Steve Jobs and his Apple iPod.

Today was a great day for the Apple faithful with a high profile presentation of the new iPods by Steve Jobs. I want to reiterate the risks of these WiFi enabled hard and ram disk devices in the corporate environment. Pod Slurping is the ability to access and copy corporate information for unauthorized purposes. Now with WiFi the risk rises. A relatively remote risk if you have a secure network, but with all things network, the number of ports and the number of methods is limited by human imagination. These devices, along with the SunSpots and Motes that I recently wrote about, will be perceived by some people as being either curses or highly effective tools. Since I am a glass half full type of thinker, I'll just mention how I use iPods today and what potential they have in the hands of the oil and gas industry that is supported by a capable software development vendor.

I currently have two iPods that I use constantly. I have used iPods for over four years and find them to be an indispensable tool in this day and age. Firstly I use an iPod Shuffle, the clip on 1GB model that I fill with PodCasts. The iTunes Music Store has many quality podcasts that I subscribe too. Unfortunately I listen to up to 2 - 3 hours of casts each day. The Shuffle allows me to control when and where I can listen to them. I clip it to my lanyard and have the earphones handy. A simple click of the play button and I'm right where I left off. With over 15 hours per charge, I have many PodCasts that I want to concentrate on when I am commuting, waiting, or just out and about. I like to think of this time as an increase in my productivity as I can generally listen and do something mindless at the same time.

What I have loaded on my Shuffle right now is Bloomburg on the Economy, EconTalk, Google Developer Podcast, The McLaughin Group, Meet the Press, 4 courses of lectures from UC Berkeley (2 economics, 2 information technology), Stanford which includes the Hoover Institute, MIT, Dr. Moira Gunn Tech Nation, NewsHour with Jim Lehrer etc. Jobs stated that there are now 125,000 podcasts, 25,000 video podcasts, so there should be something for everyone. I frequently felt frustrated that I was not keeping up on this valuable content. Now I can synch as frequently as I like and have the most up to date information available to choose from during the day, all thanks to the Shuffle.

I also have had a classic iPod for over 4 years and find them an indispensable and valuable tool for travel and the like. I also back up all of my data to them, frequently, creating a corporate risk if you lose the device. With the ability to watch movies, television, YouTube or Google videos they can provide an asynchronous portal to the entertainment / information you enjoy or need.

What will the iPod provide in the near future? I think we have seen enough of these devices development to know that the iPhone will become standard fare for the productive worker. Email may seem like a small increase in capability, however, email with rich media is a completely different tool. People are frequently working with more complex ideas and concepts. Text is the clearest and easiest to produce, but many important concepts can be articulated more clearly in rich media. Speeches, presentations and corporate summaries will be the types of media that can and will be produced. For anyone in the audience of a company that needs to know, the presentation could become central to the quality of its communications. Just as I think blogs will soon replace resumes, companies will need to revisit the definition of their audience and the communications to the people they need to communicate with.

The Technical Vision that I have presented for this software development project, noted that the volume of data will grow exponentially. I have also noted the need to be tied down into an office is becoming more redundant each day, with possibly energy, or rather the saving of it, may be the killer app for ubiquitous computing, Demanding that people be available anywhere and at anytime they are required. iPhone will be your portal to the control of the demands of daily living and completion of your work.

Or maybe transaction processing will be the killer application that brings these devices into the corporate world. That is where I am putting my time, money and energy. In bringing this software development to the 21st century oil and gas user and producer.

Technorati Tags: Genesys, Apple, Software, People

A Variety of Upgrades

Some very good news, we now have a "presence" in the three main cities that I see this software development application appealing to. Calgary, Aberdeen Scotland, and Houston in Texas.

To contact me call;

• Calgary 403-467-7971
• Aberdeen 44-122-467-6304
• Houston 713-965-6720

We also have a new domain name and it is "www.people-ideas-objects.com". This will be the domain that is used by all of the users of this proposed application. The "front end" of the application will be "Google Apps" which provides each of our users with the basic collaborative environment. This environment will include 10GB of email, collaborative "Google Doc's and Spreadsheets", calendar, contacts, chat, voice, SSO (Single Sign On), home page and hosting of each users content for information, marketing or whatever they may need or want from a web page. (Think what Intellectual Property you have today, and may have tomorrow. And then consider how your intelectual property may augment your retirement income.)

As time passes and we complete the proposed software developments, users will be able to interact with other users of this application. Software developers and other people interacting in the markets and / or firms of the industry. Google provides us with this virtual environment, and then through the Google API (Application Programming Interface), users will interface to the modules I have described here, as well as, the transaction and processing or "back end" of this business application. A virtual environment that will be available anywhere and at anytime. Readers of this blog may find these software developments maturing around the same time most are collecting their gold watch! So get involved today!

I chose this domain name for a very particular reason. To have the potential users of this application begin to think how each of us in the industry will operate in the Peak Oil era. In the "old" economy it was believed that to expand you needed one of three basic building blocks. Capital, Transportation and / or Communication. University of Stanford Professor Paul Romer coined the following comments. (See also here). In summary he has restated the basic elements of the new economy are People, Ideas and Things. My twist on this is the fact that as object oriented software developers, (including those developers that may be working in the industry now), objects are our perspective. A small play on words but I think the potential users of this system should get some good ideas what their efforts may involve after 5:00 PM local time, or for that matter, anytime.

Some select quotes of Professor Romer's.

As one of the chief architects of "New Growth Theory," Paul Romer has had a massive and profound impact on modern economic thinking and policy making. New Growth Theory shows that economic growth doesn't arise just from adding more labor to more capital, but from new and better ideas expressed as technological progress. Along the way, it transforms economics from a "dismal science" that describes a world of scarcity and diminishing returns into a discipline that reveals a path toward constant improvement and unlimited potential. Ideas, in Romer's formulation, really do have consequences. Big ones.

and

reason (magazine): New Growth Theory divides the world into "ideas" and "things." What do you mean by that?

Romer: The paper that makes up the cup in the coffee shop is a thing. The insight that you could design small, medium, and large cups so that they all use the same size lid -- that's an idea. The critical difference is that only one person can use a given amount of paper. Ideas can be used by many people at the same time.

reason: What about human capital, the acquired skills and learned abilities that can increase productivity?

Romer: Human capital is comparable to a thing. You have skills as a writer, for example, and somebody -- reason -- can use those skills. That's not something that we can clone and replicate. The formula for an AIDS drug, that's something you could send over the Internet or put on paper, and then everybody in the world could have access to it.

This is a hard distinction for people to get used to, because there are so many tight interactions between human capital and ideas. For example, human capital is how we make ideas. It takes people, people's brains, inquisitive people, to go out and find ideas like new drugs for AIDS. Similarly, when we make human capital with kids in school, we use ideas like the Pythagorean theorem or the quadratic formula. So human capital makes ideas, and ideas help make human capital. But still, they're conceptually distinct.

reason: What do you see as the necessary preconditions for technological progress and economic growth?

Romer: One extremely important insight is that the process of technological discovery is supported by a unique set of institutions. Those are most productive when they're tightly coupled with the institutions of the market. The Soviet Union had very strong science in some fields, but it wasn't coupled with strong institutions in the market. The upshot was that the benefits of discovery were very limited for people living there. The wonder of the United States is that we've created institutions of science and institutions of the market. They're very different, but together they've generated fantastic benefits.

When we speak of institutions, economists mean more than just organizations. We mean conventions, even rules, about how things are done. The understanding which most sharply distinguishes science from the market has to do with property rights. In the market, the fundamental institution is the notion of private ownership, that an individual owns a piece of land or a body of water or a barrel of oil and that individual has almost unlimited scope to decide how that resource should be used.

In science we have a very different ethic. When somebody discovers something like the quadratic formula or the Pythagorean theorem, the convention in science is that he can't control that idea. He has to give it away. He publishes it. What's rewarded in science is dissemination of ideas. And the way we reward it is we give the most prestige and respect to those people who first publish an idea.

And lastly I have been working on a wiki that will be available to those that have registered as users of this collaborative environment. This wiki will codify much of what has been stated here in this blog, but in a more coherent format. The construction of this wiki should be completed by November 2007, and lastly if you find these ideas of interest do not hesitate to call, or preferably email me.

Technorati Tags: Genesys, Collaboration, Google, Software, Strategy, Wiki

Houston we have a problem.

Clicking the title of this entry will take you to the Energy Bulletin's summary of the International Energy Agencies (IEA) report. Much is currently being written about this report as it recognizes the problem the energy industry is facing. For the purposes of this post I will state what my opinion of the situation is.

• Demand is growing due to the effects of globalization.
• Supply is constrained by the nature of the reserves that exist today.
• After almost 30 years of aggressive exploitation of petroleum reserves, current deliverability is not sustainable in the mid and long terms. (We need new discoveries, and lots of them.)
  

The point of this blog is;

1. The energy industry is constrained by the size of its work force. This is a long term problem that will accelerate as time passes and the current brain trust retires.
2. The organizations are driven by the demands of compliance and regulatory regimes. The business of the business, oil and gas, has become the second priority of the bureaucracy.
3. SAP and Oracle build systems that enable producers to move "closer to their customers". This inane statement reflects they, and their software solutions, haven't got a clue about the energy business.
   
4. Systems define the organization. Or as I like to say, "SAP is the bureaucracy". The systems vendors and the bureaucracy have a self defining, symbiotic relationship that has stifled any and all innovation or initiative.
   
5. The management of the industry boasts healthy profits, yet has done nothing to earn them. The profits are 100% attributable to pricing, not management. The profits have enabled management to ignore any concern for the industries health beyond their planned retirement party.
   
6. The earth scientists and engineers need to get to work in earnest to provide the commodity markets demands for energy.
   

I have lived with the implications of saying these things for forty six months. Being ostracized is liberating. I can say this today because I know the current management has had every opportunity to rectify the situation and has chosen to do nothing. They have been given the opportunity to deal with the problems and they have failed in their duty. The IEA report is a summary of this management failure, and it's time for a change.

I propose that we build systems that meet the unique and well established ways of how the industry operates. To build software that aligns the "business" with the legal, financial, cultural and operational decision making frameworks of the industry. The Joint Operating Committee is the natural form of organization for the upstream oil and gas industry. And that is stated on a global basis. This blog has shown the academic and logical support for this concept. The time, as defined by the IEA, is now.

Based on these points I will be preparing a summary of this blog and propose we move forward on the building of these systems. I will publish this document in September 2007. The energy business has fundamentally changed in the last 5 years, its now time to deal wih these changes. To my way of thinking, the only other alternative is to give the bureaucracy and its symbot's, Oracle and SAP, another chance, and that is fundamentally unacceptable.

Anyone that is interested in these ideas can keep up, and participate, with this blog. If you would like a copy of the proposal just email me (paul dot cox at gmail dot com) and I will forward a .pdf when it is published in September 2007.

Technorati Tags: Genesys, Failure, IEA, Software, Call-to-Action

Stanford University Statistical Course

Google video is hosting a statistics course;

"Statistical Aspects of Data Mining (Stats 202) Day #"

This course is being taught by Professor David Mease and is being broadcast on Google video. Click on the title of this blog entry for the URL of the first lecture.

This course provides valuable means of which to automate the processing of data. With most software developments, the amount of data that is produced is high. The ability to review it all in text is impossible without the use of advanced tools available to the developer / advanced user. Logs and stack traces alone will inundate even the most enthusiastic. This statistics course provides hands-on use of the statistical applications of Microsoft Excel and particularly "R". Those that are able to install and use "R" will have distinct advantages over those that are unable to review these large and growing files.

The professor is young and well organized. Using real world data such as Safeway Club cards, and hands on use of the real data within the two applications themselves. He has an entertaining fast paced style.

The time spent in reviewing these course materials and videos will pay large dividends as we move more and more into the IPv6 enabled world that is a fundamental part of the "Genesys Technical Vision". Finding errors and problems may only be able to be sourced through the types of data manipulation discussed in this course. I can assure that in 5 years these types of skills will be as generic as using a spreadsheet and word processor are today.

Technorati Tags: Genesys, Education, Software, Video

JavaFX is a go!

Sun Microsystems has announced a new scripting language, JavaFX. Designed to work with Swing, Java's GUI toolkit, JavaFX gives the developer many of the attributes of the current trend to asynchronous page loading and graphics. This trend started off on the wrong foot and has become a nightmare of coding hell. AJAX was the first, Asynchronous Java Script with XML is a dynamic hodge podge of technologies that unleashes the power of coding into any wrong direction it can find. Next was Adobe Flex, then Microsoft SilverLight and they all offer the ability to write anything on the web and the desktop of the user. Very dangerous as the access to the desktop and web provides the developer with the ability to do just about anything malicious that they can dream up. I have cautioned about the use of these products before and they certainly should never be used in a corporate setting. JavaFX is different in that it maintains the security model of Java and is unable to access the local machine. This is the primary reason that there are no associated virus' or related garbage brought to the user through their use of Java.

JavaFX takes another step above the competition in that it is statically typed, not dynamic. Dynamic languages are the easy to implement and are the Swiss army knife of programming. Perl, Python and PHP are all good languages that aid the developer in many of the tasks and routines necessary for their productivity. Few would recommend the use of these languages in an enterprise setting, and that relates to the languages inability to scale to size. JavaFX being statically typed enforces a rigid framework or constraint on the developer that aids in the codes ability to scale.

Other benefits of JavaFX is it applies across the development implementations of J2ME, J2SE and J2EE, Sun's mobile, standard and enterprise editions of Java. Enabling the use of JavaFX in mobile phones and other devices that are proliferating and making the oil and gas worker more productive. This will also aid in the deployment of the many sensors and control devices. I suspect technologies will proliferate under the new Internet protocol IPv6. The prolific use of GPS in vehicles and Google maps could be used to determine who is where. Lastly this years JavaOne conference highlighted the use of the language in the area of robotics. JavaFX also provides access to this developing area of technology.

Therefore, Groovy, the previously proposed scripting language is out. I thought that Groovy would be worthwhile tool to have as a scripting language in the developers toolbox for work being done on this project. Groovy is a dynamically typed language that enabled the Groovy developer to use the same Java classes. The only issue that I had was that it was a dynamically typed language and therefore I stated that in the design specification for this project, it would be inappropriate to have any Groovy code in the final commercial versions.

Technorati Tags: Genesys, Java, Development, Sun, Software

McKinsey Enterprise Software Customer Survey

I participated in a McKinsey study a while back and the results of that survey are now being published. (Sorry no link, the survey hasn't been released yet, email me if you would like a copy.) The topic of the survey was "Enterprise Software Customer", was sponsored by McKinsey & Company and the Sand Hill Group. The survey was completed by 475 senior IT and business executives. The objective of the survey was to;

"determine how software budget levels will change, who will control the spending, what industry trends will most impact their company in the near term, and what role innovation plays in their decision making."

and

"The results draw a picture of continually increasing software budgets, a shift to more decentralized purchase decision with increased roles for the business side in purchasing decisions, and the increasing importance of software innovation that respondents predict will come from small vendors."

Music to my ears, looking at the details of the result of the survey.

Software will account for an increasing portion of IT budgets.

McKinsey notes software accounts for 31% of spending which is expected to grow to 36% of IT costs. No change in the composition of that spending is expected.

The majority of software purchase decisions are still made centrally, although line of business buying is expected to increase.

The survey shows there may be some change in the way that software budgets are controlled. Moving from a centralized model to include business leaders and end users having a greater say.

Innovation and Service Oriented Architecture (SOA) are top of mind issues for software customers.

Respondents noted that "SOA's" were expected to be the top pick at 23% and "Software on New Devices" would total 20%. Other new trends that were noted is the Open Source Software movement.

In another question regarding "which of a list of trends would most impact their business" Software Industry Innovation claimed top spot at 33%, Software as a Service at 21% and Web Services / SOA 18%.

Product Innovation scored highest when asked "where the software industry most needed to improve, our respondents again pulled product innovation into the top slot, ranking it number one with 30% of responses. Followed closely by ease of use and customer service in the second and third spots. Curiously, "Cost" slipped in the rankings "with only 14% of respondents ranking cost as their top issue for improvement", and "48% of respondents omitting this from their top three areas". The study notes "While price will certainly continue to be a factor in purchase decisions, business customers seem to be placing a greater premium on the value that the software industry can deliver in innovative new ways."

We are still early in this software innovation wave with considerable product innovation, business model innovation, and process innovation yet to come.

"The vast majority of respondents clearly think the best innovation is yet to come. Fifty-Five percent of respondents reported they still expect significant new technology innovation to come, and another 22 percent saw the industry near the peak of technology innovation with only business model and process innovations still ahead of us."

and

"We polled our respondents to understand what type of software innovation they were looking for. Across the board buyers want more innovation, citing all of the various types of product, business model, and process innovation as important."

and

"We also inquired about the speed with which respondents were adopting various new software business models. The results showed a great degree of enthusiasm for business model innovation, with respondents predicting that more than 40 percent of their software budgets may be spent in alternative business models over the next 2 years (subscription, transaction, advertising, or another format.) Even more striking in analyzing the fraction of respondents that plan to at least try each of the proposed alternative business models a whopping 80 percent plan some subscription on demand spend, 60 percent plan some transaction based spend and 33 percent plan spend funded by advertising. This broad willingness to experiment indicates alternative business models have hit the mainstream and software vendors of all types and sizes need to ensure their level of business model innovation matches the level of product innovation."

Few customers expect to see innovation coming from large software vendors.

When asked where the innovation likely to come from, 59% of respondent's pointed to the community of small software vendors. With only 19% expected to come from the largest software vendors.

From my point of view I can't be happier with these responses. I have worked on this project as the better model and now the business community is beginning to follow. I can not think of a more timely opportunity for the oil and gas industry to get on with the development of this project. Its scope is too large for someone to come along and throw a usable software application on the table that everyone can use. It has to contain the users and the customers involvement in order for it to be functional. The energy industry can not expect the venture capital people to step up and fund this. By doing so the venture capital would eliminate the key ingredient, the user involvement from the mix.

All in all a very loud call to action.

Technorati Tags: Genesys, Call-to-Action, Software, McKinsey

Patent Changes

The Supreme Court has made two important decisions in the area of U.S. Patents. (Read the New York Times article by clicking on the title of this entry.) The application of U.S. Patent Law is enforceable only in the United States. Apparently many people were thinking the U.S. Patent was pertinent to other jurisdictions in assessing fees and determining damages. The second decision was the more interesting decision and it pertains to the definition of prior art.

In the past few years, the issuance of software patents has become a bit of a joke. Microsoft and other companies have been filing patents for the most blatant and obvious software advances. The cost of filing a patent escalated and the burden of being awarded a patent went to those with the most money. Now a process and a reasonable standard are in place to challenge many of these patents on the basis of prior art and obviousness. There will be many companies that have been awarded patents that will now have them revoked.

The patent troll is most definitely out of business. Filing for patents on what was prior art, then without making anything new or truly innovative, went after the company that developed the idea first and did not think to file a patent. These trolls were usually successful. Under the old rules they were easily able to be awarded a cease and desist order on the original developer. These types of transactions are now over thankfully and in the area of software patents, hopefully it will make that category extinct. Software Patents are a nuisance and most importantly not necessary. Copyright law can enforce the software code easier then the patents could.

Technorati Tags: Genesys, IP, Innovation, Software

We've been Haacked!

And I do like it. Phil Haack runs a blog that

"attempts to infuse technology and software development with humor and a pragmatic eye... Attempts."

Phil read one of my recent posts and commented on it in his blog.

I certainly would welcome Phil and his community to have a look at this early stage project. The scope is large and therefore, "one day", will have ample amounts of paid developers working on it. No time like the present for a little introduction, and self-promotion, I think.

Technorati Tags: Genesys, Development, Open-Source, Software

SAP is SaaS (Software as a Service)

This just in from Professor Nicholas Carr. The CEO of SAP has changed his tune as too what the better software business model is. Well, we should all welcome SAP to the SaaS party, and since they are announcing a future development product, complete with its own code name "A1S" our warmest wishes to the latest and greatest of the vaporware vendors. There is also an explicit comment that the "users define their software requirements." In response to Carr's writing Vinnie Mirchandani writes that SAP is selling the SSDD.

Since SAP wants to re-tool to accommodate the new user requirements we should give them the opportunity. The point that I wanted to make here is that SAP is now in the same boat as this projects efforts are. The only difference is that SAP wants the oil and gas producer to get closer to its customers, (?) and we want to build software to expressly support the JOC, the natural form or organization for oil and gas.

So here are the energy industries options. IBM has sold out of the business, SAP is in a comprehensive rewrite due to a shift to a new (unknown to them) architecture, Oracle is rewriting their application, and we can only assume they are not employing the user since there are no Oracle Energy bats around. And there is this choice that I write about here. One that is unconstrained by the venture capitalists or capital markets, one that is unconstrained by existing code requirements, one that is based on solid research.

I guess what this really means is that SAP NetWeaver didn't work out. Exactly how many more chances does SAP have left?

Technorati Tags: Genesys, Software, Strategy, Development, Capabilities

The globalization of the Software industry: Perspectives and Opportunities for developed and developing countries

The title of this entry will take you to ideas.repec.org to download this interesting working paper.

Authors;

Ashish Arora
Heinz School, Carnegie Mellon University, Pittsburgh

Alfonso Gambardella
Sant' Anna School of Advanced Studies, Pisa, Italy

A quick review of this document reveals that the focus of the research is on developing countries software industries. Not really on topic with the research being done on organizations, however, it has provided some interesting academic support for the purpose of this project. Speaking in the conclusion of this document the authors note some interesting points of view that we may not have realized or found in our regular research travels.

The set of quotations are:

Some authors have argued that software is to the knowledge based economy what capital goods were to manufacturing - an input source whose importance for productivity and innovation was far greater than was reflected in revenues or share of GDP. Software does supply basic inputs to virtually every industrial sector. pp. 30

There may be some advantages to hav(ing) a domestic software sector which could tailor software to local requirements at lower costs. pp. 31

The software industry can act as an exemplar of a new business model that features flatter organizations, individual incentives, competition, and export orientation, particularly for other sectors that rely upon skilled workers. pp. 32

The study reviewed India, Ireland, and Israel (What it refers to as the three I's), China and Brazil against the American, German and Japan industries. A very good read for the purpose of better understanding the impacts of globalization on the software industry.

In terms of the three quotations, neither of these points, that I am aware of had been mentioned before. Yet these show clearly why the oil and gas industry must proceed with this project. Software is an effective tool for them to exercise new and innovative methods of finding and producing oil. Yet, I hear nothing with respect to the industry willingness or desire to proceed.

Technorati Tags: Genesys, Organization, Software, Strategy, Reference

Innovation and Talent in the Indian IT industry.

John Hagel III has written many good articles and topics on the effects of IT on organizations. Through his writtings he has also introduced us to many other good authors like Professor Richard Langlois'. Today Hagel has posted a great blog entry that accurately captures some of the technical risk that I anticipate we will experience here in the oil and gas industry. The conclusion he comes to at an Indian IT conference reinforces the division of labor theories of Adam Smith. I had noted the number of individuals that were involved in drilling a well, from the Chairman of the Joint Operating Committee to the billing clerk at the water trucking company would expand in their numbers to facilitate faster and more abundant and effective economic output. Hagel states the same thing for business in general and states that the Indian development community will need to address this problem. His conclusion is stated here;

These efforts in turn would expose the Indian IT service companies to the challenges of coordinating activities across large networks of partners given existing IT architectures. By gaining firsthand experience in the limitations of these architectures, Indian IT service companies would be well-positioned to drive another wave of innovation in IT architectures. In my talk on Web 2.0 at NASSCOM, I suggested that Indian IT service companies are natural candidates to define and deploy fundamentally new IT architectures that work from the “outside-in”.

In contrast to traditional IT architectures that emerged in the center of the firm and imperfectly extend their reach beyond the boundaries of individual enterprises, we are in desperate need of IT architectures that start with the assumption that the task is to coordinate activities across hundreds, if not thousands of firms. By starting with this perspective, we would need to re-think the nature of transactions and define roles and governance processes accordingly. In fact, we would likely move from today’s transactional architectures to much more helpful relational architectures designed to support enduring and deepening relationships across individuals and institutions.

I think in order to achieve this there needs to be a Military Styled Command and Control structure to replace the hierarchy. One that provides the flexibility of many firms working together to achieve common objectives. Flexibility to have staff of all the associated firms with the knowledge of who conducts what and at what level of authority. This intermixing can then, and only then achieve the types of results that we are all seeking here.

Technorati Tags: Genesys, Langlois, Hagel, Military-Command, Software, Organization

Towards an Evolutionary Theory of Production Part B

In Part A of this secondary research review of Professor Winter's document. Winter raised two important points that provide companies with the opportunities, risks and rewards involved in the theory of production. The two key points were firstly, the production set of possibilities, and secondly the development and deployment of that knowledge. Suggesting that the production methods employed and operational today were based on the less then optimal choices. Winter suggests that today provides an opportune time to revisit the "evolution of production" and I concur.

There are some nasty pitfalls documented by Professor Winter in Part A of this document review. The software being built here for the oil and gas industry must avoid these pitfalls. But, also provide a production set of possibilities and opportunities for the producer to select the optimal solution for the situation at hand. Part B of this paper will discuss Winter's theories on "replication". Or how to deploy the optimal production process across the organization.

3. Replication

Thus, if management wishes to replicate at B the success it is having at A, a first challenge it faces is to devise methods to evoke the transfer of details of which it is unaware, including some of which nobody is aware, and some that represent information that is in various ways "impacted". This is a tall order that can never be filled completely; the gaps in the transfer will be filled by independent re-invention.

It is at this point I need to ask whom does "own" the "production set" of possibilities? Does a specific company or team of individuals? No one? Whom can effectively aggregate, develop and deploy the production set of possibilities. The competitive differentiating factors of the producer are based on its scientific capability, innovativeness and land base. These form what John Seeley Brown and John Hagel classified as an Innovation Management business. A new classification of either Innovation, Infrastructure or Customer Management would apply to all businesses within an industry. I find these theories resonate with my perception of the future. I see the producer filling the role of innovation, software developers providing the infrastructure and therefore these questions are valid. Who owns the knowledge of the production set of possibilities? Who is in the best position for their development, and whom is also responsible for them?

This ownership issue is a very fine point of conflict that will need to be determined through this software development project. The determination may involve whom provides the best solution to the energy industry. A large portion of these points fall within the domain of intellectual property and specifically, Patents. This topic will be discussed extensively due to the sensitive nature of the conflict. The solution to this issue will need to select the appropriate environment to which area (Innovation or Infrastructure) "should" be responsible for providing the definition of the production set and then replicating it from A to B, C,...

The literature of situated cognition points to the fact that the productive knowledge exercised at A exists in an intimate interconnection with the context of activity at A, both in its designed and coincidental feature. Of particular importance here are the "artefact's," tools and / or equipment used in the work (Hutchins 1995; Hutchins and Klausen 1996). In contemporary work settings, crucially important knowledge is often embedded in the equipment, and the local understanding of its functioning is narrowly instrumental. Computers and software are the most ubiquitous and familiar examples of this issue, but there are "low tech" examples as well. The spatial organization of activity at the micro level affects patterns of interaction and communication, and this can affect outcomes in ways that are not fully recognized or understood. (Bechky 2001). pp. 34

This last quote makes it appear that Winter would site the artefact's of tools, equipment have been the traditional area where the knowledge was embedded. In current times the computers and software "are the most ubiquitous and familiar examples of this issue". Possibly denoting where the analysis of this conflict will lead.

In some cases, top management may be totally unaware of the fact that considerations in these various categories are relevant to success. For example, this is inevitably so for procedural details that have been learned without awareness. In many cases, however, it is fairly obvious that the success of an activity depends in various ways on features of its context. Management may understand very well, for example, that the skills and personalities of employees have considerable bearing on the results achieved. pp. 36

Replication in Practice.

Winter has some particular salient warnings in the following quotations. That management may not take these points in consideration at their peril.

The above discussion suggests that replication is potentially quite challenging. It is not necessarily viewed as such, however. Often, management seem to take quite a relaxed attitude toward such challenges. While the relaxed attitude may be justified in some cases, it is arguable that many managers still have a good deal to learn about the subject. Where special circumstances force the issues to management attention, such as the technological peculiarities of semiconductor production (Intel), or MacDonalds' strategic devotion to a uniform customer experience, we do see managerial practices that are consistent with the general picture offered above. The example of Intel's Copy EXACTLY! policy (McDonald 1998) is particularly valuable because it rests precisely on the recognition that there is more productive knowledge implied in achieved high yields than the organization can capture in the form of comprehensive causal understanding of the method in use. pp. 37

And secondly, the exponential difficulty that is evident when interactions are populated with additional options.

This is not at all the case; the point is to control the amount of new learning and problem solving required. Every decision to create a difference between the sites makes an addition to an invisible list of unintended and hidden differences that will occur in spite of the policy. Interaction effects tend to make complexity rise exponentially with the number of discrepancies to be dealt with; it is better to keep the list as short as possible. There will be no shortage of problems to solve. There are several reasons why the problematic aspects of replication often go unnoticed. A basic one, surely, is that exploiting existing knowledge from the original site is rarely an end in itself. pp. 37

4. Production Theory Evolving

One of the competitive advantages of this software offering that differs from SAP and Oracle is the ability to exercise the fact that the costs of goods sold for the second and subsequent copies of the software is zero. This value is being captured by the Energy Industry in a lower cost offering through this development. Industry pays for the developments once. Then pays the associated costs of supporting and improving the application over its life time. Not each time there is a sale, but once and only once. This is where I would assert that these issues being discussed reside for the betterment of the energy industry. Professor Winter touches on these points with the following and final comments:

That knowledge and information are not exhausted by use in a kind of economic magic, a cheerful exception to the manifold scarcities that give the dismal science its name. pp. 39

and

To extend the use of existing knowledge in time and space is not at all the trivial matter it is often made out to be. pp. 39

and

Intra-firm homogeneity of method across establishments is definitely not something that just happens; it is something that happens when managements work hard to achieve it and devote substantial resources to the task. pp. 40

Technorati Tags: Genesys, LEM, WInter, Software, Capabilities, Innovation, Production

Greg Papadopolous of Sun Microsystems.

In what is dubbed as "Sun Analysts Summit 2007," Sun Microsystem co-founder and Executive Vice President of Research, Dr. Greg Papadopolous makes his presentation entitled "Redshift: The Explosion of Massive-Scale Systems. This presentation should be viewed by most users of computers today. An important video that details where the demand for computer processing is coming from, and where the solution to satisfying those demand resides. At 46 minutes it is a worthwhile review. So much of what I expect in this oil and gas software development project needs to be addressed from the hardware side. The demand for processing of an entire segment of the oil and gas industry is not something that can be taken likely. Recall that we have selected Sun as our key vendor for their support of the Java platform. This extends to Sun's Niagara Chip set, Solaris their Operating System, their Grid Computing offering, Crossbow their virtualization offering and finally the Java Programming Language.

Starting off with "Project BlackBox" which is a standard shipping container that provides substantial computing performance in one "BlackBox". Two rows of 19' standard racks, with each rack capable of housing 42 units of servers, blades and / or storage devices. The cooling of 200 kw of processing is the defining capacity of a project Blackbox. One should ask what / who would need to use such a large unit? That is the purpose of this talk. Many of these systems will be used by the market, and most importantly this software development project will use BlackBoxes in order to host the application for the oil and gas industry. The system we will be using will be owned and operated by Sun Microsystems and hence provides not only the solid reliability, performance, and availability of computing power but also the security that each producer knows their data is as secure and as confidential as possible.

"Red Shift" is a leading observation of Sun's marketplace of computing. The costs of computing is halving each year, yet the demands continue to grow. Where is this demand coming from? Core Enterprise demand has been satisfied by Moore's Law for a number of years. Dr. Papadopolous says that Band Width is the key driver to the current and future increases in computer processing demand. Band width has grown exponentially from 56 kilo-bites of analog capacity in 1995, to now 10 Gigabit Ethernet being available today. This band width is fueling an increase in the number of devices that are networked. It is clear that the proliferation of these devices assumes that processing is centralized in one location. This Band Width related demand is consistent with the technical vision I noted here, and the proliferation of IPv6 related devices. I agree with Dr. Papadopolous that the computer demand in the future will be difficult to satisfy.

Bandwidth is driving the increased demand for computing in far greater volumes then what Moore's Law provides. In addition to the conventional business market, the High Performance Computing market makes the demand for computing processing insatiable. Papadopolous notes demand from small and midsized firms that are using hosted services like Gmail, Salesforce.com and other web applications is a trend that he suspects will be showing up soon in large firms as well. Running an email server is an arduous task for any and all users. Aggregating the demand for email in the hands of large service providers provides economies of scale and better application functionality over the long term. A variety of customers are beginning to realize Service Oriented Architectures are the most effective and efficient means of managing these services.

Dr. Papadopolous notes that what he calls "Redshift" is a move to massive scale. Where scale and efficiency are available and afford-ably provided to users, when the users need them, wherever they may be. Sun believes RedShift will be redefining to the computing industry. Coporate strategies regarding Red Shift are of two possible scenarios. First Sun could be disintermediated such as what Google is doing in building their own servers. Or alternatively, follow the Sun school of thought that high levels of engineering are needed to build systems for today and the long term future. This latter strategy is also where strong integration of both software and hardware engineering is needed. "Efficiency and Predictability at massive scale are as Mission Critical to Redshift as Remote Access Servers (RAS) has been to the core enterprise."

Papadopolous is keen to differentiate what he means by the "Commoditization of computing" is not the "Commoditization of computers." The engineering of complex systems is necessary in this "RedShift" era. The cobbling together of many single core systems will only provide so much value. The approach of providing the City of New York with electrical power generated by a series of portable generators is inefficient, impractical and costly. This is the analogy he draws between what Sun is providing with their services and what many of the smaller service providers are doing.

Speaking on the Sun offering Papadopolous notes that computing infrastructure consists of three things. And to Sun's credit they have been able to integrate these components and provide commoditization of computing in an efficient manner.

• Core Services and Platforms
• O/S Instances
• Base HW Plant (Server, Storage and Switches)

Base Hardware Plant.

What had happened in the past 20 years to distill the microprocessor down to a single chip is today what Symmetrical Multi-Processing (SMP) systems are being codified into one chip. That which was a full rack of servers in 1997 is contained on one Sun Niagara chip. Providing lower costs in almost any metric of computing power.

Taking these concepts further, Neptune, Sun's next processor will contain a 10 G Ethernet card embedded in the chip.

Operating System Instances

Solaris, Sun's open source operating system, Crossbow their operating system virtualization tool, and Java which is integrated into Solaris. "The Java RTS (Real Time Systems) + Solaris = Real time Application Server". With real time results, providing a solid application system performance that mirrors and exploits the value of their hardware. It is my opinion that both Apple and Sun's futures are brighter based on their ability to integrate their own operating systems on their own and x86 hardware. Companies such as Dell, IBM and HP are unable to compete in this arena due to their inability to provide the integration at this high level.

NetBeans which is the open source version of Sun's development tool is one of the best Integrated Development Environments (IDE's) available today. BlackBox as mentioned above defines the shape of Sun's very bright future.

Core Services and Platforms

• Identity and Security
• Procedural languages and scripting.
• Service Oriented Architecture and Web 2.0
• New Clients.

Finally Dr. Papadopolous notes a key component of Sun's open source business model is that "Open Source" does not apply to the binary or run time application. The Binary requires the use and service contract with the in this instance. Genesys will be paying for the use of Solaris and Java services, support and use agreements. This is in addition to the processing power purchased by the hour off the grid. All in all an excellent video, one that provides a vision of the future of computing.

Technorati Tags: Genesys, Sun, security, software, strategy, video, engineering, development

John Seeley Brown on MIT Video

John Seeley Brown talking about "Re-learning Learning - Applying the Long Tail to Learning" on MIT Video. The video is on the longish side at 1:43 minutes, however, it is time well spent. Along with John Hagel III, John Seely Brown was instrumental in defining the web services paradigm for business. I wrote about their thinking at the time on the subject.

Speaking in the context of change, Brown suggests the "speed of acceleration" of change means that little or no skills will be able to sustain their value over a moderate to long period of time. A new approach to learning requires people to adopt the attitude that an inventory be conducted to determine where new skills are needed, each year. In support of new skills Brown also suggests that we find successful learning models. Differentiating between "learning about" and "learning to be" with the latter being the more difficult of the two.

Dr. Brown notes that a good example of "learning to be" is the open source software development model. I have to agree with his comment as it is a strong model of organizational learning. Brown calls it a "distributed cognitive apprenticeship platform". The most popular culture in the digital generation has come back to a "building, tinkering and participatory culture". This last comment in line with Sun Microsystems and its CEO talking about the "Participation Age". In the future I will discuss in-depth the methods that software is developed under these open source models. It is what we will be using on this development and it is rather complex and interesting development model in terms of its methods and processes.

Brown comments that this "learning to be" is usually more amateur then professional with the point that passion is what drives the people in the open source model to build better systems. This passion leading to the rise of the Amateur Class. For almost no amount of money users can participate at high levels in science and business ideas. Professionals and amateurs are working together today. The tools by themselves are not sufficient. What is needed is the passion of the users to make things happen.

Technorati Tags: Genesys, Attention-Economy, development, software

Mondrian Code Review.

Guido von Rostrum, who wrote the Python scripting language, is also an employee of Google. Guido has been with Google for a little over a year and is presenting his Mondrian Code Review project. The development of Mondrian is what he has done with his 20% time that Google pays him to do the things that interest him. Mondrian Code Review fills a nice hole in most IDE (Integrated Development Environments) and is a natural extension of the standard concurrent version systems, like Subversion, the choice of this development project. With the variety of projects that Google is involved in, the tool would provide real value. A real value for any large software development project.

I have reviewed many of the videos that MIT produces and it is a source that never fails to inform and entertain. Google on Google video looks to me to be as high a quality of source of useful videos. This review provides the petroleum user with a window on the methods and procedures of how software is built in an open environment.

Technorati Tags: Genesys, Open-Source, Software, Development, Video

How Open Source Projects Survive Poisonous People.

Google has had the capacity in the past few years to draw in many of the pioneer's and industry leaders to work for them. Two of these people, Ben Collins-Sussman and Brian Fitzpatrick are leaders in the open source world. Both have worked on Subversion which is the version control system used on this project. Of note, Google hired them to implement Subversion through out their product line, and in the process giving the tool the most significant test I could imagine.

The experiences they refer to throughout the presentation are based on work done for both Subversion and Apache. The topic of discussion focuses on how to avoid the toxic or poisonous people that can infect an open source project. The most important aspect of any contribution is to ensure that the team is not drawn down by people not reviewing the archives. Contributions have to be incremental to the work that has been done, not reiterating what has already happened.

The presenters open with their 4 areas of concern.

1. Comprehension
2. Fortification
3. Identification
   
4. Disinfection

The resource you are trying to protect is the Attention and Focus of the user and development community. Keeping disparate groups from losing focus and spending their attention in the wrong areas will lead to project failure. The methods to guard against these incidents is highlighted in their video. The first note is that poisonous people can;

1. Distract.
2. Emotionally drain your community.
3. Cause Needless infighting.
   

You need to avoid paralysis.

• People can derail forward progress by people being.
• Perfectionists.
• People obsessed with process.
• Even nice guys can do this unintentionally.
• The perfect is the enemy of the good.

The presenters then bring up the analogy of "Painting the bike shed". Which was an analogy that was used in the development of BSD Unix. The analogy goes; a nuclear plant that was needed to be built was progressing as good as it could. The entire development then stalled to determine what color the bike shed should be painted. The debate then ground to a halt on both the bike shed and the nuclear plant. Here the authors noted "The amount of discussion on a feature, is inversely proportional to their value. And is noted to be one of Parkinson's Law's.

Fortifying against the threat.

Politeness, Respect, Trust and Humility are necessary in an open source project. All of the deficiencies that the presenters had experienced originated from these 4 points.

Have a Mission, where do your want to go. Limit your developments scope. Define the project so that future requests can be classified as "its on our list of things to do" or "its not"

Mailing lists are a critical tool of the open source project, etiquette should be monitored and enforced. Review of the archives, don't let users disrespect any previous conversations by not reviewing the archives. A few more of their points include;

• Design documentation.
• Bug fixes.
• Document Mistakes. (Ensures that travels down dark alleys are limited and not repeated.)
• Code Changes (Change Log)
• Code Collaboration policies. Email is the key to participation.
• No powerpoints.
• Do big changes on branches for easier review. (Be generous on creating branches.)
• Spreading the "bus factor" so that developers move around alot. (Bus factor is how many people need to get hit by a bus before the project fails.)
  
• No names on top of source code files. (Makes people nervous) Everything is owned by everyone. (Cuts the pettiness.)
• Have well defined processes.
• Releasing Software
• Backport Bugs
• Test and release tarballs.
• Accepting and reviewing patches.
• Admitting new committers
• The community founders establish the culture.
• The culture becomes self selecting.
• Voting is a last resort
• A healthy community should rarely need to vote.

Identifying poisonous people.

Communications Annoyances

• Uses silly nicknames
• Uses multiple nicknames in different media
• Overuses Capital letters.
• Uses excessive punctuation.
• Acronyms are used.

General lack of a clue as to what is going on.

• Unable to pick up on the mood.
• Doesn't understand common goals of the community.
• Asks incessant questions.

Hostility

• Insults the status-quo.
• Angrily commands help.
• Attempts to blackmail.
• Attempts to deliberately rile people .
• Makes accusations of conspiracy.

Conceit

• Refuses to acknowledge the opinions of others.
• Makes sweeping claims.
• Usually about the projects future success.
• Re-opens topics that are long settled.
• Without reading the archives.

Lack of Cooperation

• Willing to complain but not help with anything.
• Unwilling to discuss design.
• Too insecure to take criticism.

Disinfecting your community.

• Is this person draining attention and focus?
• If so, is the person really likely to benefit the project?
• Is this person paralyzing the project?
• Is the dispute likely to finish soon?

Don't...

• feed the energy creature.
• give jerks purchase.
• engage them.
• get emotional

Do...

• pay attention to a newcomer.
• even if they're annoying at first.
• extract a real bug report if possible.
• know when to give up and ignore them.
• know when to forcibly boot them from community.

Summary

• Comprehend:
• Preserve attention and focus.

Fortify:

• Build a healthy community.

Identify:

• Look for tell tale signs.

Disinfect:

• Maintain calm and stand your ground.

And finally, the presenters put a special emphasis on decision making. All decisions can be discussed off-line, no decisions made without the documentation in the email lists. The reason why and what alternatives will show up in the archives and contributors can see the reasons and justification for the previous decisions. All of these excellent points will form a major part of the code of conduct that will be one of the first deliverables from this community.

Technorati Tags: Code-of-Conduct, development, software, tradition, Attention-Economy, Genesys

Capabilities and Governance, Conclusion

Langlois' et al's theories have taken us a long way in terms of researching the optimal organizational construct for oil and gas. I have suggested, and the industry concurs with me, that greater recognition of the Joint Operating Committee as the organizational construct provides value within the industry. Through this review, Langlois has taken us down some roads that we otherwise may have travelled on our own. I am certain that we would have discovered many of the same pitfalls that Langlois discovered and noted in his many papers. The use of "production" costs and "transaction" costs as clear classifications of costs managed by two "sub-organizations" either the Joint Operating Committee (production costs or market) or Military Command and Control Structure (transactions costs or firm).

I would like to end this research of Professor Langlois with the note that I will be writing more about his theories as we progress. I have added him to the stable of excellent research that is being conducted by Dosi, Perez, Romer, Winter and Schumpeter. Recall that Langlois is a recipient of the Schumpeter Prize, a well earned attribute. In closing with this final entry on Capabilities and Governance I want to highlight some of the salient quotations. They are;

"The organizational question is whether new capabilities are best acquired through the market, through internal learning, or through some hybrid organizational form. And the answer will depend on (A) the already existing structure of capabilities and (B) the nature of the economic change involved." pp. 21

and

"If a profit opportunity requires a configuration of capabilities different from what already exists in the economy, the Schumpeterian process of creative destruction may be set in motion." pp.21

and

"More generally, we are worried that conceptualizing all problems of economic organization as problems of aligning incentives not only misrepresents important phenomena but also hinders understanding other phenomena, such as the role of production costs in determining the boundaries of the firm. As we will argue, in fact, it may well pay off intellectually to pursue a research strategy that is essentially the flip-side of the coin, namely to assume that all incentive problems can be eliminated by assumption and concentrate on coordination (including communication) and production cost issues only.

"Either way it boils down to the same common-sense recognition, namely that individuals - and organizations - are necessarily limited in what they know how to do well. Indeed, the main interest of capabilities view is to understand what is distinctive about firms as unitary, historical organizations of co-operating individuals." pp. 17

These last quotes of Langlois reflecting to me the role that industry needs to help define and develop. A process of coordination that will be an inherent part of the software development process. A coordination process that industry can and will benefit from without the perceived costs of loosing any competitive advantage. A process that can evolve with the shared cooperation that comes from an enhanced competitive understanding. One that will identify the key competitive criteria as the producers land base, and the capability to explore, produce and exploit these much needed energy resources.

"In a world of tacit and distributed knowledge - that is, of differential capabilities - having the same blueprints [or software] as one's competitors is unlikely to translate into having the same costs of production. Generally, in such a world, firms will not confront the same production cots for the same type of productive actively." pp. 18

"This in turn, implies that the capabilities may be interpreted as a distinct theory of economic organization." pp. 18

And industry can then achieve many of the promised benefits.

"... while transaction cost consideration undoubtedly explain why firms come into existence, once most production is carried out within firms and most transactions are firm-firm transactions and not factor-factor transactions, the level of transaction costs will be greatly reduced and the dominant factor determining the institutional structure of production will in general no longer be transaction costs but the relative costs of different firms in organizing particular activities." pp 19

"If by contrast, the old configuration of capabilities lies within large vertically integrated organizations, creative destruction may well take the form of markets superseding firms. History offers many examples of both." pp. 21

These changes are needed, and based on my current marketing, much desired. People know intuitively the time is now to proceed in these directions. A time to realize many of the benefits that are promised through their Public Petroleum Data Model, Royalty Simplification, Petroleum Accountants Society of Canada and Canadian Association of Petroleum Land-man and other standardizations.

"If however, change is autonomous - if change can take place in separate subsystems without greatly affecting the way those subsystems are connected together - then markets, which can take advantage of specialized and decentralized knowledge, may be at a relative advantage. Here the issue of standards enters the picture: for standards are typically ways of fixing the connections among subsystems so that change is channeled in autonomous directions. Langlois and Robinson (1992, 1995) call this kind of structure a modular system." pp. 22

"But more quantitative empirical studies also suggest that differential capabilities, and therefor production costs, are significant variables for explaining the boundaries of the firm. In Graham Walker and Donald Weber's (1984) empirical study of the make-or-buy decision, the most important explanatory variable turned out to be the indicator for differential firm capabilities, that is, for production costs." pp. 22

Technorati Tags: Capabilities, Governance, Langlois, Military-Command, Genesys, Software, Strategy

photo courtesy David Sifry

Capabilities and Governance Part III

Professor Langlois' Slides (mentioned before here) # 178 provides an interesting quotation from G. B. Richardson

[I]t seems to me that we cannot hope to construct an adequate theory of industrial organization and in particular to answer our question about the division of labour between firm and market, unless the elements of organization, knowledge, experience and skills are brought back to the foreground of our vision (Richardson 1972, p. 888).

This comment captures very succinctly the reason that I am so closely reviewing this. I have suggested that the Joint Operating Committee is the ideal organizational construct and I now have strong concurrence of that concept in industry. I have recently suggested the Military Command analogy provides a management framework for the command and control mechanisms, and is a possible replacement of the hierarchy. And that is also receiving strong support in the industry. I now have stumbled into the collective works of Professor Langlois et al and can see things in a different perspective that provides the clear definitions of how this software will need to be built.
II Production and Governance: the Post-Coase literature.
A. Historical Sources of the Neglect of Production in the Post-Coase Literature.

The clear definition of production costs being incurred by the Joint Operating Committee and the transaction costs being incurred by the Military Command structure is a fairly clear and well established classification for the purposes of this review. Why is it that Langlois et al want to establish such a tie-in of these classifications with the governance and capabilities views of the firm? I will attempt to clarify for myself and my readers the validity of these theories in relation to the Joint Operating Committee and the Military Command Structure.

"Production costs determine technical (substitution) choices, but transaction costs determine which stages of the productive process are assigned to the institution of the price system and which to the institution of the firm. The kinds of costs are logically distinct; they are orthogonal to one another. As a result, issues of economic organization - such as the boundaries of the firm - cannot turn on considerations of production costs. Present-day theory has not only bought into this view but has arguably reinforced the separation." pp. 10

In a nutshell, the boundaries of the firm can not be defined by production costs. The methods the industry will use to organize its production is through the ability of transaction costs to determine the origin of the production cost from the market or the firm.
B. Production, Coordination, and Incentives in Present-Day Theory.

One of the key points that I noted in the October 2006 Final Research Report was the manner in which the command and control of the firm was not being tossed to the four winds in favour of the joint operating committee. It is specifically suggested that the command and control of the firm is supported through what I have called the Military Command style of management. A Military Command analogy that would enable a pooling of the industries resources and capabilities. Reducing the redundant duplication of capabilities that is built into each and every producer. The redundant duplication of capability necessary to conduct the operation of the producers assets. This has the effect of diluting the overall industry capability, decreasing the speed of operations and increasing the production and transaction costs of operations.

With Langlois' clear definition of "production costs" and "transaction costs." Langlois et al permits the experienced oil and gas worker to clearly discern the two separate components of the "firm" and its redefined boundaries. Boundaries that clearly fall into the two types of costs (production & transaction) and management functions (Joint Operating Committee & Military Command like matrix structure).

"As we will argue in more detail below, there are in fact two principal theoretical avenues closed off by a conception of organization as the solution to a problem of incentive alignment. And both have to do with the question of production knowledge. One is the possibility that knowledge about how to produce is imperfect - or, as we would prefer to say, dispersed, bounded, sticky and idiosyncratic. The second is the possibility that knowledge about how to link together one person's (or organization's) productive knowledge with that of another is also imperfect. The first possibility leads us to the issue of capabilities or competencies; the second leads to the issue of qualitative coordination". pp. 11

and

"A close reading of this passage suggests that Coase's explanation for the emergence of the firm is ultimately a coordination one: the firm is an institution that lowers the costs of qualitative coordination in a world of uncertainty." pp. 11

Here we have justification and need for the Military Command style of management control. Without the ability to organize the people in the manner that best suits the opportunity, co-ordination of the work would not occur. Production knowledge is a fundamental component of the tacit knowledge of the people in the organization. Each representative on the Joint Operating Committee operating in their respective disciplines know intuitively how to get the work that needs to get done, done. However, is that enough? It would appear to me that there is a role for the authorization, authority, policies and procedures to provide a framework of how oil and gas operations are conducted for company X. And this can be asserted through the Military Command type recognition of Generals to Privates. I would certainly stand guilty of Langlois et al's following quotation in asserting the Joint Operating Committee as the key, and only, organizational construct. However, clearly to do so, I would be incorrect as their are essentially two different organizations operating in two separate domains. Those that deal with production costs (JOC) and those that deal with transaction costs (Military Command). And each of these organizational domains need to be defined and supported in the software. A software application that identifies and supports the legal, financial, operational decision making, cultural, and most importantly the accountability frameworks of the oil and gas producer.

"Largely in a quest to make Coase's ideas more "operational," this literature has arguably both narrowed his explanation for the firm and moved its focus away from issues of coordination, especially qualities coordination. More precisely, both the issue of capabilities and the issue of the coordination of production - in the sense of aligning the knowledge and expectations of the parties who need to cooperate in production - have been overshadowed by a dominant interest in issues of incentive compatibility." pp. 12

and

"If, by contrast, the transacting parties were to pool their capital into a single enterprise in whose profits they jointly shared, the incentives for unproductive rent-seeking would be attenuated. And, because such unified organizations would choose the more productive specialized technology, they would win out in the competitive struggle against the contractual alternative." pp. 13

and

"If, however, assets are specifics, or if opportunism becomes possible for other reasons, it may be efficient to place the residual rights of control in the hands of only one of the parties by giving that party ownership of both sets of assets. In general, the owner ought to be the party whose possession of the residual right minimizes rent-seeking costs, which typically means the party whose contribution to the quasi-rents of cooperation is greater." pp. 14

and

"All recognize that knowledge is imperfect and that most economically interesting contracts are, as a consequence, incomplete. But most of the literature considers seriously as coordinating devices only contracts and the incentives they embody. It thus neglects the role- the potentially far more important role - of routines and capabilities as coordinating devices. Moreover, the assumption that production costs are distinct from transaction costs and that production costs can and should always be held constant obscures the way productive knowledge is generated and transmitted in the economy." pp. 14

These last few quotes providing valuable information on how this software will be developed. I will be following this entry up with Capabilities and Governance Part V in the next few days. This will speak to the role of contracts as coordinating devices.

Technorati Tags: Genesys, Langlois, Software, Research, Capabilities, Development

The Public Petroleum Data Model

I am in receipt of a January 2007 publication from Nickels Publications. This month's issue is on Petroleum Software with the sub-title Upstream Data Surge, and focuses specifically on the Public Producers Data Model (PPDM). A non-profit organization dedicated to standardized data and database schema's for upstream oil and gas. PPDM provides a forum for software companies and producers to standardize the data set for oil and gas. They provide the Data Definition Language component of SQL to build the database for this data. PPDM have extended much of this into the standardization model necessary for the transactions between producers to be standardized. This brochure can be downloaded from the home page of their website.

I have written about PPDM before and those comments are here, here and here. I have now deprecated the comments that I made regarding the use of PPDM and I am now essentially supporting the data model. It would be a mistake to ignore the fine work of these people. The change of heart is based on the comments made by the Chairman of PPDM Arthur Boykiw:

"A second worry is monopoly. As common data standards are developed, oil and gas producers do not wish to see them become the private property of one or two software vendors."

I concur with Art's comments in terms of the standardized data model. There is no conflict between the data model and the copyright that I hold. Using the Joint Operating Committee as the key organizational construct uses a different perception of the data within the model than a system developed for the hierarchy would. As I indicated in the Final Research Report this copyright is a benefit for the energy industry, enabling it to focus on the right solution.

The analogy that PPDM puts out is addressed in "What the heck is a data model?

"Only very rarely does a high-rise office or apartment tower collapse due to poor construction. That's because everyone in the building industry must work within the terms of a building code. In a well governed country that safety code is based on carefully-defined technical terms and standards. The alternative - a construction sector in which architects, engineers, contractors and building materials manufacturers could each define their own safety standards - would be a recipe for disaster, and also for inefficiency.

In a parallel way, the Public Petroleum Data Model defines technical standards for anyone who creates upstream petroleum software applications and administers digital information. Each technical term or standard in the PPDM is defined so that it will mesh well with all of the others. That framework of definitions is called a data model.

Much like construction designers create an enormous range of high-rises, factories, houses and so forth within the building code, software developers can work marvels to the limit of their imaginations within the Public Petroleum Data Model. Think of PPDM as the software building code for the energy industry."

In the Final Research Report I noted a technical vision that included wireless, Java, asynchronous process management and IPv6. The combined effect of these technologies is a logarithmic growth in the data of a producer. How the producer deals with this growth is an integral part of the PPDM role. A process that we can freely contribute too and expand. This alleviates many of the problems and issues of developing a data model, for this development, for the industry and the

I am looking forward to commencing these developments. So many of the basics such as the PPDM Data Model are available to us that was not used by our competitors. In addition to PPDM we have the following attributes of this development that provide significant value to our system.

• Open Source Projects
• Sun Solaris Operating System
• Ingress Relational Database
• Java
• NetBeans and Eclipse Integrated Development Environments (IDE)
• Java Enterprise Edition
• Mature
• Robust
• Capable
• Broadband Internet Access
• Ubiquitous
• High user level capabilities.
  
• Grid Computing
• Processing power
• Low costs
• Zero footprint for producers.
• PPDM's data model
• Standardized
• Mature
• Technical alignment between the producers organizational frameworks
• Legal
• Financial
• Operational Decision Making
• Cultural
• Accountability
  

If there is a golden age for the development of systems, this has to be the beginning of it.

Technorati Tags: Capabilities, Software, Strategy, PPDM

photo courtesy David Sifry

I want to reiterate my concern.

First, yes I want an iPhone as soon as possible. The networking and Mac OS / X underpinnings will make the "tool" usable by everyone and anyone.

Secondly, yes I will develop unique applications that employ the iPhone in the many ways the oil and gas users will want. Using Cascading Style Sheets, Ajax and JavaScript limit the scope of the applications that can run on the iPhone to ones imagination.


And thirdly, yes, I want to reiterate a concern that I mentioned last summer. As with any new technology the security and access privelages are becoming much more difficult to have under even reasonable control. My concern about wifi enabled pod slurping can and will be one of the greater risks to corporate security.

Technorati Tags: Security, Software, Innovation
Photo Courtesy of Apple.