The Budget for Phase Two

Here we step into the truly surreal world of People, Ideas & Objects budgetary needs. The objective of Phase Two is to complete the Preliminary Specification. A task that has been defined as 100 man years of effort. A task that when complete would be a significant step forward for the innovative oil and gas producers. Costing this part of the development is relatively easy. We pay standard rates for contributions of $125.00 U.S. per hour. Therefore 100 man years at 1,760 hours per year totals $22 million. I could identify many other costs involved in supporting these developments, however.

Our revenue model sets an annual rental fee for each calendar year. That fee was set at $1.00 per barrel of oil equivalent for the 2010 year. Penalties are due and payable effective March 31 on any outstanding fee for that year. As of today’s date, each and every producer will be assessed the 300% penalty on their 2010 rental fees. These fees and penalties are to be paid in full by all producers irrespective of when they may join the developments. No participation or use of the software is permitted by any producer until all outstanding fees and penalties, back to January 1, 2010, are paid in full. The incentives are to participate early, and there are no financial benefits in waiting for other producers to pay disproportionately the fees and costs of these developments. Early participation is rewarded with a reduction of 75% of the total potential fees, (penalty avoidance) and greater participation in the definition of the software. (Or the ability to map the software to deal with the producers organization.)

To set a dollar amount to complete the Preliminary Specification is beyond what can be reasonably budgeted or defined. We are therefore proceeding with Phase Two on the basis that as producers join, and pay their required fees and penalties, we will proceed with the further development of the project. A pay as you go basis as producers join the development. The nature of the Preliminary Specification facilitates this stop-and-go type of development.

It is also time to set the fees for 2011. As in 2010, 2011 fees are set at $1.00 per barrel of oil equivalent. This fact alone shows the value proposition of this project. That although the costs of development are high, the costs to an individual producer are not only reasonable, they are a mere shadow of the traditional ERP software costs.

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

Technorati Tags: People's Phase-Two Revenue-Model Budget Development

S + B's Big Oil's Big Shift

We have today a remarkable article from Booz & Co’s “Strategy + Business” (S + B). Prospective users of People, Ideas & Objects software applications and members of the Community of Independent Service Providers need to see that the work that they can do at People, Ideas & Object is topical, and hence valuable. This S + B article entitled “Big Oil’s Big Shift” provides an understanding of some of the issues in oil and gas. Many of the points in the article are specifically addressed in the Draft Specification. Although S + B considers the majority of these issues arise as a result of the BP Gulf of Mexico spill, to many, these issues were evident irrespective of the spill.

The targeted market for the People, Ideas & Objects software applications is the entire oil and gas industry. This definition includes start up oil and gas companies, independents, International Oil Companies (IOC’s) and National Oil Companies (NOC’s). All of these firms use the Joint Operating Committee (JOC) systemically throughout their organizations.

Risk has always been inherent in the extraordinarily complex projects that extract oil from the ground or sea. During the past few years, industry trends have added to this risk. The most accessible and productive oil fields, including those in the Middle East and Russia, are now owned and operated solely by national oil companies (NOCs). Leading international oil companies (IOCs) such as BP, ExxonMobil, and Shell — also known as the oil majors — therefore find their access to “easy” reserves rapidly shrinking.

For the reasons noted in the above quotation, People, Ideas & Objects believes the four classes of producers will partner to approach the remaining technically difficult and demanding reserves. Therefore it is imperative that these JOC’s and partnerships are able to deal with any combination of producer classes, in as many geographical areas as necessary. Access to an ERP system that can identify and support these different producers business operations is therefore a necessity.

Supporting the interactions between producers within a JOC is only the beginning. The ability to work closely with the service industries is also a necessity. The Draft Specifications Resource Marketplace module provides the ability for the producers represented in the JOC to deal more closely with service providers in the service industries, communities and contractors. The Draft Specification also provides a new governance model to facilitate these interactions through the Military Command & Control Metaphor. S + B states:

But the oil majors will have to manage their contractors differently, working more closely in teams with business partners that earn their trust over a long period of time, and in some cases taking stakes in third-party providers to better control their performance. This partnership model must be built on interdependence and mutual respect — a significant change from long- standing practices in some parts of the sector. The oil majors will also need to revise their operating models, sorting out a different mix of activities to outsource, and bringing some of the most critical oversight functions back in-house — so they can address quality issues and place employees on the front line to better oversee the growing situational risk in oil drilling.

To make this possible requires management to fall on their sword. As I have noted in each of this blogs recent closings, management are conflicted, and the executives at the producer firms need to make the decisions to financially support these developments.

Perhaps the biggest uncertainty in this new and challenging business environment is the ability of the major oil companies to change as conditions shift measurably. Most large oil companies — including both international oil majors and state-owned NOCs — have rigid management cultures and adversarial, penny- pinching relationships with suppliers and partners. Historically, they have tended to focus on short-term cost cutting without sufficient consideration for collaborative operations that could benefit themselves and their partners.

Lastly, S + B notes that the time for these changes to become effective is now. Prospective users and members of the Community of Independent Service Providers will be the ones at the forefront of these changes.

Many people in the oil industry have foreseen these types of changes, but they haven’t been forced to act. Now they will be. Those who figure out how to move beyond their past practices, troubled contractor relationships, and rigid management structures will lead the next generation in the oil sector — on land, in shallow waters, and in deep and remote locations. The time for these changes could come surprisingly soon. 

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

Technorati Tags: People's Phase-Two Call-to-action Governance Military-Command

Our Revenue Model Part VII

People, Ideas & Objects focus is on its users and the business issues that they face. We are not providing “new” technology for technologies sake. With respect to our revenue model, technology has a substantial impact on our product delivery.

Past systems development and integration projects have led to time and monetary black holes. Users have frequently had to adapt to poor or technology focused perspectives of their jobs. These are the issues that users face in the marketplace today.

A key area of People, Ideas & Objects competitive offering is that our software development capabilities are based on the “Agile” development principles. In addition to being user focused, these capabilities provide iterative developments that are substantially more productive then past methodologies. More productive due to the focus on working with the user to solve their systems development needs. Getting the users needs satisfied, not chasing blind bunny trails.

Agile developments affect our revenue model by budgeting for the current years activities. Although our total costs remain high, taken from an annual perspective helps to break down the ominous nature of these developments. A release early and release often schedule also benefits the entire community, leading to further focused iterative developments in the short term. I anticipate the only time users will be working without the assistance of developers is in the development of the Preliminary Specification. While the Preliminary Specification is being developed, our development team will be forming, installing the infrastructure and working with Oracle to become familiar with their Fusion Middleware product offerings. Then the two communities will begin to use and develop the systems based on users priorities.

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

Technorati Tags: People's Revenue-Model Phase-Two Budget User Community

Our Revenue Model Part VI

Throughout the past few months (here, here and here) we have talked about the risks of becoming blind sleep-walking agents of whomever will feed us. An issue when we are discussing systems development. People, Ideas & Objects Revenue Model shows these risks are real and require a new approach to funding these software developments. It serves no ones interests, People, Ideas & Objects, the Community of Independent Service Providers, Users or Producers to proceed without dealing with this issue. It is best to identify these conflicts and compromising situations now, while the influences are manageable.

Producers are expected to fund the software developments on the basis of their production profile. Rental fees are assessed on all producers starting January 2010. This eliminates the possibility that some producers will pay disproportionate shares of the development costs. All producers will be required to have their rental fees, and penalties, paid in full from January 2010 to the current year in order to access the applications. These methods and penalties eliminate all incentive to delay and avoid financial participation by producer firms.

Financial participation is how the communities are supported and hence able to avoid the trap of becoming blind sleep-walking agents of whoever feeds them. People, Ideas & Objects are user focused developments. The choices that a software development project can prioritize are many. Users are one, technical efficiency another and there are many other possibilities. For users to support the producers focus on its competitive advantages of their asset base, oil and gas leases and earth science and engineering capabilities. Users need to have the software tools and means of production, (the financial resources to build those tools) within their control.

This discussion does not preclude the producers participation in these communities. Producers, on the contrary, are critical elements of the user community. These developments will need their full participation and contribution. What is necessary to proceed is the appropriate “political environment” in which users are able to define, build and use the software tools they need to do their jobs.

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

Technorati Tags: People's CISP Community Funding Organization Revenue-Model Software User

A Quick Break

A quick break from documenting our revenue model to highlight a blog post from our favorite researcher. Professor Richard Langlois’ work has provided a solid foundation for the Draft Specification. In a recent blog post Professor Langlois posted an interesting commentary about the discussion that “might have” taken place at GM in the 1920’s. It’s an entertaining read and is probably based wholly of the facts of the case.

The point of the argument is the change that needs to take place at GM. The “owner” of GM is faced with a new management theory about the role of management in controlling the ways and means of the corporation. “Sloan” who might be Alfred P. Sloan, the CEO of GM during the time that management theory was developed and applied, is interviewed by the owner about these new theories.

We are having this same argument today. Management has ceased to be capable of building value within our organizations. Just as the “owner” of GM had to cede to management, management needs to cede to the market definition. People, Ideas & Objects Draft Specification is the means for management in oil and gas to cede to the marketplace. Professor Langlois’ article is located here.

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

Technorati Tags: People's Langlois Management Change Organization

Our Revenue Model Part V

Another element of our Revenue Model is the means in which People, Ideas & Objects is capitalized. Traditionally software developers are stand-alone organizations with their own banking, regulatory and venture capital influences. People, Ideas & Objects is taking a project management perspective in providing this software solution to the marketplace. The differences in our capital structure are significant, with our Revenue Model being a critical element in defining and supporting these differences.

The fact of the matter is, by having user based developments defined and supported by various communities. To then have various venture capitalists, or other groups involved in a traditional capital structure, influence whether or not the software was built to specification is too large of a compromise to be viable. Therefore People, Ideas & Objects is funded by its Revenue Model and focused on its users.

To be clear the scope of People, Ideas & Objects is beyond what venture capital groups would be willing to fund. That is to say if the producers are unwilling to invest in this software development, based on the value proposition put forward, no venture capital groups would touch this type of venture. Amortizing the costs of this development over the production profile of the industry is our value proposition. Complicating our capital structure only complicates and compromises the deliver-ability of the software.

To suggest that People, Ideas & Objects can be structured without the traditional involvement of investment capital might be naive for me to consider. However I do know, that it would be naive to suggest that the systems as described in the Draft Specification could be built with the influences of a traditional capital structure. Therefore, it is with that in mind, and to ensure that the Preliminary Specification captures the full scope of the technical and geographical concerns of each subscribing producer. That producers would be wise to support these developments to ensure their concerns remain the appropriate priority of this software development.

One area where our capital structure is not a concern is in the hosting of the application on the cloud computing infrastructure. I have addressed these needs by separating these business concerns from the software development activities. As I have documented in our Hardware Policies & Procedures, the hardware infrastructure is directly managed by the producers themselves. The purpose in structuring the hardware in this fashion is to eliminate the producers regulatory concerns in running their ERP systems, and to ensure that all parties have a vested interest in the infrastructure. In the process of meeting those concerns the business of the firm that hosts the application will have its own capital structure that will not in any way affect or influence the software developments or communities 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 economic development has proven, reorganization would achieve far greater oil and gas production. Management of the industry is conflicted in expanding the output of the industry. The less they do, the higher the oil and gas prices and the better they appear to perform. This managerial conflict must be addressed and the performance of the industry unleashed. To do so requires the current management of the industry to fund People, Ideas & Objects and build the systems as defined in the Draft Specification. Please join me here.

Technorati Tags: People's Funding CISP Revenue-Model User

Our Revenue Model Part IV

This post seeks to clarify People, Ideas & Objects revenue model and provide an understanding of the flow of funds within the associated communities. Needless to say all the funds flow from the Producers, however that is where the money is. I’ll break down the general flow to show how each of the different groups are sustained over the long term.

To start we need to clearly identify the three different groups that are supported directly by the producer firms. These groups include (1) People, Ideas & Objects, (2) the user communities and (3) the Community of Independent Service Providers (CISP). The need for this financial support is as follows.

1. People, Ideas & Objects assesses an annual rental on all producers for access to the software applications, cloud computing infrastructure and the communities involved in the development. These funds are assessed based on an annual rental for each barrel of oil equivalent of the producer. This rental has been set at $1.00 per barrel of oil equivalent for the 2010 calendar year. In addition, assessments are due and payable by March 31, of each year. Producers are subject to a 300% penalty for any late payments. All producers are required to pay the rental from 2010 forward. 
2. The second group that receives producer funds are the users themselves. These users are the producers employees or consultants that they hire to do the work within their organizations and Joint Operating Committees. These funds are incurred indirectly as a result of the individuals doing their jobs and are not necessarily a direct cash payout. These costs are incurred by the users on behalf of the producers in working with the Community of Independent Service Providers and the People, Ideas & Objects developers. The work the users are compensated for is in defining and designing the systems they and the producers want and need. 
3. The third group that receives direct funding from the producers is the Community of Independent Service Providers. This community is engaged by the producers to handle many of their specific systems related needs. Accounting integration and systems development are the two areas where the CISP will be used most often.

What happens to these funds is also important to note.

1. People, Ideas & Objects incurs the costs associated with the hosting of the infrastructure for running the application and software development environment. We also have the developers on staff who are working with the Community of Independent Service Providers and user groups to define and enhance the systems they need and want. Lastly we directly compensate the CISP for the work that is done concerning the applications development.
2. Users are direct recipients of the funds they earn in their positions with the producer firms. 
3. The Community of Independent Service Providers are independent in that they are not affiliated with one specific producer or Joint Operating Committee. They are service providers to the oil and gas industry. Their services to People, Ideas & Objects and subscribing producers are provided as independent organizations. 

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

Technorati Tags: People's CISP Revenue-Model User Organization

Our Revenue Model Part III

Continuing on with our discussion of People, Ideas & Objects revenue model. Today we discuss the impact of the revenue model, and the Draft Specification, has on the competitive advantages of the producer firm.

We start off with recognition that China is now the world’s number one consumer of energy. The demand for energy in the next several decades will be insatiable. The somewhat fixed number of earth scientists and engineers will have substantial business opportunities addressing this world demand. It is through a reorganization of these fixed human resources, by having People, Ideas & Objects software applications define and support enhanced divisions of labor and specialization, that this demand for energy will be satisfied.

Building systems that deal with the commercial interactions between the producer, society and the individuals that work in oil and gas, and the service industries, is beyond the direct concern of the producer. Yet, are a necessity of basic operations. If we agree that the competitive advantages of the producer firm are based on it’s unique composition of oil and gas leases, physical assets of the firm, and application of the firms earth science and engineering capabilities. The producer will remain involved and focused on the development of efficient software systems to identify and support those competitive advantages. Much in the same manner as society and individuals will work to develop those same systems to meet their needs.

Therefore, the producers decision to financially support these developments affect society and individuals. The producer firm receives 100% of the direct revenues from oil and gas sales. Allocation of a portion of these oil and gas revenues towards an initiative like People, Ideas & Objects can not be evaluated based on its competitive return at the producer level. Everyone is familiar with one or more software development or implementation projects that were terminated as the result of a lack of long term funding. These failures have little to do with the quality of the project or the people that were behind it. Over time the sense of urgency that the project may have put forward fades as does the financial support. Approaching a project with the scope of People, Ideas & Objects, without having an answer to a fading sense of urgency would be a failure.

The question therefore becomes, how does the revenue model of People, Ideas & Objects 1) sustain these communities throughout the development cycle and 2) provide these communities with the software tools they need to expand economic output? We provide this by way of the inherent promise or guarantee of this project. That being, this software development, and associated communities, provide the innovative oil and gas producer with the most profitable means of oil and gas operations. The profitable nature arising as a result of the expanded oil and gas output, based on the enhanced division of labor enabled with the People, Ideas & Objects application, and, the value proposition we have put forward.

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

Technorati Tags: People's Revenue-Model Community Development Value-Proposition

Our Revenue Model Part II

In this our second instalment that details our Revenue Model, we apply and extend Professor Jurgen Habermas’ 1960’s theory of different knowledge interests. Building on yesterdays discussion of People, Ideas & Objects value proposition, and targeting the oil and gas producers as the sole source of revenue, this post will delve into the difficult question regarding what we need these systems for.

We need to ask ourselves what we need these systems for. Are we developing systems that manage the commercial operations of an oil and gas producer? Of course we are, but that does not address the societal and individual needs of these systems. If we continue to look at just the needs of the producers, then we are leaving many needs unaddressed. Society and individuals are critical elements of a successful oil and gas industry. For example society benefits by having producers and the service industries efficiently interact and develop profitable operations, and individuals create innovative solutions to the demand they see for their services. Overall organizations, individuals and society benefit by an increased and expanding division of labor and specialization.  In today’s globalized, high technology workplace, an expanded division of labor and specialization can be more efficiently created through a software development capability like that described by People, Ideas & Objects in its Draft Specification.

When we concern ourselves with the economic output of the oil and gas industry. To expand that output requires that we organize based on greater levels of specialization and a further division of labor. The responsibility for increasing output does not fall to society, individuals or organizations in isolation but to all three. Therefore it is reasonable to state that what we need these systems to address society, individuals and organizations needs. I do not foresee the further development of the division of labor occurring without the active involvement of systems development. In a somewhat deliberate manner where all groups are represented.

If we look critically at the division of labor, and eliminate some of the constraints to expanding it further. Constraints like the limitations of working within one firm or one Joint Operating Committee (JOC). If an individual has the capacity to apply their skills to a task for a geographical region that includes 100 producers and 200 JOC’s, the efficiencies could be substantial. The ability to manage a task in this fashion doesn’t exist within our current organizational context. Maybe it should.

Following on the logic of the previous post, where the producer firms are the sole source of the revenue for People, Ideas & Objects and associated communities. Sharing the input of these systems development across society, individuals and the organizations might appear to be inconsistent with the reality that 100% of the funds are coming from the producers.

That’s why the People, Ideas & Objects revenue model shares the one time development costs across the subscribing producers. Just because the producer firms receive 100% of the proceeds of oil and gas sales, doesn't mean that they earn 100% of the revenues of the oil and gas sales. Individuals and society have a role and responsibility in these systems and therefore, these need to be considered irrespective of the desires of the producer firms. We’re not going to develop systems that address the needs of society, individuals and organizations when producers have a disproportionate influence due to their control of the revenue stream.

To sustain this software development requires that we cease being subjected to the individual decisions of one or more producers. A company that chooses not to proceed with the development or implementation of these technologies can not hold up the greater benefit of all concerned. Essentially I am stating that the decision to support these communities needs to be made where appropriate representation considers the needs of all concerned. Looking at the cost benefit analysis of supporting this software from the point of view of only one producer misses the benefits to society and individuals.

Habermas theories deal with the issues of power, influence and most importantly emancipation.

But when it comes to using science or computers to change the relations of power in our society, when emancipation is put forth as a knowledge or development interest, then the question of values becomes more controversial. Who is to be emancipated, and from whom? Who is to loose power, and who is to gain? And how can it be the business of scientists or computer professionals to take part in a political struggle for power?

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

Technorati Tags: People's Revenue-Model Development Organization Orlikowski Value-Proposition

Hofmeister on BP's plans

Former Shell Oil Company president has the following comments on Bloomberg today.

It's very important for BP to turn the page so to speak, although they still have the well to put out, and hopefully that will go according to plans over the next couple of weeks. But they have to turn their attention to the future. And part of that future in addition to the asset sales is getting on with what I call the boring bits of business, and that is, under John Browne they did a great job of expanding the portfolio and growing the company. But I don't think they ever integrated the company and turned it into a high performing institution, that takes a lot of time and Tony Hayward saw this and started the process but didn't get far enough. Now I think its time to really get into the structures, processes, systems the procedures so that the whole company operates the same way all over the world. 

Makes at least two people that think the boring bits of business are needed.

Technorati Tags: People's Change Energy Firm Ideas Management Organization

Our Revenue Model Part I

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

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

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


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


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

Technorati Tags: People's Revenue-Model Development Value-Proposition Policies Community

Focusing on our Revenue Model

We will now begin our focus on this software development project and associated communities revenue model. (These posts will be aggregated under the new Revenue-Model label.) The purpose of these posts will be to fully explore the contradictions and conflicts inherent in developing the revenue to support People, Ideas & Objects software development and associated communities. We will be asking difficult questions that reveal these conflicts, questions like what are these systems developments for, and how do we sustain the financial support throughout the development life cycle. 

It is expected through the discussion of our revenue model, that producers will begin the process of financially supporting these developments and communities. Much of the discussion will bridge the surreal world in which this project currently resides, with a prospective future that promises to surprise. I guarantee an interesting discussion. 


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

Technorati Tags: People's Revenue-Model Focus Value-Proposition

The Marketplace Metaphor

The Draft Specification includes three modules that employ what we call the Marketplace Metaphor. The Petroleum Lease Marketplace, Resource Marketplace and the Financial Marketplace Modules. Each of these modules create an environment that is similar in many respects to a marketplace in the “real” world. A virtual representation, and means for people to interact in marketplaces. Definitions of a marketplace include;

market: the world of commercial activity where goods and services are bought and sold; "without competition there would be no market";

The Petroleum Lease Marketplace (PLM) is a virtual market where partners can interact with each other to post and bid on petroleum leases, negotiate and execute agreements, buy and sell properties to name just a few of the many activities that can be carried out in the PLM. The PLM is designed to facilitate and support these transactions and activities, and capture the data and information necessary to manage the assets for the producers involved. 


The PLM is in many ways the beginning or initiation of the JOC. Since the JOC is the communication framework of the industry, many of the partners communications will be held within the Petroleum Lease Marketplace module. Mail ballots, AFE’s and agreements are initiated by the user while using the PLM module. 

The Resource Marketplace module creates a virtual representation of vendors, suppliers and the people who work within the oil and gas and service industries. Working closely with the Knowledge & Learning and Research & Capabilities modules, the Resource Marketplace provides the producer or JOC with the ability to interact within the Resource Marketplace to engage with vendors for the products and services that producers and JOC’s need. These interactions will include the capacity to contract, seek bids, billing, accounts payable and e-commerce capabilities. 

Recall in a recent post we documented how the Draft Specification facilitated a greater level of specialization and division of labor. These two economic theories being the source of all economic growth. That post documents that the process of “gap-filling” is how the division of labor is expanded. This “gap-filling” is part of the Resource Marketplace where producers and suppliers find one another in an effort to expand the output of the industry. 

Finally the Financial Marketplace module provides a virtual representation of the financial marketplace. Using the perspective of the Joint Operating Committee presents a different view of the oil and gas assets. Traditionally each producer has maintained their own financing of their oil and gas assets. What the Financial Marketplace module does is change the perspective, of how oil and gas assets are financed, from the producer firm to the Joint Operating Committee.

Each of these marketplace modules employ the People, Ideas & Objects user vision. The point of this post is to reinforce the use of the marketplace metaphor in the development of these systems. When we adopt the Joint Operating Committee as the key organizational construct of the innovative producer, we gain the ability to create this kind of software and methods of interaction within real and virtual marketplaces. 

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.

Technorati Tags: People's Market Governance PLM

Asynchronous Process Management Success

One of the cornerstones of the People, Ideas & Objects “Technical Vision” is Asynchronous Process Management (APM). I have described this type of functionality as it relates to communications, as a phone call is synchronous, and a letter would be asynchronous. The letter provides the communicator time to interact more deeply and to contemplate the response more thoroughly. Applying this communications metaphor to Process Management is directly applicable.

In a recent post we discussed the scenario around the timing of the voting and implementation of a plan to increase natural gas production. Where the participants within a Joint Operating Committee were asked to vote on a prescribed course of action. The description in that post imputed the implementation of the plan would be immediate, during the virtual meeting. In the real world, there would need to be time for each participant to consider their decision. The ability for participants to take the time to think what their next action will be, and based on those actions, implement and complete the appropriate management of the earlier initiated process.

Technology has expanded significantly in the past ten years. Particularly with respect to having multiple threads and multiple cores of application processing. Simply defining when an applications process can be broken down into multiple steps is easily handled by the developer and today’s advanced compilers. The problem with this processing is that the timing of each operation is unpredictable and therefore the sequence of when the program will be completed is random. In the oil and gas situation where partners were voting on a proposal for further operations, those operations would not be able to be commenced until the voting was completed, or adequate votes in the affirmative were received.

Today, the software developer has tools that provide the ability to control the timing of dependent processing in the software. This opens the world of systems development to higher levels of performance, processing tasks in parallel shortens the processing time required, and allows for advanced Asynchronous Process Management such as the People, Ideas & Objects technical vision.

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.

Technorati Tags: People's Asynchronous Capabilities Development Process Software

More on our Business Model

The business model and value proposition of People, Ideas & Objects are fundamentally different then any other software provider. Based on a number of assumptions that involve the use of the Joint Operating Committee (JOC) and the cloud computing delivery model, this post details some of those elements of this software development project.

Using the Joint Operating Committee presents some interesting opportunities and difficulties. Providing producers with a software development capability, and software applications that support start-ups, Independents, International Oil Companies and National Oil Companies is necessary as the partners within a JOC could and will be formed from any and all of these types of producers. Partners within a JOC need to have the same systems in order to optimize the interactions between themselves. Having only one producer working off advanced collaborative systems like that proposed in the Draft Specification, severely limits the value realized by each and every one of the producers. 


Take for example the situation that deals with the decision making authority of the JOC. Participants are asked to approve a course of action to increase natural gas production. AFE’s and a proposed team to undertake the program are voted on by the members of the JOC. Seventy six percent of the working interest ownership agrees with the program, surpassing the 75% necessary for a decision to pass. Since all members of the JOC are using the same software, the AFE’s become active within the system, and the individuals calendars and tasks are updated with the approved program. The speed in which the program is approved and implemented is facilitated by the collaborative elements of the People, Ideas & Objects systems. 


Each member of a JOC will be able to participate virtually through their mobile / desktop device. These systems will be recording the key decisions and initiating the actions that are decided upon in these virtual meetings. In the future, the oil and gas industry participants will need to be able to decide and implement plans of action on a much faster basis then today. The speed and volume of the decisions that will be needed within the innovative oil and gas producer, I expect will grow in the near future. It is my opinion that the speed of the decisions being made today are the reason for the poor performance of the oil and gas companies. Poor performance in terms of reserve replacement and production increases. This is because the decisions that are being made are not at the Joint Operating Committee level, the JOC has the authority, but these processes are obstructed by the internal decisions being made within each producer (management). 


When each of the participants are supported by the same systems and software development capability, each are able to collaborate and implement the decisions based on the outcome of the voting. Accessing this type of operational efficiency is one of the inherent values that People, Ideas & Objects provides the producer firms. When we discuss the value proposition of People, Ideas & Objects, this type of value is one of the benefits that producers earn from using the Draft Specification. 


Additional value is generated when we realize the costs to the producer, to have this software application available to them, is allocated over the entire population of oil and gas production profile. The industry as a whole is being assessed the costs to develop the software, once. Compare this to the current model of purchasing software from a vendor who’s key asset, the software application, is sold to each producer. People, Ideas & Objects competitive offering is based on a software development capability, not on the software code itself. A competitive offering that is not constrained to one static piece of software code, a competitive offering that mirrors the incremental changes in the innovative oil and gas producers.

Another assumption that is inherent in the value proposition of People, Ideas & Objects is the determination of what an innovative producers competitive advantage is. That is the oil and gas leases, the physical producing assets and the earth science and engineering capabilities applied to those assets. These are the attributes of the producers unique competitive offering. Having SAP or any other accounting system, including People, Ideas & Objects, is not the basis of competitiveness of the producer firm. What we can do, and is the competitive offering of the Community of Independent Service Providers, is provide the producer with the most profitable means of oil and gas operations. That is to say that the system will not make a silk purse out of a sows ear, only that the most efficient means of operations will be attained by using People, Ideas & Objects and the CISP. 


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.

Technorati Tags: People's Collaboration Capabilities Innovation Value-Proposition