McKinsey, Five Misconceptions About Productivity

One of the benefits of a six month sabbatical is that we have aggregated many articles from McKinsey and others that pertain to the work we are doing at People, Ideas & Objects (PI&O). These articles are ideal for weekend postings and will enable us to fill out several months of weekends blog posts. In this first post McKinsey have an article entitled “Five Misconceptions About Productivity”

In oil and gas we are primarily concerned with the productivity of earth scientists and engineers. Specifically their ability to find and produce more oil and gas. These people’s ability to produce more energy is challenged today by steep decline curves and the challenge of finding the reserves. Since 2005 the world’s oil production has remained somewhat static and its unknown what influence OPEC may have been able to impact the market. Nonetheless the valuable energy resources require significantly greater volumes of science and engineering per barrel of oil produced. These science and engineering resources are somewhat limited in their volume and the capacity to increase them is very difficult, therefore we are left with the need to increase their productivity.

In today’s marketplace we thankfully have the means at our disposal to significantly effect the productivity of our organizations. In 1776 Adam Smith determined the division of labor was able to lead to higher productivity. Division of labor is the source of all economic output. That is to say that through successive reorganizations and application of the principles behind the division of labor we have been able to reach the level of economic activity we enjoy today. Therefore to expand the output of the oil and gas industry, which we can all agree is required, will require that we reorganize ourselves to achieve a higher level of economic output.

As the industrial revolution had a significant impact on our quality of life, the coming Information & Communication Technology revolution will have a significant impact on the output of our organizations. This is the opportunity that this community has in hand with PI&O. In this McKinsey article they point out a number of misconceptions about productivity, the one that stands out for me is;

Productivity is only about efficiency and is designed to bolster corporate profits.

Productivity can come either from efficiency gains (such as reducing inputs for given output) or by increasing the volume and value of outputs for any given input (for which innovation is a vital driver). The United States needs to see both kinds of productivity gains to experience a virtuous growth cycle in which increases in value provide for rises in income that, in turn, fuel demand for more and better goods and services.

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

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

Those Annoying Fees Are Due.

A key element of People, Ideas & Objects value proposition is that the costs associated with software development are allocated across our population of subscribing producers. The more producers we have subscribing to our development, the greater the allocation of these development costs across a larger denominator. Our cost - plus method of charging the producers the costs associated with development, and allocating these costs across a large base of producers provides a substantial value proposition in comparison to the traditional means of billing by software vendors.

Another element of our value proposition is that with a large subscriber base we quickly acquire the resources necessary to approach engineering the appropriate software solutions. When the traditional software vendors are developing one-off solutions they are usually unable to allocate the costs beyond one or two subscribing customers, therefore the costs to engineer the solutions quickly exceed what those customers can tolerate. With People, Ideas & Objects value proposition, our ability to engineer the solution to the ideal level on behalf of our entire subscribing base is easily attained as no one individual producer is asked to disproportionately incur intolerable engineering costs, and all of our subscribing producers are able to acquire highly engineered solutions.

The following is a quick summary of the fees and penalties that are due for producers subscribing to People, Ideas & Objects.

2010

Recall that 2010 was the year in which we began our policies of assessing our fees and penalties. Effective 2010 all subscribing producers, irrespective of the date in which they subscribe, are required to pay all fees and penalties from January 1, 2010 forward. 2010 was also the year in which we implemented our policy of assessing penalties on any outstanding fees after March 31 of the assessment year. These penalties are assessed at 300% of the years fees. (Please see our recent post entitled Free Riders and the Participation Bonus)

Therefore producers wishing to subscribe to People, Ideas & Objects are subject to the 2010 $1.00 fee and $3.00 penalty per barrel of oil equivalent per day of production.

2011

Fees for 2011 have been determined to be $1.00 per barrel of oil equivalent production.

Therefore to become a fully subscribed producer member of People, Ideas & Objects the producer would take their daily production volume of x boe / day x $5.00 (total fees and penalties for 2010 and 2011) = producers subscription fees.

It is now time for producers to act. Review of our Revenue Model will inform producers how they can participate in the development of People, Ideas & Objects Preliminary Specification. Producers can contact me here for further information, or to begin the process of their participation.

IBM's Global CEO Survey

IBM has published their bi-annual Global CEO Study. Registration is required to download the .pdf, I recommend reviewing the document to gain an understanding of the state of affairs in the global CEO’s mindset.

Oil and gas producers are faced with a difficult situation. As the earth science and engineering disciplines expand. And the volume of technical effort needed for each barrel of oil increases. The scientific human resources available to the producers remains relatively constant. What’s needed is a new division of labor and specialization to increase the volume of throughput of these fixed human resources. This changing environment is, according to the IBM study, being joined with a new variable, complexity.

Using the Joint Operating Committee (JOC) as the key organizational construct of the innovative oil and gas producer becomes a necessity in this complex environment. The JOC being the legal, financial, cultural, communication and operational decision making framework of the industry can deal with this enhanced complexity. When we are required to work with the needs of multiple producers within each and every JOC. Continuing to use generic ERP systems that don’t identify and support the JOC. Introduces unneeded complexity to an already difficult environment. If industry is to meet the market demands for energy, the Joint Operating Committee will need to be supported and identified by the ERP systems that are defined in the Draft Specification. The IBM Study notes.

In our past three global CEO studies, CEOs consistently said that coping with change was their most pressing challenge. In 2010, our conversations identified a new primary challenge: complexity. CEOs told us they operate in a world that is substantially more volatile, uncertain and complex. Many shared the view that incremental changes are no longer sufficient in a world that is operating in fundamentally different ways. Four primary findings arose from our conversations:

The first of these four findings is complexity and the capacity to deal with that it. IBM’s survey seems remarkably candid about the CEO’s capacity to deal with this new complexity.

Today’s complexity is only expected to rise, and more than half of CEOs doubt their ability to manage it.

Innovation will become the means for value creation in the oil and gas industry. Innovating on the basis of the expanding earth science and engineering disciplines. The industries leadership will be derived from those that are able to operate creatively in this scientific and technical environment.

Creativity is the most important leadership quality, according to CEOs. Standouts practice and encourage experimentation and innovation throughout their organizations. Creative leaders expect to make deeper business model changes to realize their strategies. To succeed, they take more calculated risks, find new ideas, and keep innovating in how they lead and communicate.

Third in the IBM study focuses on the customer, the Draft Specification will enable, closer interactions between the producers, vendors, suppliers and communities involved in the industry. IBM’s survey notes the focus of CEO’s is more towards the customer. Oil and gas producers never see their customers however, an expanded capability to deal with those involved in the business of oil and gas is needed.

The most successful organizations co-create products and services with customers, and integrate customers into core processes. They are adopting new channels to engage and stay in tune with customers. By drawing more insight from the available data, successful CEOs make customer intimacy their number-one priority.

In the fourth finding, IBM focuses on the interactions between partners and suppliers.

Better performers manage complexity on behalf of their organizations, customers and partners. operations and products, and increasing dexterity to change the way they work, access resources and enter markets around the world.

These four conclusions are consistent with the needs of the innovative oil and gas producers. IBM has developed a strong capability in their bi-annual study of CEO’s. I can only assume that personally interviewing 1,500 CEO’s is done at substantial expense. I would question the value that IBM is able to generate from this survey. This paper was published in May 2010 and the volume of discussion that it has generated must be disappointing. I wonder if there will be another report in two years time.

Producers are encouraged to contact me in order to begin their participation in these communities and support our Revenue Model. Those individuals that are interested in joining People, Ideas & Objects can join me here.

Technorati Tags: People's Change Call-to-action Science Engineering

Langlois, Innovation and Process Part II

Today we discuss the second part of Professor Richard N. Langlois' January 2008 working paper "Innovation Process and Industrial Districts". A summary of the first part of this series would highlight how the service industry, Community of Independent Service Providers (CISP), users and producer firms would re-organize themselves to facilitate innovation. With the producer firms focusing on their core competitive advantages of 1) a unique asset base and 2) application of the scientific and engineering capabilities available to them. Producers would be able to increase their reserves and deliver-ability. The knowledge, tacit and codified, residing in the "Industrial District" (ID), or Small Knowledge Intensive Enterprise (SKIE) of which the CISP would be considered a part of. As Professor Langlois noted, these communities may be organized in local, regional, national and international fashion with communication being encouraged between each.

Today we are discussing the enhanced division of labor and specialization necessary to expand the economic output of the oil and gas industry. With energy demand projected to be insatiable, the focus of the industry is changing. The scientific capability of the oil and gas industry is somewhat fixed and to increase output will therefore require new forms of organization. People, Ideas & Objects proposes to build the software that identifies and supports the industry standard Joint Operating Committee as the key organizational construct of the innovative producer. Within the software it is implicit that the enhanced division of labor and specialization is a key output of the Draft Specification.

2. Specialization and Embeddedness in Industrial Districts

Differentiation, Specialization and Integration

It is an economic fact that growth is achieved through Adam Smith's division of labor and specialization. To take the energy industry to drill a well may currently require over 1,000 specialized individuals when we consider the scope of individuals from the drilling firms billing accountant to the rig hands, to the geologist engineers and staff at the member firms of the Joint Operating Committee. To move to a higher level of performance will require a more defined and broader division of labor and specialization. How this comes about is suggested in Professor Langlois' discussion of ID's. Moving the majority of the science based capability to the market is the logical choice when we consider the real competitive advantages of producers are resident in their asset base.

The Resource Marketplace module of the Draft Specification facilitates Langlois' ID's. The point that I am attempting to focus on is the need to have the necessary systems in place to support the innovation based market. In addition, a software development capability such as contemplated by People, Ideas & Objects, is necessary to continue the iterative developments within the marketplace, based on the ideas of the greater oil and gas community. 

As adaptation usually takes time, a system that is optimized in the sense that there is near-perfect efficiency in the integration of inputs is probably not only stable but static and hence endangered if the surrounding environment is unstable (as is almost always the case). It is important, therefore, that an industrial district actively generate change in its internal relationships and in those with the outside world, and that it is flexible enough to absorb change without serious losses in efficiency. Inability to change either or both of the internal and external relationships contributed to the decline of such industrial districts as the textile and fashion district of Como (Alberti, 2006) and the eyewear manufacturing district of Belluno (Camuffo, 2003). p. 4

Flexibility has its costs and these directly affect performance. That is a given, and a static industry is a dying industry. I think that Professor Langlois clearly shows the risks and shows that a balanced approach may be the best strategy. We run risks and rewards in whichever direction we take. And maybe the optimal strategy is an ability to pre-select the balance of these criteria within the systems we build. Irrespective of the choices made. The key criteria is an enhanced specialization, division of labor and a capability to further enhance the division of labor and specialization.

Embeddedness and Centralization

In our first quarter 2010 budget drive we proved the management within oil and gas will not act to develop the Draft Specification. Alternatively we have turned to the investor / shareholder as the source of our budget funding. Oil and gas investors have the opportunity through People, Ideas & Objects to build the infrastructure necessary to manage their oil and gas assets in the most profitable manner. [The stated objective of the CISP.] Langlois ID's and Perez' SKIEs facilitate this form of organization through the industry standard JOC.

Because of their structure, industrial districts offer important benefits in innovation processes. For one thing, the high levels of differentiation and specialization allow firms, in the Smithian fashion, to focus on aspects of the supply chain in which they are especially competent. p. 5

What was able to be achieved through the hierarchy and "bigger is better" organizational thinking has been lost in the past 25 years. Bureaucracies were known to be inefficiently efficient, and for the past 100 years society has benefited greatly. We now see the multitude of stakeholders of these large corporations disenchanted by the performance of these organizations. Society is concerned about the environment, consumers are demanding more, better and faster service, and shareholders are being treated as poorly as could possibly be conceived of just a few years ago. The only benefactors appear to be the management. Their lack of financial support for the ideas represented in People, Ideas & Objects ensure that their way will remain unchallenged.

I see the future in many ways being an extension of the individual. The scope of an investors domain would be much smaller and be a direct function of his / her own capabilities. A move toward a much more hands on type of operation. Management is redundant, compromised and has lost the motivation to act on its stakeholders best interest. I foresee the management role being codified in the People, Ideas & Objects software that the investor uses to manage their operations. This assumes substantial administrative performance is provided to the investor.

The stakeholders that would benefit from this need to orchestrate this monumental change through active financial support of People, Ideas & Objects. With the Community of Independent Service Providers being a critical element of the embeddedness and a "virtual" Industrial District. 

Strong ties (Granovetter, 1973) among workers, including managers, can increase the amount of information available to firms and the readiness of people to share what they know when relationships gain a dimension of friendship to counterbalance the competitiveness among firms. p. 5

Communities of Practice and Knowledge Diffusion

To suggest that the oil and gas investor / shareholder, organized around the JOC, supported by the CISP and other ID's -- as represented in the Resource Marketplace module of the Draft Specification, is a fundamental and bold redrawing of the ways and means of the oil and gas industry. One that is based on an understanding derived from 30 years of working in oil and gas, utilizing the capabilities of the mature Information Technologies and steeped in the academic research conducted here. One sees a vision of how the industry could operate in a more natural and logical manner. One consistent with the culture of the industry, the JOC, that is summarily ignored by SAP and other systems vendors. A vision that deals with issues and opportunities that are open and available to those in the changed oil and gas industry. However, does this vision provide the enhanced division of labor and specialization that we are seeking?

When embeddedness is strong, the creation of communities of practice (Wenger, 1998; Brown and Duguid, 2000) generates competences that, although possessed by individuals, are collective in that they are based on a set of practices that is common to all members of a community. These competences (both tacit and codified) can transcend firm boundaries and become characteristics of an entire industrial district. As Marshall (1975, 197) wrote of nineteenth century Britain, “To use a mode of speaking which workmen themselves use, the skill required for their work ‘is in the air, and children breathe it as they grow up’”. p. 6

Langlois defines a risk associated with a limited distribution of the Industrial District. The limited division of labor and lack of significant levels of specialization obstruct the opportunity for this type of community to develop to their full potential.

Relationships within industrial districts therefore lead to diffusion but also to the creation of new knowledge through shared preoccupations. Because many people or firms can work on a problem simultaneously, a number of different solutions may be found (Bellandi, 2003b). The results is a larger and stronger "gene pool" within the sector (Loasby, 1990, 117), with the further advantage that solutions that are originally regarded as competing may turn out to be complementary and well-suited to different niches within the district.  p. 7

Although Langlois talks about networks and IT, not at the level needed for this discussion. Critical to the success of this type of industry re-organization will be a software development capability that is an active and involved member of the communities, ID's, SKIEs, CISP etc. This software development capability is what People, Ideas & Objects is proposing we build for these communities.

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

Technorati Tags: People's Langlois Capability Science Engineering Funding Organization
 

Oh those Russians.

We see in this Reuters article that Russia wants western based producers to develop their offshore energy resources. I think this shows that the demand for the type of skills that the Duverney's and BlackPearl's, the prototypical producer, is high amongst National Oil Companies (NOC's). 

I think this is indicative of the difficulties of finding and producing oil and gas. The demands of energy, in the non-easy era, are particularly hard from the engineering and earth science perspective. I think the International Oil Companies (IOC's) have learned that they can rely on the skills of the prototypical start-up to build their reserves. NOC's can take a lesson from Russia who appear to be actively searching for the skills to develop their reserves. And were only to happy to seize assets from Shell and BP a few short years ago. 

Adding political risk to technical, financial and all the other risks these teams face. Is just another day at the office. 

Technorati Tags: People's Capabilities Geology Engineering

Changes at Shell.

A number of articles are appearing about the announced changes at Shell. A new CEO Peter Voser takes over July 1, 2009 and has announced a major overhaul of the firms operations. Fox notes:

Oil giant Royal Dutch Shell on Wednesday announced a series of changes to senior management roles and responsibilities, which it said were aimed at creating a sharper focus on operating performance and technology.

I interpret these changes as an admission that the engineering and earth sciences necessary for each barrel of oil produced are increasing. The Calgary Herald reported that Voser said:

"Organisationally, we are too complex, and our culture is still too consensus-oriented. Our costs are simply too high," Voser said in an email to staff, excerpts of which were seen by Reuters.

Details of the changes include the consolidation of divisions into operating units around geographical locations. North America being one in which I would assume Houston will take the lead role in. It is also reported that many lay offs will occur throughout the company. 

The Calgary Herald notes many of the differences between Shell, Exxon and BP's announced reorganizations. These are all ongoing and reflect different characteristics and management styles. 

Exxon is renowned within the industry for its strict management practices and insisting employees do not deviate from standard operating procedures. BP, on the other hand, had a risk-taking culture that allowed considerable freedom to managers of units or fields, and Shell had a culture of making decisions by consensus.

What does People, Ideas & Objects offer firms such as Shell, Exxon and BP.

• The Preliminary Research Report provides:
  
• A focus on the expanding earth science and engineering demands of each barrel of oil.
• A focus on innovation and its iterative impact on science. 
• How a firm can adopt an innovative footing.
• A greater focus on the business of the business through the five frameworks of the Joint Operating Committee.
• Providing the innovative footing and science based strategy.
• The legal, financial, operational decision making, communication and cultural frameworks of the industry. 
• A global dedicated oil and gas software development capability.
  
• Unconstrained by the paradox of code and customers. 
• Draft Specification.
• Eleven modules based on the research contained in the Preliminary and Final Research Reports.
• Firm focused application modules.
• Compliance & Governance 
• Research & Capabilities 
• Analytics & Statistics 
• Marketplace focused application modules.
• Petroleum Lease Marketplace 
• Resource Marketplace 
• Financial Marketplace 
• Joint Operating Committee application modules.
• Knowledge & Learning 
• Performance Evaluation 
• Accounting application modules.
• Accounting Voucher 
• Partnership Accounting 
• Generic
• Security & Access Control 

It's interesting the three methods that are used by Exxon (Strict Management Practices), Shell (Consensus) and BP (Risk Oriented.) Neither of these management practices or strategies are precluded in the People, Ideas & Objects. It is very clear that a unique strategic identity is enabled in each producer through this system. This also does not preclude a strong governance structure. With the reduction of the hierarchy an alternate form is required and one has been developed. That is the Military Command & Control Metaphor used within the Joint Operating Committee affording the pooling of resources and reducing the redundant capabilities built within each silo'd oil and gas firm. 

Lastly I would point to how this project is a commercially viable one by pointing out the business model of People, Ideas & Objects and the Community of Independent Service Providers. And the Technical Vision  of where the Information Technologies promise the greatest value and how this product is supported technically. 

These firms are a part of the global oil and gas industry and therefore part of the focus of this development. I encourage you to forward this post to the people you know at Shell, Exxon or BP and have them read for themselves what is possible. I would also encourage you to get involved in moving this vision forward by joining in this process. 

Technorati Tags: People's Capabilities Changes Engineering Geology Governance Specification

Sources and costs of energy.

Reason Magazine have published a summary of the various costs, advantages and disadvantages of the various forms of energy. This summary is very educational and shows in stark terms the energy problems we face. It makes it clear where we should putting our capital and our efforts. It also shows that when man attempts to best mother nature, it usually turns out bad. Have a look here.

Technorati Tags: People's Engineering Energy Environment

Exploration facts.

There's news from Reuters and the Calgary Herald that Canadian oil and gas companies costs of finding and producing oil are expected to fall this year. What has to be record prices is the announcement that the cost of replacing one barrel of oil rose to $22.72. It does not mention whether this was attributable to the higher level of engineering and earth science per barrel of oil, or, the lower volume of discoveries of reserves from exploration and production activities.

Irrespective of the specific reason why the price is rising, the same costs in 1999 were only $4.38. (All prices are reflected in Canadian dollars.) What the two articles subtly suggest is the costs associated with drilling and field work were up substantially. I have mentioned many times that the oil and gas company manager operates more as a Seal trainer then someone interested in developing the business they are in. They are only more interested in making themselves look more important by doling out the fish food to the service companies based on a "what have you done for me lately" basis. Between holding their captive audience over lunch to hear how wonderful they are, and talking to the press about how greedy the service industries have become, these oil and gas company managers pretend to have a full slate of work. Nothing could be further from the truth and I would suggest, again, that these people be shown the street as soon as possible. 

I have addressed these issues in the Draft Specification. The ability to develop the service industry is a critical part of an innovative oil and gas industry. The constant boom and bust cycles, and the "this quarter closing" ritual have made it difficult for service companies to develop any long term vision. Make hay while the sunshine's and hunker down when the storms role in are the only two operational strategies. To move forward from an engineering and earth science point of view. The oil and gas companies must approach the service industries with an eye to developing usable and innovative technologies together. The companies receive 100% of the revenues associated with producing oil and gas. When it comes to paying the royalties for those that are entitled to them, or the service companies that help in the exploration and development, the oil and gas company manager treats them as if they are a leach on their otherwise unearned fortune. The Resource Marketplace Module and Research & Capabilities Module address these issues and offer a solution of how the oil and gas and service industries can achieve greater throughput, innovation and capabilities. 

To speak to the elements in the main part of the Reuters and Herald articles. I suggested in the Preliminary Research Report that the engineering and earth science costs per unit of production were going to escalate as a result of the lapsing of the cheap energy era. This difficulty is showing itself in the five fold increase in costs over one decade. If anyone believes this trend will continue, that would bring a $110 / barrel of oil cost within the next decade. I happen to believe the number will be substantially more then five fold, although I have given up my gambling and fortune telling careers.

The power hungry primates that serve as managers at the Canadian oil and gas companies will have much larger budgets to play with. People, Ideas & Objects research shows that oil and gas companies are organizationally constrained. For them to increase their throughput requires more resources. Consistent throughout the Draft Specification is an understanding that re-organization is the only proven method of increasing productivity. Adam Smiths pin shop proved this in the 1700's and we have benefited from specialization and the division of labor since. The need is evident to me. Please join me here.

Technorati Tags: People's Accountability Engineering Exploration Geology Innovation Leadership Management

User friendly development tools.

The other day I wrote about how the Users involved in this community could get an understanding of how the modern development tools operate. Although new and innovative development tools is a major part of the ways and means that our work is changing. I now think that the perspective that I had, community of users looking at the development tools, is putting the cart before the horse.

In many ways it is the development communities responsibility to show their tools and help the Users understand what is being done. New interfaces, applications and perspectives that are designed to help the user to communicate with the developer what it is they are thinking.

These IDE's (Integrated Development Environments) have come a long way in the past few years. You can develop code faster and better then one could imagine only a few years ago. But what is being developed? Is the limit of these IDE tools somewhat constrained to where the developer understands the problem? A developer who is able to communicate and deal with other developers who share that point of view, and hence create a consensus on what action to take.

User based developed applications, such as this People, Ideas & Objects application, are generally larger, more complicated, and technically feasible. But, unproven mostly as a result of their size. Are these tools able to support the user? A user who knows what their job consists of and is able to communicate what it is they want or need. What if the developer is unable to understand why business users are demanding some of the things that they ask. Developers understand the science and engineering of systems. However, do they stumble on some of the more advanced business concepts used in today's companies?

I left a comment on Geertjan's blog on this topic. He is involved in the community that deals with the direction of where NetBeans is heading. And is one of the people that runs the NetBeans podcast. If this community of like minded business users could meet with his community of NetBeans developers. Would the users be able to improve not only applications but tools as well?

Technorati Tags: People's Development Engineering User

Constrained Organizations

In a follow up post to the "Unconstrained Prices", I thought it might be a good time to reiterate the reasons that I see for the ever escalating oil and gas prices. Energy production is driven by the earth science and engineering disciplines. As one would expect, over a given period of time the science and engineering will be subject to new discoveries and findings, leading to further enhancements of the underlying sciences. Innovation plays a key role here in that the new sciences bring about new innovative uses, and in turn, lead to new science. This is the key area of long term value add in the oil and gas industry. A producer that is able to apply the science and ideas to the problem at hand will, over time, increase their production and reserves. I'd like to call this the "Capabilities Approach" to the oil and gas industry.

If we reduce the competitive nature of the industry down to this Capabilities Approach. We see the interactions and understanding of the industry as it developed over the past 100 years. Someone figures out how to drill deeper, then the subsequent wells expose more oil bearing formations and hence more opportunities for increased oil or gas production. As time has passed the more lucrative and "big" ideas have been applied in broader areas, and for longer periods of time.

As we have learned from Stanford Professor Paul Romer's new growth theory, "more" ideas are needed to progress forward from the current base of understanding. The supply / demand for these ideas is not linear, but logarithmic, and occur at a much faster pace through their life cycle. Enter the classic bureaucracy and realize its efficiencies are based on expansion of the underlying activity (growth) and continuous process improvement. Change, and particularly scientific and engineering change, are the hierarchy's deficiency. What we need is a new form of organizational structure that will support and enable the industry to compete in this dynamically changing and high demand marketplace. Until such time as we can change the performance dynamics of the organizational form for the oil and gas industry, prices of commodities will continue to rise.

It is these comments and ideas that I have asserted in this blog for the past few years. They are a direct result of my thesis that provides evidence that the Joint Operating Committee is the method of organization of the innovative energy producer. We need to start building the software that I have specified in the 11 module People, Ideas & Objects application and unleash the potential of the sciences for the betterment of society. I find these ideas are consistent with many of the industries leadership. The International Energy Agency recently made some comments that reflect these concerns.

The IEA states that by 2015 there will be a shortfall of 12.5 million boe / day.

"Future crude supplies could be far tighter than previously thought."

"Reflects an increasing fear within the IEA and elsewhere that oil producing regions aren't on track to meet future needs."

"The oil investments required may be much much higher than what people assume."

My personal favorite;

"This is a dangerous situation."

"We are optimistic in terms of resource availability, but wary about whether the investments get made in the right places and at a pace that will bring on supply to meet demand."

Yet nothing is done by these bureaucracies. They know what the problem is, there is just no motivation for them to make the necessary changes. Record profits at Exxon Mobil mask the 10% production declines. We need to consider who's responsibility this problem is, as the companies are unwilling to do so. After all it is not they who will be suffering with energy shortages but society in general.

On the other hand, and what I truly do not understand is that the $135 prices are rewarding those that find and produce the energy. This is an entirely new dynamic for the industry, when will we see the companies that are able to outperform the current crop of producers? The answer to that question unfortunately is not soon. Until this software is built to organize the efforts of the industry, our choices are limited to the status quo or manual systems. Join me here.

Technorati Tags: People's, Call-to-Action, Energy, Engineering, Science,

Devon Energy gets it.

Speaking to Reuters Global Energy Summit, Devon Energy president John Richels made the following comments.

"We are fairly bullish, we don't see any large amounts of natural gas coming on in the near term."

and

"He said new oil wells being discovered around the world are coming from very complex plays that require considerable skill and expense to produce oil."

Guess the hierarchy will have to redouble their efforts. Oh wait, it can't, it's already at capacity.

Then it must be time to leave the laggards behind.

Technorati Tags: Genesys, Innovation, Engineering, Geology, Failure

The peaking of Offshore Oil and Gas:

Is the party over?
Or just Beginning to get exciting?

April 30, 2007

Matthew R. Simmons

Although the majority of this information is sourced from this Simmons presentation, little specifically is referenced. I felt that most of the information was factual and therefore not subject to Mr. Simmons copyright. (You can't copyright a fact.) I highlighted only what I thought was Mr. Simmons opinions in the noted references below.

Simmons noted the significance of the earlier period of the years 1859 to the 1930's where "no one had any idea what to do with so much oil"! The 148th year of the oil era is marked this year. 70 Years ago drilling teams began hunting for oil in the Middle East. Scouting for oil in Kuwait, Iraq, Iran and Saudi Arabia. Many of the large commercial fields that still produce in that region where found. Ghawar, the biggest was discovered in 1948, Safaniyah in 1951, up to 1967 with the last great super giant onshore Middle East find being Shaybah.

During 1947 Kerr-McGee moved offshore beyond piers and brings in the era of offshore oil and gas. These initial wells reached as deep as 150' feet of water. 150 feet being the limit of human endurance and safety due to the "bends". 1967 saw the Siberian Samoltar region develop, ARCO discovered the North Slopes Prudhoe Bay in 1968, Phillips found Ekofisk in 1969 and in 1975 Pemex found Cantarell. These regions and discoveries were the last 3 great oil frontiers.

With the development of mixed gas for diving, hyperbaric chambers, and the "Jim Suit" c/w GE's robotic arm. Led to testing and drilling into 1,000 feet of water in the early 1970's. Commensurate with this deeper diving capability Drill-ships and Semi-Submersible were able to conduct drilling into 150 to 400 - 450 feet of water. Further development of sub-sea production systems led to offshore satellite fields. During the 1980's the offshore drilling industry was faced with declining returns due to the costs of these technologies and the relative decline in demand for offshore drilling due to the delcine in the price of oil. As I recall it went to $10 / barrel in 1985 or 86. The pricing problem led to what was believed as the overbuilding of the offshore drilling fleet. This lack of offshre drilling demand dropped the capacity utilization rates to 43% overall. However when 1993 saw new offshore drilling technologies being introduced, the associated declines in costs and the producers earning reasonable returns on moderate oil prices of around $18 - 21 / barrel. This led to the real deep-water / ultra deep-water opportunities. This lead to a rebound or recovery of offshore drilling when in May 1997 Sonat Offshore announced the building of a deep-water rig with a 5 year contract at $200,000 / day day-rates.

"After 1980: all growth in oil output came from offshore oil". In his presentation Matthew Simmons shows the volume of oil production increases since 1980 are attributable to the offshore drilling discoveries. 120% of the 1980 to 2007 increase in the global oil production has come from offshore exploration and production. This is significant in showing the way in which the industry should turn. If the industry was able to make these discoveries with immature technologies and imploding commodity prices, I think the answer as to where the oil and gas industry needs to turn is evident.

Today after 38 years, the contractors for offshore drilling are financially healthy and prosperous. Only the number of rigs has not changed in the last 20 years. And the vintage of that fleet is quickly realizing its useful life. Recall that rust never sleeps and the useful life issue becomes more focused. Only 15% of the total fleet is new, with the majority being 25 years or more in age. It is unknown how quickly the fleet can be refurbished and how fast the fleet could be rebuilt. Simmons asks what does 500 offshore rigs cost. With 126 rigs on order, the delivery dates being from 2008 to 2011 it would seem the drilling platforms are very limited in their opportunities for the energy industries redevelopment capabilities. Time seems to be the greater cost in rebuilding the fleet. One must recall the effort of the United States during WWII, mixed in with some modern day innovation and science in seeing how the number of platforms could be built in time. With all of the oil found from offshore wells since the early 1980's, what is the prospect of the industries productive capacity and uptake?

One of the reasons that I follow Simmons is his analysis is usually unimpeachable. He is / has been a lightning rod for the wrath of the industry soothsayers that state all is well. Dr. Daniel Yergin seems to have sampled some magic cool-aid when it comes to predicting the supply possibilities, and hence his popularity. Simmons on the other hand has consistently put quality analysis that has proven correct over time. I have been following him since 1997 and his comments are stark, to the point and not something that Yergin appears to want to wake up to. For example, in this article Simmons notes the following prospective changes with respect to the supply that Yergin thinks is going to explode in the next 10 years.

• USA's onshore oil totals approximately 4.5 MB/D with an associated produced water of 128 MB/D. A 96.6% overall average water cut.
• Middle Easts giant oilfield now in decline. (Based on reserve analysis and decline in production from the region.)
  
• Mexico's Cantarell complex is beginning its steep decline.
• Lake Maracaibo is a "mess".
• Niger Delta is a rust belt of decay.
• The North Sea is in steep decline.
  

In light of this and the fact that 120% of the increase in oil and gas production in the past 27 years is from offshore oil exploration and production. How is it that Yergin believes the onshore oil and gas industry can respond to today's demand challenge. If it didn't contribute in the past 27 years to the global capacity of production, what is it that Yergin believes will solve this problem? More and more each day I think that Yergin is actively attempting to impeach his history and contribution to the oil and gas industry. As time passes he will become known for getting it all wrong.

Simmons falls definitively in the category of Peak Oil Theorists. He asks if the January 2007 production profile is 1 MB/D lower then May 2005's 74,151,000 B/D. This decline may show that May 2005 was the point of no return from a Peak Oil theory point of view. Unless the number of wells that can be drilled increases size-ably, then Peak Oil starts it's otherwise impossible decline. With the associated growth in the global fleet of offshore drilling capability, production decline will accelerate.

Its at this time that Simmons puts across one of the other phenomenon he has asserted many times before. The ability to accelerate the decline by aggressive exploitation is the only thing that the industry has really done in all of the onshore and offshore fields. This has raised the deliver-ability of oil and gas from known reserves to its absolute optimum, and cleaned out what was producible form the formations quicker then what has been found to replace it. In some companies in Canada this replacement rate is consistently 15% of the production! If you see a hamster in the wheel running at full speed your correct, however, this last point demands a doubling in the speed from the hamster. Our current consumption of energy is enabled by the aggressive and highly technical exploitation of known reserves over the past 25 years. This deliver-ability rate is therefore not sustainable. And if the peak oil theory is proven right, since May 2005 a very large clock has been ticking for the energy consumer who is unawares and unprepared. Thank you Dr. Yergin.

The dire nature of Simmons facts are captured in his 27th slide. Asking "Can the industry survive post peak oil?

• Will the global economy survive post-peak oil world?
• How high could oil prices go?
• When demand outstrips supply are shortages inevitable?
• Will the Offshore Technology Conference (OTC) survive Post Peak Oil? (The OTC is the group Simmons made this presentation too.)
  

How this gets done, and I cannot imagine anyone arguing for the bureaucracy to lead this charge. We need to organize our efforts to scale to this level. The industry is significantly bound by constraints and needs to reorganize around this proposed software development. How much longer will we face an angry consumer regarding the alleged gouging at the pump? How much longer will the bureaucracy feel complacent and wealthy in their deliberate inaction? How much longer will Yergin continue to belittle the Peak Oil theories and Simmons, and tell his customers, the consumers and bureaucracies, things are not as rosy as he has stated?

Technorati Tags: Genesys, Peak-Oil, Simmons, Yergin, Offshore, Engineering

CO2 as a solution, not a problem.

In this article,the April 2007 Oil & Gas Network (Print Edition), "What's New in EOR Research" talks about the use of CO2 in Enhanced Oil Recovery schemes in Alberta. Each of the highlighted projects are taking advantage of an Alberta Government's CO2 Projects Royalty Credit Program. The participants include Apache, Devon, Penn West and Anadarko. The schemes use the EOR technology that has been learned by the energy industry over the past 20 years. Using pattern drilling to sweep the reserves to the production wells with a Water Alternating Gas (WAG) injection, sometimes horizontally as well. I found it interesting in the article that the producers could now justify this type of flooding with the higher oil prices. I did not realize CO2 injectants would be more costly then C2+. However the article states that the source of these injectants is primarily from the neighboring gas plants. And that the sources of CO2 would constrain the further development of these pilot projects. Another interesting element is the use of reserves that have been very prolific, yet difficult to find, areas like the Rainbow Lake pinnacle reefs and Nisku formation in Pembina. Another area where it is being tried is the Pembina Cardium Miscible Flood.

The injection of liquefied CO2 is a miscible agent that will also maintain pressure on the oil being driven to the producing wells. In the Weyburn area over 7 million tonnes of CO2 has been injected over the past 4 years. And unlike any other miscible flood where the miscible agents are expected to be recovered, the CO2 will be left in the ground permanently. If the energy industry is able to discern any value from CO2 injection, a given as far as I am concerned, and the Alberta Government continues to provide incentives to the industry to do so, we may have shortfalls in those green house gas supplies. If we used the 7 million tonnes of injectants as a guide how much human production of CO2 is offset?

Using the "Carbon Dioxide Calculator" we can determine that the atypical home heating and other associated demands produce of CO2. Using rather liberal values, and particularly 5 eight hour flights per year, I came up with 935 tonnes per household. Now in the past 4 years, 7 million tonnes of injected CO2 at the Weyburn facility essentially eliminated the annual production of 7,486 homes. If we extend the number of facilities that could use CO2 as a miscible agent, maybe these Kyoto targets are not necessary after all.

Technorati Tags: Genesys, Environment, Engineering, Development

Collaborative Advantage

"The days of U.S. technological domination are over. The nation must learn to thrive through working with others."

Leonard Lynn
Hal Salzman

Blog Summary

I found this kicking around on my hard drive. I had apparently downloaded it from the Kauffman Foundation a while ago, a copy of this document can be secured by selecting the title of this entry. Collaboration is clearly a key attribute of how work will be done in the future. Collaboration facilitated by technologies that are available today provide competitive advantages, and different methods and means of completing work. This article suggests the American dominance in technology leadership is waning. How the U.S. can regain the leadership position they once enjoyed is suggested in this article is through collaboration. This document takes a critical look at the realities of globalization for the U.S. Based here in Canada, much of the same feelings of the need to compete is shared by most. We have lost some of our leading position, however, the U.S., and to a lesser degree Canada, were in need of a competitive challenge. Competition is good, and we are faced with some formidable competitors in a globalized world. This document focuses on collaboration in the sciences and technology, and specifically noting the role of engineers in providing the means for North America to compete.

It at times seems that the differences that made North Americans unique are fading quickly. Whether or not a reconciliation of the standard of living of all people is in force, most people would concur with this documents premise and hypothesis. The authors note;

"It is not that the new globalization has gone unnoticed. Many observers are concerned that the United States is beginning to fall into a vicious cycle of disinvestment in and weakening of its innovation systems. As U.S. firms move their engineering and R & D activities offshore, they may be dis-investing not just in their own facilities but also in colleges and regions of the country that now form critical innovation clusters. These forces may combine to dissolve the bonds that form the basis of U.S. innovation leadership." pp. 75

Were these challenges demand driven? Or, has the scientific and engineering capability to conduct most of the high end complex tasks what made North America so dominant? Or was it the freedom and liberty were being released in the former communist nations, that is now rising up to challenge the west? I think it is the latter, that with China in 1978 and the Former Soviet Union (FSR) since 1989, can now focus on quality of life issues and be less concerned with controlling their populations. The authors seem to think that some of the ways in which business had been conducted has been exploited by other countries. In an open society that is what will happen, and did happen to the benefit of all people. Although losing these competitive attributes is possible, the competitive focus they unleash is both the purpose of an open society and the key to its future.

"Strategies that may have served U.S. firms in the second generation globalization will not work in the third generation world. The new emerging economies are an order of magnitude larger than those that emerged a generation ago, and they are today's growth markets. Nor does the United States, despite its undeniable strengths, enjoy global dominance across the range of cutting-edge technologies. More-over, U.S. multinationals are weakening their national identities, becoming citizens of the countries in which they do business and providing no favors to their country of origin. This means that the goal advocated by some U.S. policy makers of having the United States regain its position of leadership in all key technologies is simply not feasible, nor is it clear how the United States would retain that advantage when its firms are only loosely tied to the country." pp. 77

These comments may appear to resonate more with a protectionist mindset then with a more globalized point of view. It also seems to state a wanting for a greater share of a smaller pie then sharing a large pie to a certain extent. If the third generation globalization ties into Professor Carlotta Perez's theories, the third generation is the point where the benefits are soon to arrive. Dr. Perez made that call just recently. So the installment period as she described has been made, and thankfully we had a large and growing China and India to help sustain the world through this transition. It is also necessary to point out that what fuels this activity is the oil, gas and coal industries. These resources are constrained due to the global demand, and are potentially a hindrance to the progress of the world economy. The only manner that the energy industry can meet this demand is to re-organize for this challenge. This reorganization has to be made explicit through the software that defines and supports the structure. We should be less concerned about the losses of competitiveness and focus more on how they can be solved collectively.

The authors offer some of the ways in which the past competitiveness of the U.S. market is slipping away. In these four categories I can clearly see that the authors are not offering a means to stop the hemorrhaging of the U.S. economy. But offering constructive ways in which the U.S. can participate in the global economy and compete.

The Bandwagon Syndrome.

"As U.S. multinationals join the bandwagon of offshore technology development, they often seem to go beyond what makes economic sense." pp. 77

The Snowball Effect.

"The more that U.S. multinationals move activities offshore, the more sense it makes to offshore more activities." pp. 77

The loss of Positive Externalities.

"Some multinationals are finding that if their technology is developed offshore, then it makes more sense to invest in offshore universities than in domestic universities." pp.78

The Rapid Rise of Competing Innovation Systems.

"Regional competence centers or innovation clusters in the United States grew haphazardly in response to local market stimuli. China, India and other countries are much more explicitly strategic in creating competence and innovations centers." pp. 78

"Rather, the United States needs to develop new strengths for the new generation of globalization. With U.S. and other multinational firms globalizing their innovation work, emerging economies developing their education systems and culling the most talented young people from their huge populations, and communication technologies enabling the free and fast flow of information, it is hard to imagine the United States being able to regain its former position as global technology hegemony." pp. 79

"No amount of science and engineering expansion will restore U.S. technology autarchy. Instead, a new approach - collaborative technology advantage - is needed to develop a vibrant S&T economy in the United States." pp. 80

Policies for strength,

"We believe that the government, universities, and other major players in the U.S. innovation system need to work toward three fundamental major goals:" pp. 80

• "The United States should develop national strategies that are less focused on competitive, or even comparative, advantage in the traditional meaning of these terms, and are more focused on collaborative advantage." pp. 80
  
• "To start, the nation needs to counter the bandwagon and snowball effects that are driving the out-sourcing of the technology in potentially harmful ways." pp. 80
• "Designers of Tax Policies at all levels also can redirect policies in these directions." pp. 81
  
• "To a large degree, the U.S. patent office serves as the patent office for the world." pp. 81
• "As a second goal, the United States need to help create a world based on the free flow of S & T brainpower rather that a futile attempt to monopolize the global S&T workforce." pp. 81
• "Immigration policies that support global circulation would allow easy short term entry of three to eight months for collaboration with U.S. based scientists and engineers." pp. 81
• "Finally, in working toward the first two foals, the United States needs to develop an S&T education system that teaches collaborative competencies rather than just technical knowledge and skills." pp. 81
• "Our finding suggest that it is not the technical education but the cross - boundary skills that are most needed (working across disciplinary, organization, cultural, and time / distance boundaries)." pp. 81

Finally as part of the conclusion of this paper, "the enhanced communications within and between organizations". In oil and gas the consistency of motivation between the members of a Joint Operating Committee (JOC) resonates with the recommendations of this paper. The science, technology and engineering is the focal point of those JOC members. It is their backgrounds and scientific interests. The JOC has the operational decision making capabilities, however, it must retard these processes for the various bureaucracies to sign off on the plan. Its time to stop placing the bureaucrats at the centre of the organization and adopt this papers recommendations. And it is my opinion that the start of this change would be to develop the software as part of the solution to our long term economic well being.

"Our research suggests that the new engineering requirements, like the old, should build on a strong foundation of science and mathematics. But now they go much further. Communication across disciplinary, organizational, and cultural boundaries is the hallmark of the new global engineer. Integrative technologies require collaboration among scientific disciplines, between science and engineering, and across the natural and social sciences. They also require collaboration across organizations as innovation emanates from small to large firms and from vendors to original equipment manufacturers. And obviously the require collaboration across cultures as global collaboration becomes the norm. These requirements mandate a new approach not only to education but to selecting future engineers:colleges need to recognize that the talent required for the new global engineer falls outside their traditional student profiles. Managers increasingly report that although they want technically competent engineers, the qualities most valued are these other attributes."

Technorati Tags: Genesys, Call-to-Action, Engineering, Science, Trends

Professor Whitesides, on MIT Video

This video has an interesting point of view, one that states the United States will at least be challenged for leadership in science and technology. Professor Whitesides suggests that areas such as K - 12 education need to be amended to accommodate the ways that academia and corporate research are undertaken.

Two of the important points that he suggests is that the Chinese have a very low cost structure. This cost structure extends in all areas of their economy and includes research. Noting the Chinese also have very large foreign currency reserves that could be used to help sustain the long lead times necessary in research. This provides them the opportunity to challenge and possibly lead the world in research and science.

Professor Whitesides notes that energies problems will require science and technologies to advance to solve these issues. I would suggest that this is correct, the problems are many, they are diverse in nature, and are key to a countries competitive position. I have suggested here that the oil and gas industry needs to aggressively employ the sciences in order to meet these challenges. I have also suggested that the tie in to the academic community is necessary. As Professor Dosi has suggested technology influences science, and science influences technology. Industry and academia need to be working together. And to do this effectively I believe industry needs to reorganize themselves for these purposes around the Joint Operating Committee. A bureaucracy will most certainly fail in these critical energy challenges.

The question and answer session in the last half of this video is a must watch as well. The participants for this presentation are the who's who in terms of who is interested in providing solutions to these issues.

Technorati Tags: Genesys, Knowledge, Research, Engineering, Science

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

MIT President Emeritus on MIT Video

Dr. Charles M. Vest provides an interesting discussion regarding the teaching and developmental challenges that the engineering disciplines will go through in the next 14 years.

At around the 35 minute point, Dr. Vest states their is a parallel to the current issues the energy industry faces, with the issues the auto industry faced in the 1970's. An interesting and accurate analogy.

During the Q and A Dr. Vest makes the point that at a diner with Secretary Rice, regarding the changes at the State Department, Newt Gingrich made it very clear, we have something that was built for a different era, that science and technology in industry have to re-organize to meet the challenges of today.

Technorati Tags: MIT-Video, MIT, Engineering, Innovation

A new security risk?

This is a warning to oil and gas companies regarding a new and significant security risk. Normally I don't concern myself with these, however, the following is the most prolific risk in technology today.

Pod slurping has been known to be a reasonable risk since the beginning of the iPod craze. Podslurping involves high speed copying of hard drives onto an iPod at an unauthorized location. The difficulty is having physical access to connect an iPod device to the network and then copy the disk images to the iPod for later review. With these iPod's being upwards of 60 gigabytes, significant volumes of data can be taken in less then 2 - 3 minutes. That is until now.

If as Microsoft has claimed, their new iPod killer will be wireless, then the physical access is not required. A visitor to your office may be able to access the data on hard drives wirelessly and maybe not even require physical access. I believe this may be a significant risk.

The only remedy is to encrypt literally everything so that the information is useless in the wrong hands. This can be done by ensuring all;

• data is stored in encrypted form.
• network connections are on a virtual private network.
• wireless connections are encrypted, and not broadcast.

Trust Microsoft to introduce the device that brings the greatest risk to data integrity. Which brings up the other risk. The ability to load programs and other data on to a harddrive is also a concern. The ability to store something in non-encrypted form would still be a threat if it were a script or, other compromising data.

When a company of size considers how many hard drives are accessible in this fashion it gives one the willies. Each computer is essentially a potential entry point when one considers that a wireless USB port can be augmented with a 802.11 b/g or Bluetooth connection in less then 10 seconds. Permitting anyone to create a new wireless network for their own use. However, it would be fairly easy to see someone using a computer in an unauthorized fashion, the iPod could be actively downloading information during a regular meeting. The network computer and service oriented architectures have never been more justified.

Now based on Microsoft's release schedule, their iPod killer won't be out until 2015. However, Apple won't sit idly by and let Microsoft introduce any innovation that isn't on their platform first. If there is to be a wireless iPod it could be seen as early as this years Apple World Wide Developer Conference in August. The time frame therefore to encrypt one's data is now, with very little time to do it.

Technorati Tags: iPod, Security, Innovation, Energy