The Preliminary Specification Part VIII (PLM Part III)

In the past two posts regarding the Preliminary Specifications Output. We have noted two research projects for the community to undertake. The first research project relates to all three of the “marketplace” modules and is to determine if the user interface would incorporate elements of the “user vision”. The second research project relates to the Petroleum Lease Marketplace module and is to determine if the data and information is to be stored at the Joint Operating Committee level or at the producer. This would enable many changes, the most important of which was a revised division of labor and specialization in the administration of oil and gas.

The implications of the decisions from these research projects are far reaching. The entire Preliminary Specification is a substantial opportunity for the industry to participate in a significant redesign of how the industry operates. By realigning all of the frameworks of the hierarchy, those being the compliance and governance, with the legal, financial, operational decision making, cultural, communication, innovation and strategic frameworks of the Joint Operating Committee we are leaving no stone unturned. We have the opportunity to address everything and make it far more natural in how it operates.

The budget for the Preliminary Specification has taken on the controversial size of $100 million. We begin to see how that size matters in the type of work that needs to be done. These two research projects are only small subsets of the work that needs to be undertaken, but they are budgeted for. It is this type of research that will benefit the system as we move forward. These research decisions made at this early stage will have the dramatic impact on the system when it is developed. Change after the Preliminary Specification becomes difficult and very costly. Now is the time to address these difficult points, and now is the time to address them appropriately with the appropriate research budgets.

I don’t want to get into the details of what is required in each of the research projects. Once you start thinking it becomes quite a large issue. And that is why they will be addressed in the Preliminary Specification. For the industry to successfully provide for the consumers energy demands, it’s necessary to build the systems that identify and support the Joint Operating Committee. Building the Preliminary Specification is the focus of People, Ideas & Objects. Producers are encouraged to contact me in order to support our Revenue Model and begin their participation in these communities. Those individuals that are interested in joining People, Ideas & Objects can join me here and begin building the software necessary for the successful and innovative oil and gas industry.

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

The Preliminary Specification Part VI (PLM Part I)

We now move to the next “marketplace” module in the Preliminary Specification, the Petroleum Lease Marketplace (PLM) module. The PLM is the most interesting marketplace module as its objective is to replicate virtually what the physical oil and gas marketplace is. That begins of course with Petroleum Leases. The discussion of the Petroleum Lease Marketplace module will take a few posts as its scope is rather broad and the concepts far reaching.

When we are replicating the physical oil and gas marketplace, the Petroleum Lease is the source document that is the common denominator of all activity and ownership within the industry. Any physical oil and gas assets will be attached to some lease, agreement, rights or concession granting the holders the rights and privileges of ownership, lease or rental. These are the things that are contained within a marketplace. They are what are purchased and sold, bargained and traded for. They are the things that people are recruited to provide services for. Generally a marketplace is a dynamic and evolving commercially oriented hub of activity. That is what we are replicating in the PLM.

The second point that I want to put across today is the manner in which some of the interactions may take place in the PLM, the Resource Marketplace and Financial Marketplace modules of the People, Ideas & Objects application. I have been hesitant to promote this “user vision” too aggressively due to the controversial nature of the vision. Its something that the community will need to determine if it wants or needs to include the vision in the Preliminary Specification. Please read the user vision here.

Simply it shows a three dimensional version of a virtual representation of a marketplace. One which avatars looking to conduct business on behalf of their human representatives. I think it may have validity in the future of business. I could be wrong. If the “user vision” is necessary will be a determination of the community in the Preliminary Specification. I expect this decision to be based on substantial research and user input, not an initial show of hands as to who thinks its a good idea today. This may have some value for the innovative oil and gas producer. If so we will need to determine that in the Preliminary Specification, design those features and engineer them into the application.

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

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

McKinsey, The Psychology of Change Management

McKinsey, once again, have published an article that provides real value and discussion to the work we are doing here at People, Ideas & Objects. Change is a difficult process to manage. This article discusses the psychology around change management within organizations, and therefore is relevant, but I want to mention a few aspects of People, Ideas & Objects unique perspective before we review this paper.

There are two types of changes that affect organizations. The first type of change is to steer the ship in a new direction, one that is believed to be the better choice for all concerned. The second type of change is the type that is forced upon an organization by events that are beyond the control of anyone. People, Ideas & Objects is oriented to the second type of change. One that addresses the scope of the forces of change that are being exercised on the oil and producer.

The forces of change that are currently being asserted on the oil and gas producers are significant. The change in oil and gas prices affects all aspects of a producer firm. At the same time the volume of engineering and earth science effort per barrel of oil continues on a steep upward trajectory. A third major change that is occurring is what I would call the maturation of the Information Technologies (IT), bringing new and innovative ways of doing business. These are of the type of changes that are seen once a century. Fundamental changes that have the power to re-configure the makeup of an industry.

To accommodate the changes that are acting against the producer firm, People, Ideas & Objects prescription is to align the producers internal processes. By simply moving the compliance and governance frameworks to be in alignment with the Joint Operating Committee’s legal, financial, operational decision making, cultural and communications frameworks. Our research has shown that this alignment increases innovativeness and accountability, to name just two of the key benefits.

Alternatively, left unaddressed, these changes will soon cause producers to outspend their revenue streams. These losses will also exercise the type of change that is needed within the producer firm and the oil and gas industry. Producers therefore need to choose to ride these forces or continue to resist them. Either way that these changes are made, People, Ideas & Objects will provide the systems and applications that provide the innovative oil and gas producer with the most profitable means of oil and gas operations.

Our claim to be the most profitable means of oil and gas operations is a bold statement. And we assert that this is provided through our value proposition and the enhanced division of labor the software will identify and support. By allocating the one time development costs across the producer base, the costs of software development will fall to a small percentage of what firms have traditionally paid for ERP systems.

With respect to the second component of our claim to being the most profitable means of oil and gas operations. For any industry to increase its economic output demands that an enhanced division of labor be used. This economic theory has been proven time and again over the last few hundred years. We now live in times where to expand on the current division of labor and specialization requires that advanced Information Technologies be employed to identify and support them. People, Ideas & Objects is configured to develop the software that will provide these to the producer firm. This is our fundamental competitive advantage.

McKinsey’s discussion on change is of the first type, or deliberate change an organization undertakes. Nonetheless it provides us with some valuable information regarding change in general.

Over the past 15 or so years, programs to improve corporate organizational performance have become increasingly common. Yet they are notoriously difficult to carry out. Success depends on persuading hundreds or thousands of groups and individuals to change the way they work, a transformation people will accept only if they can be persuaded to think differently about their jobs. In effect, CEOs must alter the mind-sets of their employees—no easy task.

People, Ideas & Objects have presented a workable vision of how the innovative oil and gas producer would operate. This vision is represented in the Draft Specification. People can then see the effect of working in that environment and adjust their actions to fulfill that vision and enable the innovative oil and gas producer.

But what if the only way a business can reach its higher performance goals is to change the way its people behave across the board? Suppose that it can become more competitive only by changing its culture fundamentally—from being reactive to proactive, hierarchical to collegial, or introspective to externally focused, for instance. Since the collective culture of an organization, strictly speaking, is an aggregate of what is common to all of its group and individual mind-sets, such a transformation entails changing the minds of hundreds or thousands of people. This is the third and deepest level: cultural change.

With the benefits of people having this vision in mind. And using the Joint Operating Committee as the key organizational construct of the innovative producer, people will be able to think differently about their work.

Employees will alter their mind-sets only if they see the point of the change and agree with it—at least enough to give it a try. The surrounding structures (reward and recognition systems, for example) must be in tune with the new behavior. Employees must have the skills to do what it requires. Finally, they must see people they respect modeling it actively. Each of these conditions is realized independently; together they add up to a way of changing the behavior of people in organizations by changing attitudes about what can and should happen at work.

In this next quote McKinsey note that cognitive dissonance will affect the people who believe in our purpose. I can only suggest that those people begin the process of joining People, Ideas & Objects or the Community of Independent Service Providers.

The implication of this finding for an organization is that if its people believe in its overall purpose, they will be happy to change their individual behavior to serve that purpose—indeed, they will suffer from cognitive dissonance if they don’t. But to feel comfortable about change and to carry it out with enthusiasm, people must understand the role of their actions in the unfolding drama of the company’s fortunes and believe that it is worthwhile for them to play a part. It isn’t enough to tell employees that they will have to do things differently. Anyone leading a major change program must take the time to think through its "story"—what makes it worth undertaking—and to explain that story to all of the people involved in making change happen, so that their contributions make sense to them as individuals.

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.

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The China Syndrome

In a recent post we highlighted the EIA’s revised energy supply forecast. The chart from that post shows a 1 million barrel per day reduction in current production volumes. Econbrowser is now publishing anlysis of the EIA’s energy demand forecast, focusing on the impact that China will have in the marketplace. 

Providing the market with adequate energy supplies would be a difficult issue on its own. Adding the unprecedented demand expected from China, provides a real opportunity for the innovative oil and gas producer. The author of the econbrowser article, Stephen Kopits notes an interesting characteristic of energy demand.

Oil demand does not grow linearly with GDP. Rather, the bulk of oil demand growth occurs in the two decades during which societies typically acquire motor vehicles, after which per capita oil demand flattens. For example, per capita oil consumption in the United States is today lower than it was in 1979, even though per capita income has increased substantially since.

That is not to say that the U.S. demand for energy has dropped. The focus on motor vehicles alone, which is what Kopits reviews, would therefore limit the potential demand from China to just that form of consumption. If we are to gain an understanding of the volume of potential demand from China, motor vehicles will be a portion of that demand, but not the sole source of the demand increase. Now the scary part of the analysis. Comparing the per capita increases in energy use of Japan (1960 - 1973) and Korea (1976 - 1996) and using either of those trajectories in China’s situation shows...

In any event, without delving deeper, we might expect China's steady state demand for oil could prove not less than that of more advanced Asian nations. Based on the experience of Korea and Japan, China's current population would be expected to consume approximately 55 mbpd at steady state (when per capita consumption plateaus), or nearly 2/3 of current global oil production, were the supply available.

One might argue that this is an unreasonable amount of energy consumption. It imputes systemic gridlock throughout China, and therefore would define the upper limit of what is possible. Nonetheless the volume of energy demand will be substantial. In this next quotation Kopits argues that the EIA’s forecast demand is similarly too low.

By contrast, the EIA sees China's oil consumption at only 10 mbpd for 2015, a growth rate of approximately 2.7% from current levels, and at only 16 mbpd by 2030. Is this consistent with a country whose vehicle sales are up 56% in the first five months of the year? Where sales of Audi's are up 77% and those of BMW have doubled compared to the first five months of last year? Is China truly going to be satisfied, as the EIA would have it, with less than 1/5th of the per capita oil consumption of Korea in 2030, even though they should be similar by that time?

and

The differences in views about China's oil demand outlook have enormous policy implications. If the EIA is right, and China will forget how to grow, then pressures on the oil supply will be modest. On the other hand, if China is to develop like other countries in Asia, the pressure on the oil supply will be crushing, with oil shocks, recessions, and war all conceivable outcomes. The energy--as well as the economic and security--policy differences between the two scenarios are like night and day.

I don’t think it has to be that way. Call me an optimist but I think that whatever China, the U.S. and all others need in terms of energy, it is possible to supply them at prices that reflect that demand. The costs associated with the exploration and production will be substantially higher then what they are today. The easy stuff is gone, that is something that we can all agree on. The prices and volumes of production are unknown at this time, with demand growth from China, the oil and gas business has moved into a different era of operations. We know that a commodity like oil or gas is affected by the demand from China no matter where the source of production is. 


Today’s oil and gas firms, particularly the large Independents and International Oil Companies are having difficulty generating value. The cost structures have caught up to the commodities prices and the performance of these bureaucratic firms is diminishing rapidly. If we look forward to 2030 we can assume that the way these firms are managed today will be history. No one would establish a firm today to operate in the fashion of the bureaucracy in 2030. 


What we do know about 2030 is that the industry will be using advanced systems to manage their operations. It is also reasonable to assume that the Joint Operating Committee (JOC) will be the key organizational construct of the innovative producer. The use of both the technology and the JOC will be decided upon today. Approaching issues that are as broad in scope as the supply and demand of energy, that present this level of opportunity, can not be approached in the same old bureaucratic fashion. We need to pursue a definitive course of action, by developing the Draft Specification of People, Ideas & Objects. 


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 has been proven, this reorganization could 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.

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Velocity of Productivity

Velocity of productivity is an idea that came to me as a result of watching this YouTube video of Google CEO Eric Schmidt. As with many of the talks that he gives, this one provides some tangible ideas that can be built upon, I highly recommend watching the entire video, particularly the Q & A.



Of interest he notes the explosion in information has happened. During the beginning of time to 2003 Schmidt states 5 Exabytes of data were generated. In just the past seven years we are now producing 5 Exabytes every two days! This fact got me thinking about the type and pace of work that was being done in 2003. How in many ways it seems that the past seven years feels like several generations difference in terms of the scope of the changes. It seems we should ask ourselves how much more productive we are today in comparison to 2003? Once we ask that question, you begin to wonder how we will maintain our productivity growth in the future, or, how will we deal with the demand for increased productivity velocity.

Not only is the volume of productivity increasing, the work that we are doing is changing. Ideas and decisions are the two areas where computers are unable to affect any change. Making ideas and decisions the type of work that we can do effectively is the business of People, Ideas & Objects and the Community of Independent Service Providers (CISP). I see the pace or velocity of ideas and decisions being the area that will now be influenced by the Information & Communications Technology Revolution (ICTR). Using the metrics of the information explosion, we can almost map the 200 fold increase in information directly to the volume of decisions that will be made in seven years. Therefore, however many decisions you make today, multiply it by 200 to get a feel for the number of decisions that will be made in seven years. Whether these assumptions are reasonable or not is not the point. Clearly what is in process today is the velocity of our productivity is accelerating on a logarithmic scale.

In the video Schmidt states the only constraint to doing his job as CEO is time zones. Noting that all CEO's should be operating at that level. It becomes obvious to me that if we accelerate our idea and decision making velocity, our only constraint are time zones. Spending time getting to the office in the morning to meet attendance requirements will be a destruction of up to 3 hours of our day. A day where the velocity of productivity does not afford this type of luxury to be expected of managers. When location is not a constraint, "what's an office" is maybe a question that should be asked.

Based on this slight diversion in thinking! I see the economy is responding to what Professor Carlota Perez has always maintained. The old economy ceases to be able to carry the weight of society, and the new economy is robust enough to carry the substantial weight of the old economy and much, much more. We see these factors in many of the technology companies earnings surprises and I expect the pull of a more robust and exciting ICTR based economy will begin to draw people into higher velocities of productivity.

I would like to invoke elements of the vision of the Draft Specification. Three of the modules, the Petroleum Lease, Resource and Financial "Marketplace" modules are using the marketplace as the metaphor for where people interact. The user vision involves the use of Avatars, both virtual and real, in which people can interact within those marketplaces. More information on these elements of the Draft Specification are available through the review of this blogs archives and our User Vision. Without this type of environment, purpose built for the oil and gas industry, our productivity velocity will not reach its full potential.

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.

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McKinsey Internet of Things

We have another McKinsey document that provides a keen insight on how the Information & Communication Technology Revolution will affect everyone. This paper entitled "The Internet of Things" is very much on topic. I highly recommend reviewing it.

Of particular interest is the fact that this article dove tails with the People, Ideas & Objects Technical Vision. Recall this vision suggests that since the oil and gas industry is comprised of sciences around heat and pressure, the use of sensors to monitor and control elements of the production cycle is possible. This monitoring and control would help in making the industry more productive and enhance the business decisions made, if, firms were able to deal with the volumes of data.

The four cornerstones of the Technical Vision are as follows.

• IPv6 - Providing unlimited addressing for those sensors to be accessed and controlled.
• Java - Strong Static Typing providing assurance that the sensor your controlling is really the one that you want, and not a mistake.
• Wireless - Ubiquitous networks anywhere, anytime.
• Asynchronous Process Management - The ability to deal with data and information in a more controlled fashion.

A couple of interesting points that McKinsey suggest the "Internet of Things" could provide are as follows.

Automation and control

Making data the basis for automation and control means converting the data and analysis collected through the Internet of Things into instructions that feed back through the network to actuators that in turn modify processes. Closing the loop from data to automated applications can raise productivity, as systems that adjust automatically to complex situations make many human interventions unnecessary. Early adopters are ushering in relatively basic applications that provide a fairly immediate payoff. Advanced automated systems will be adopted by organizations as these technologies develop further.

The impact within oil and gas could be much higher productivity and greater value. The scenario that I have detailed on this blog is that of a pricing model that provides the producer with price-maker characteristics. The scenario has the Joint Operating Committee deciding that their production costs of $50 / barrel require that production begin to be scaled back 25% at $80, 50% at $70, 75% at $60 and shut-in at $50.00. The input being the market price would drive control systems to shut the well down to the correct level of production. Otherwise producers may find they continue to produce at a loss and the price drops to $25.00. This being a predetermined and agreed to threshold where the operational decision making authority resides - The Joint Operating Committee - and as a result can be operated in an automated fashion.

Software to aggregate and analyze data, as well as graphic display techniques, must improve to the point where huge volumes of data can be absorbed by human decision makers or synthesized to guide automated systems more appropriately.

McKinsey go on to suggest that these types of systems will require new organizational models be adopted by firms.

Within companies, big changes in information patterns will have implications for organizational structures, as well as for the way decisions are made, operations are managed, and processes are conceived. Product development, for example, will need to reflect far greater possibilities for capturing and analyzing information.

And a dedicated software development capability, like that which is discussed here at People, Ideas & Objects.

Companies can begin taking steps now to position themselves for these changes by using the new technologies to optimize business processes in which traditional approaches have not brought satisfactory returns. Energy consumption efficiency and process optimization are good early targets. Experiments with the emerging technologies should be conducted in development labs and in small-scale pilot trials, and established companies can seek partnerships with innovative technology suppliers creating Internet-of-Things capabilities for target industries.

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.

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Restating Our Value Proposition.

Another reason that the oil and gas producers should financially support this blog is our compelling value proposition. Based on a business model that allocates the costs of development over the population of subscribing producers. This creates value by assessing the producers only once for the development costs plus an element of profit as developers. The Community of Independent Service Providers (CISP) who provide direction and guidance to the developers are part of these costs. However, their costs in using the software to support the producer will also be billed directly by the members and do not attract the profits element for People, Ideas & Objects.

These are user-driven developments that have the user in the forefront of designing, implementing and supporting ERP software for their producer clients. This is a complete restructuring of the industry in order to "Provide producers with the most profitable means of oil & gas operations".

The perspective of People, Ideas & Objects towards software is that it's a journey and not a destination. An innovative oil and gas producer can not subscribe to a fixed ERP system when the political, technical, logistic and financial difficulties continue to escalate. As things change so should the software and the CISP who use it. This dynamic attribute can only be provided in the fashion that is discussed in this software developments value proposition.

In order for the success of this development and community to provide value to the producer. We need to provide the most profitable means of oil and gas operations. This is People, Ideas & Objects competitive advantage. It's important to realize that our competitive advantage can only occur if the strategy of the producer focuses exclusively on their competitive advantages. And lets be clear the choice of ERP system has absolutely nothing to do with an oil and gas producers competitive capability or advantage. For a producer to attain the success they are searching for. They need to build the engineering and earth science capability within their firm. In addition their asset base is where their scientific capability will be applied. People, Ideas & Objects competitive advantage only provides the producer with the knowledge that from an administrative point of view, it is the most cost effective and efficient means of production.

If you are producer and this value proposition resonates with your perspective of the future oil and gas producer, please review our Funding Policies & Procedures. If your a user, please join us here.

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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.

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Data and the Military

People, Ideas & Objects have define a Technical Vision that identifies and works to mitigate a technical issue that all areas of society need to address. The issue is the ballooning of data. Noted in National Defence Magazine an article entitled "Military Swimming in Sensors and Drowing in Data" it is stated “The appetite never seems to slow down.” As the energy industry is mostly based on the science of physics, chemistry and biology, it is believed this data growth will fuel innovative use and application in the industry. Those firms that have the capacity and ability to deal with this volume of data will have competitive and financial benefits arise from this capability, but only if this software development and community are funded.

The Community of Independent Service Providers and People, Ideas & Objects - Technical Vision suggests four cornerstone technologies enable this data explosion. At the same time, these technologies provide the ability to deal with the problem / opportunity. The four technologies are;

1. Object based technologies, and particularly Java.
2. Asynchronous Process Management.
3. IPv6
4. Wireless.

Further information on the Technical Vision can be found here.

Today's blog of Richard Fernandez notes this issue is affecting the U.S. Military. And of particular concern, is today's Wall Street Journal video of how Predator Drones have been monitored by insurgents. (If that specific URL doesn't work, search WSJ's video site for Predator Drones.) This issue of the Predator Drones is also noted in Fernandez's second blog post.

Some may note "This explosion of data has occurred for the better part of the last 40 years. Computers have always presented this difficulty and the energy industry will address this problem as it has before." I hope not, because the volume of data and the ability to use that data are something that will have to be purpose built and dynamic. What can be monitored can also be controlled.

People, Ideas & Objects has listed this Technical Vision as the manner in which this community will approach the problem. By exploiting the advantages and having the commercial benefits accrue to those that have a handle on them, I think, will be the difference between success and failure in the oil and gas industry. Critical to the success of the oil and gas producer will be this change oriented and innovation supporting community and application.

The Draft Specification considers a scenario where the use of this type of data and the ability to manage it is possible in a fundamentally more profitable way. The example is the manner in which energy prices can dictate, on a pre-determined and agreed too basis, at what price level would trigger the production was scaled back. If prices were to drop a predetermined percentage, then the production would be autonomously scaled back by X%. And these decisions could be executed on an iterative basis to fully exploit the reserves of the specific Joint Operating Committee (JOC).

These are business decisions that can be made by the Joint Operating Committee as it holds the legal and operational decision making control of the reserves underlying the property in question. (And something today's bureaucracies can not even begin to consider.) If the JOC has the authority, and the legal agreements consider this opportunity, then the industry can move from a price-taker to a price-maker position. This last point should be coming more evident as a necessity in the industry. Leaving everything to produce at 100% and then watch the prices drop year after year must get a little tiring. Only a fool would continue to sell his resources at a price less then its cost. And in an escalating cost environment, we have many managers who know they do not have the tools to deal with this problem, and yet will not support this software development project and associated community.

If it is generally agreed by the producers that an additional $20 trillion will be spent on oil and gas operations in the next 20 years. I would suggest the producers attain these types of capabilities so that they can prove to their shareholders they have the capabilities to address these difficulties and profit from them. Or is it really assumed that the bureaucracies can exist in that prospective environment, and provide returns to those outside of their own management team. Please join me here.

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A Brief Summary

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

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

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

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

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

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

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Producers Have Choices

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

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

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

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

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

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

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

Modules available in Oracle Fusion.

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

Vs. People, Ideas & Objects modules

Generic Modules

Security & Access Control Module

Accounting Modules

Partnership Accounting Module

Accounting Voucher Module

Marketplace Modules

Petroleum Lease Marketplace Module

Resource Marketplace Module

Financial Marketplace Module

Producer Modules

Compliance & Governance Module
Research & Capabilities

Analytics & Statistics Module

Joint Operating Committee Modules

Knowledge & Learning Module
Performance Evaluation Module

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

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

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

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

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

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Another step closer.

We live in a world where the communicative ability of each individual is, for lack of a better word, unlimited. What I can do with the technology available to me is truely remarkable. Voice, text and video are all being captured, transmitted, and understood by their recipients. What are they talking about, ideas. It use to be that if you wanted to make a personal phone call at work, use of the telephone for non business purposes was not permitted. As ridiculous as that sounds, and it is ridiculous, it is not too different today. The majority of use of the computer at work is limited to the business areas that you are involved in. Browse to a "not approved" site and you could be called on it. This doesn't turn us into the nanny state, it gives the IT Manager something to do.

What we are doing is spending upwards of two to two and half hours a day to travel downtown to use the computer at the office. Not to much difference to the way that phones used to be regulated. Why wake up to spend all that traveling time for your managers mandatory attendance. When you can be productive as soon as you make a cup of coffee. It doesn't make to much sense other then the ability to so, doesn't exist, because the bureaucracy is unable to change.

The BBC is reporting today that Wifi, which is a cornerstone of the People, Ideas & Objects Technical Vision, is going through another specification called Wifi Direct. Enabling point to point network creation. 

It will let wi-fi devices like phones and laptops connect to one another without joining a traditional network.

The future that I see, and the one the Technical Vision provides, is that people will work in much the same way they are communicating today. Gripes that people were concerned with of working, where ever and when ever, big brother watching, or never get a moments rest, have been replaced with the freedom of not being at the behest of the phone ringing, somewhere they are not. With video being recorded of your every move the belief was this would be an invasion of privacy. These concerns are mitigated by the knowledge that you are being recorded, and the freedom these devices otherwise provide.

People, Ideas & Objects would extend these freedoms to having the opportunity to do your work in the future in the same manner that you live your life today. One in which you the User has a direct influence on. If data security is really the concern of the management then they had better get on board with this software development project. The issue I see is that the bureaucracy doesn't want to give up control of the access to the data.

In the past, many times I would think there is a better way to do the job I was tasked with. Many times I thought this would be so much easier if I could get a new report, or other information to make the job easier. This was easier to do twenty years ago then it is today. How many times have users thought that If I had the authority and access to the data and developers, I could make this job much easier or more timely. People, Ideas & Objects is the opportunity to have these types of interactions available to the users. Please join me here.

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MGI on Global Financial Markets

The McKinsey Global Institute is the research and development arm of McKinsey Consulting. (Registration Required) They have published "Global Capital Markets: Entering a New Era".

MGI’s mission is to help leaders in the commercial, public, and social sectors develop a deeper understanding of the evolution of the global economy and to provide a fact base that contributes to decision making on critical management and policy issues.

To suggest that I am overwhelmed by the scope of the economic problems that we face. Is something that I would never have believed possible. I'll leave it to those that want to review the paper to do so, however, it is stark. My "job" here at People, Ideas & Objects is to make the ideas compelling for like minded individuals to organize and act. I call on the shareholders of the existing oil and gas firms to build the software discussed in this blog. To act in financing the building of the application modules in the Draft Specification. As Paul Romer recently said in terms of his Charter Cities initiative, "All that holds us back is a failure of imagination."

After 12 months of the global credit crisis, it is easy to see the difficulties that continue in the marketplace. In reviewing this MGI document it is clear that serious problems remain. My own opinions are not of importance, but it really seems that we have been using debt to fuel the western lifestyle for the past 20 years. To find the value that should have been generated during this past 20 years, is a lonely and difficult task. I see the bureaucracy as being the main culprit here. Accusing the bureaucracy is somewhat self serving for me to say, but I don't see any value being generated through this archaic form or organization. Continuing on in the fashion that we are, shows me that we will be challenged in keeping the global economy moving forward. 

I leave you with a few select and sobering quotes.

Going forward, our research suggests that global capital markets are entering a new era in which the forces fueling growth have changed. For the past 30 years, most of the overall increase in financial depth—the ratio of assets to GDP—was driven by the rapid growth of equities and private debt in mature markets. Looking ahead, these asset classes in mature markets are likely to grow more slowly, more in line with GDP, while government debt will rise sharply. An increasing share of global asset growth will occur in emerging markets, where GDP is rising faster and all asset classes have abundant room to expand.

Given the decline in asset values and growth in debt, we see that leverage in the global economy has increased during the financial crisis rather than declined. This is true for many households, governments, banks, and some segments of the corporate sector. In aggregate, the global debt-to-equity ratio nearly doubled, jumping from 124 percent in 2007 to 244 percent by the end of 2008. This raises the vulnerability of the global economy to further shocks. It also indicates that the long process of deleveraging in the private sector has at best only just begun, and in the public sector has yet to begin.

One of the most striking consequences of the financial crisis was a steep drop-off in cross-border capital flows, which include foreign direct investment (FDI), purchases and sales of foreign equities and debt securities, and cross-border lending and deposits. These capital flows fell 82 percent in 2008, to just $1.9 trillion from $10.5 trillion in 2007 (Exhibit 7). Relative to GDP, the 2008 level of cross-border capital flows was the lowest since 1991. This created turmoil in the global banking system, causing severe liquidity crises and hurting borrowers dependent on foreign loans. It is unclear at this writing how quickly these flows will recover.

Although the crisis started in the United States, it followed multi-year borrowing expansions in many other countries as well. Total global borrowing—comprising all loans, forms of credit, and debt securities—rose by 70 percent from 2000 through 2008, to $131 trillion. Not only has the recent credit market turmoil nearly stopped this growth, but it has set the stage for a long process of debt reduction going forward.

Many parts of the economy will need to be rebuilt. Oil and gas is rebuilding around the Joint Operating Committee and the vision of the Draft Specification. Please join me here.

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More comments on Google Wave

I have a real passion for Information Technology. Applying IT to my understanding of the business of the oil and gas industry is more fun then work. The recent maturation in the Information Technologies bring together an opportunity to increase productivity and make life more interesting. One of the technologies that I saw over the summer had me thinking that when we incorporate the framework in the People, Ideas & Objects applications, we could make a big difference. That technology is Google Wave which I report about here and to a lesser extent here.

I also think Google Wave is one of the frameworks that will be a game changer. A game changer that is being overlooked as to its importance and impact, particularly from what I would call the classic ERP vendor. If we look at the People, Ideas & Objects technical vision we see the elimination of client server computing. Asynchronous Process Management and IPv6 are two of the four cornerstones of the technical vision. These intimate the power, particularly in oil and gas, in which these technologies can be deployed. Add to this the User focus of this project and the potential environment for innovation, to me, is intoxicating.

Today I ran into this blog post that sees this same opportunity. As I indicated in my previous post, pooling the resources of the producers to the various Joint Operating Committee's (JOC) is done through the Military Command & Control Metaphor which is an underlying theme throughout the Draft Specification. The blog posts author Jason Kolb notes;

Take CRM and ERP systems for example.  Instead of customers emailing you about a sale and then sending purchase orders, it will be part of the "sale wave".  The entire sale, from start to finish, will be encapsulated in a single wave, bringing individuals in and out of the conversation as need.  The ERP and CRM platforms themselves will be participants in this conversation, recognizing the purchase order, executing the work-flow, processing the order, making the order details available to manufacturing or delivery in a sub-wave, and then making the receipt available to the customer and the sales team.  Your CRM Whether you approve the purchase order from your desktop, your phone, or a point of sale device, makes no difference--they can all be directly addressed and participate in the conversation natively.

The conversation that is mapped by the Google Wave product, embedded in the People, Ideas & Objects application modules will document transactions. Recall transactions are key to modules like the Accounting Voucher. As not only the definition of the boundary between market and firm. But most importantly, is that designing transactions is the higher value added work that is done in the oil and gas industry. It is how the work gets done and these Wave conversations will be inherent in the Accounting Voucher as part of these transactions. The thing I see that makes this technology important to me is; the natural means of documenting and processing User designed transactions. Please join me here.

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The rise of virtual service grids.

I found this article on the dzone.com web log, click on the title of this entry to be taken to the article. It is a reprint or summary of a book about Service Oriented Architectures (SOA). It has an interesting point of view regarding the changes that are occurring due to what they call the "virtual service grid technology". The conclusion states;

The changes brought by virtual service grid technology will likely transform the information industry in ways that are difficult to fathom from our present day vantage point. We are essentially at an inflection point defined by two forces: the transition from an up front investment model for IT requiring large capital outlays to a pay-as-you-go model. Market elasticity dictates that when price points go down, demand increases, partly due to pent-up needs, but perhaps more so because new entrants enter the field who could not afford to play before. This means increasing participation by the members of the "long tail" of cloud computing: small businesses, emerging markets and even individuals coming up with a great idea.

Second, the acceleration of the time it takes to build an application by orders of magnitude means the evolutionary process gets accelerated by the same rate. The evolutionary refinement of hundreds of generations taking place in the same time it took to develop a traditional application is mind boggling. (See also 1 , 2)

I try to stay away from getting too involved in the technical attributes of People, Ideas & Objects. Other then the Technical Vision, I prefer to stick to the business reasons to be developing the applications modules.

I also maintain that the future earnings of anyone working will be generated through the ownership or access to Intellectual Property (IP). The entirety of the IP of People, Ideas & Objects is available to the Community of Independent Service Providers through a license. Those that will be successful in the Community of Independent Service Providers will be able to use the IP in combination with their unique service offering. Providing a hybrid styled source of revenue for their firm.

The second point in this articles conclusion is something that has not yet been proven, but will be soon. Standing on the shoulders of giants has been a term in academia that reflects the ideas are built on the history of many ideas up to that point. The same concept is about to be realized with respect to the ability to build off of the extensive infrastructure of the Java Programming Environment. Many of the difficult and complex attributes of systems development have been standardized and developed.

With reasonable royalty payments to Sun for the use of Java, a development project with the scope of People, Ideas & Objects accesses many of the components that will make the majority of the process management and functionality from Sun's various software products. With out being too specific this substantially eliminates the time necessary to develop systems. Today the real key to the quality of these systems is the end users involvement. Please join me here.

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