developed a software development capability of the scope that People, Ideas & Objects demands. Therefore to access the talent we need, we will not be putting any physical constraint on the co-location of team members.

As the discussion in the previous paragraph discussed developers, the same can be stated about users and the Community of Independent Service Providers. When do we start? As soon as there is a financial commitment. We'll then settle on the scope of the application, break down the modules into sub-modules and build the user base and software development capabilities.

March 31, 2010 is the deadline for raising our 2010 operating budget. After which a variety of consequences, such as financial penalties and a loss of one years time will occur. Our appeal should be based on the 21 compelling reasons of how better the oil and gas industry and its operations could be handled. They may not be the right way to go, but we are committed to working with the various communities to discover and ensure the right ones are.

If your an enlightened producer, an oil and gas director, investor or shareholder, who would be interested in funding these software developments and communities, please follow our Funding Policies & Procedures, and our Hardware Policies & Procedures. If your a government that collects royalties from oil and gas producers, and are concerned about the accuracy of your royalty income, please review our Royalty Policies & Procedures and email me. And if your a potential user of this software, and possibly as a member of the Community of Independent Service Providers, please join us here.

Technorati Tags:
 

Sunday, January 31, 2010

Hardware Policies & Procedures

Let's talk about that 800 pound Gorilla that's sitting in the room. That is the desire of the management of oil and gas producers to control their data, their software code and the hardware their applications run on. With this post, management will see how it is they have those attributes under their control in a manner that gets this animal out of the room.

Hardware and software are two areas that need to be addressed in providing the People, Ideas & Objects application to its users. The software is as has been detailed elsewhere, open source providing the producer firm to see what their applications are doing. This opportunity may best be managed in the hands of a consortium of professional accounting firms that review and verify the code on behalf of their clients, the producers. The hardware is proposed to be handled in the following manner. This proposal is valid until April 30, 2010 and is dependent on producer firms, shareholders and investors funding the 2010 software development budget.

By way of granting an exclusive license to run the binary of People, Ideas & Objects, People, Ideas & Objects earn an interest in a subsidiary corporation. This firms sole purpose will be to run that binary in manner that is consistent with the innovative oil and gas producers needs. The only caveats that I place on this firm is the hardware is sourced from Oracle and is "cloud" based in its delivery. We do not need to have a disjointed hardware service that is scattered around the globe. Centers could be located in Calgary, Houston, Dallas, Aberdeen, Riyadh, Rio de jeneiro, Malaysia or Mexico City. But only one location within each logical region. In Wednesday's Oracle presentation Larry Ellison asked "How could you be against Cloud Computing, that's all there is."

An equal portion of the firm will be granted to Oracle in providing them the ways and means to profit from the firms activities. Oracle will need to have Data Base Administrators (DBA's) servicing the user and producers. The fact that these facilities will be all Oracle products might be an opportunity for Oracle to make a donation of hardware, software or services in recognition of that.

The industry will then provide the start-up funds for this hardware and service. These are expected to run up to $2 million and the industry earns their equal interest. Therefore Oracle, the industry and People, Ideas & Objects will each own one third of the firm and each will have some skin in the game as they say. But this will still not satisfy anyone with the removal of the monkey.

With the granting of the license to run the binary, Paul Cox or my designate, will sit as the Chairman and have two votes on the board of directors. Oracle and industry will each have one designate. The president of this hardware firm will be the innovative oil and gas producers designate, as will all of the staff of the facilities. The Chairman will have limited access to the facilities in all ways and at all times. In addition to running the binary of the application, these facililties will host the development environment for People, Ideas & Objects.

Invoicing of the costs associated with running the facilities will be sent to People, Ideas & Objects. These funds will be sourced from the annual assessments paid by the innovative oil and gas producers.

The Hardware Policies & Procedures satisfy the needs of industry with respect to their data, their processing and the costs associated with running these facilities. Absolute administrative control is provided to the producers. Oracle will provide their hardware, software and services in such a manner as the administration deems necessary and in compliance with the license granted.

This structure is proposed to expire on April 30, 2010, and is contingent on our 2010 budget fully secured. The oil and gas producers have a fully motivated team operating this critical resource. If your an enlightened producer, an oil and gas investor or shareholder, who would be interested in funding these software developments and communities, please follow our Funding Policies & Procedures. If your a government that collects royalties from oil and gas producers, and are concerned about the accuracy of your royalty income, please review our Royalty Policies & Procedures and email me. And if your a potential user of this software, and possibly as a member of the Community of Independent Service Providers, please join us here.

Technorati Tags:
 

Thursday, January 28, 2010

Royalty Policies & Procedures

In 1992 the Alberta Legislature enacted "Royalty Simplification". Conceived as a benefit for industry and the administration to reduce the burden in calculating and filing gas royalties. This initiative was to be achievable through a heavy reliance on Information Technology. A significant and ambitious program that promised greater ease for both government and industry. It's now almost eighteen years since that legislation was passed, how have things gone? The only conclusion that you could come to is; why would industry ever want to develop an accurate system in determining and remitting royalties? Is accuracy of royalty payments within their business interests?

Apparently not. To date nothing tangible has been built by any producer or software vendor and no plans currently exist to build a system. Within People, Ideas & Objects there is no calculation of royalties included in the Draft Specification. There is a place in the Joint Account to record the royalties that are due, but it will have no basis in fact or necessarily be in compliance with the regulations supporting those royalty assessments. It's an all-or-nothing proposition in terms of making the correct calculations. Therefore in today's marketplace the burden has fallen to the Alberta Government to assess invoices to the producers based on what they believe to be volumetric variances.

In 2009 Alberta's Auditor General reported the amount of royalty deficiencies may be upward of a quarter billion dollars. To be honest he really didn't know! What is known is that the industry will not spend a penny on royalty compliance software. Therefore why would People, Ideas & Objects expend producers money to meet the Alberta or any other jurisdictions royalty calculation? Who's responsibility is to ensure compliance and accuracy? Although it was conceived as a self assessing system, the governments ability to assess invoices for deemed deficiencies alleviates the producers of the responsibility to accurately calculate the royalty obligation.

In 1997 the Alberta government held a meeting with the software developers and asked why there was no usable software in the market. It was suggested that to build royalty based compliant system it would cost $40 million per software vendor. Where would this money come from? No investor or producer is willing to pay that cost. And therefore that is where we stand.

Unless Alberta, Saskatchewan, British Columbia, Mexico, Texas, Louisiana, Libya, Saudi Arabia, Petronas and others want to fund the systems development costs of royalty compliance, People, Ideas & Objects would not use any producer funds to build a system that is the responsibility of the royalty holder. In Alberta that is the provincial government and they have over $10 billion in annual royalty income, it is therefore their responsibility to ensure that they are collecting the right amount from the producers.

Whether the Alberta government would fund the costs of developing royalty compliance in People, Ideas & Objects is unknown. If the Auditor General has a perceived shortfall, that is the government's problem. How much an individual producer is overpaying could also be unnecessarily high. Royalties like taxes, have opportunities and issues with how the royalties are calculated. Those producers that are able to approach their royalty strategy aggressively have a substantial benefit in lower royalties and as a result, higher margins then other producers.

People, Ideas & Objects would like to build a fully compliant and accurate royalty system for all the jurisdictions in the world. Software, as we see in this discussion, is a small portion of the entire picture. The Community of Independent Service Providers is where the tacit knowledge exists in calculating accurate and fair royalty obligations. They are the ones that can employ the aggressive strategies on behalf of their producer clients, using the People, Ideas & Objects prospective Royalty Modules for the calculations. Software that is funded by the Alberta Government and verified to be accurate by Alberta's Auditor General.

If your an enlightened producer, an oil and gas investor or shareholder, who would be interested in funding these software developments, please follow our Funding Policies & Procedures. If your a government that collects royalties for oil and gas, and are concerned about the accuracy of your royalty income, please email me. And if your a potential user of this software, and possibly as a member of the Community of Independent Service Providers, please join us here.

Technorati Tags:
 

Monday, January 04, 2010

2010 Funding Policies and Procedure

Establishing 2010 as the year that this project stops the passage of time without consequence. We have a problem in oil and gas. That problems definition, size and scope is generally understood and agreed to. The current oil and gas companies organization models are unable to meet our needs and they are certainly not positioned to address our future. And by "our" future it is intended to define societies future. For this reason we need to move to begin the development of the Preliminary Specification, and have it completed in 2010. The next blog post will document the budget and planning necessary for this to occur. Key to attaining these goals is the scope of the effort has been determined to be 100 "People" years. People years is the same as the gendered "man" years in defining what the effort is. With statement of these goals it is necessary that we create the mechanisms to raise this money.

The budget will also document that the 2010 capital requirements total $10 million. By stating this it shows the serious nature of properly identifying the user community. The May 2004 Preliminary Research Report documents the issues the oil and gas industry is currently facing. The document also establishes the accuracy of the research that has been conducted in this weblog. Now that management of the oil and gas companies understand these issues, they should also understand the need to act.

Therefore I want to reiterate that the targets for funding these developments are primarily to the shareholders and oil and gas investors. They are the ones that have been adversely affected by managements co-opting the governance frameworks to better secure their existence. Clearly investors want and need an alternative governance and organizational method to build and manage their oil and gas assets. People, Ideas & Objects makes these changes in the Compliance & Governance Module of the Draft Specification. Our secondary markets are the National Oil Companies like Pemex, Petronas and Saudi Aramco. Quasi governments and corporations who hold the dual role of managing their countries oil and gas resources. Lastly our openness of communications enable the International Oil Companies and Independent producers to contact us and participate. The benefit in being part of this development is to have their unique organizational needs met by the software being built, and the CISP's service based offerings. Lastly Start-ups, primarily due to their lack of any substantial production, are also welcomed to this development.

Fees for 2010 have been set at $1.00 / BOE / Day. (A producer that produces 50,000 / boe / day would be assessed $50,000 for 2010). These fees are due and payable on or before March 31, 2010. Invoices will not be provided outside of this blog post. We are also establishing a Penalty component as follows: 1) Penalties are assessed on March 31 of the current year. Penalties are 300% of the years fees. 2) Any participant to this development will need to make up any and all Fees and Penalties back to January 1, 2010. Therefore if a producer joins in 2012, they will need to pay the Fees and Penalties of 2010, 2011 and 2012 before they would be entitled to participate in these communities, developments, or use of the software. Choosing to wait to join this development will preclude the communities and developments ability to cater to the producers needs. As time passes the inertia of these developments will make it progressively more difficult for one firm to address the scope of their development needs. 

The Business Model of People, Ideas & Objects provides substantial value to our subscribing producer firms. The basis of these developments uses the cost - plus model. Where these costs are amortized over the participating producers, once. Our objective, and that of the Community of Independent Service Providers (CISP) is to provide the innovative oil and gas producer with the most profitable means of oil and gas exploration and production.

Management may want to sit back and continue to belittle this process. Noting that it doesn't have this and hasn't got that. That it is a start-up with no proven record of delivering any commercial software. If the research, business model, user focus, using the Joint Operating Committee as the key organizational construct, and our understanding of the oil and gas industry from a business point of view doesn't sell you, nothing will. Our competitors will be far better at selling you the next great technology that comically brings you closer to your customers.

To participate please contact me at this email or call me by selecting the "Call Me" service on the bottom of the left hand column. And for those individuals interested in joining, please join us here.

Technorati Tags: