Posted on October 21st, 2014
by Chip Davis
The Oil Industry has for years used ERP systems to manage its operations. These systems typically sit at corporate headquarters and capture data from keyboards located in cubicles. The data they capture is generally of three different types: (a) “the plan”, (b) “the rules”, and (c) “the results”. Here is the plan and if we follow the rules we will likely get these results. The plan and the rules sit in a central computing system and wait for execution from the field to determine the (i) the results, and (ii) if the rules require adjustment. The recording device for most of the results is historically a piece of paper.
Mobile technology takes pieces of the system that historically sat at corporate headquarters and puts them on iPads. Each iPad represents its own mini-ERP system (complete with rules) and all of these systems are bound together and controlled by a centrally-located computer instructing the mini-ERP systems on what to do and how to work together. This is sort of like distributed computing where a job is apportioned among many computers and the results reassembled.
What makes the oilfield version of this so complicated is that many times there is no network to which one can timely connect one’s iPad. As a result, this means that a complete set of business rules needs to sit on the unconnected iPad so that it can instruct the field user what to do (at the time when he/she has no internet access). After completing an “unconnected voyage” in the field, the iPad then has to be able to competently tell the central system what is has been doing. The central system then has to be able to coordinate a bunch of iPad stories accurately and in a time frame that makes sense. This coordination competency makes the oilfield version of mobile technology substantially more complex and (advanced) than other versions of mobile technology. It makes sense to me that the most mobile industry in the world (but for airlines) would develop among the most sophisticated mobile competencies in the world – breaking ERP into a thousand pieces so it can be used in a remote environment.
Posted on October 17th, 2014
by Chip Davis
Posted on September 5th, 2014
by Chip Davis
Houston Ventures wanted to understand what was on the minds of Oil & Gas Industry workers regarding the above question. The OilPro network had a lot to say on the subject and it was a pretty consistent message. It creates a fairly different view from the notion that the whole industry is just “job hopping”.
Posted on August 14th, 2014
by Chip Davis
An astute CEO of a Houston-based software company regularly reminds me that most software can do what it is designed to do. He makes this statement while acknowledging that a significant number of corporate software adoptions fail: he is pointing towards the human factor.
A piece of software is really an instrument by which a group of people can agree to do a certain thing a certain way. This group is generally led to agreement to try something “new” based on its recognition of an opportunity or problem. The opportunity or problem must be substantial enough to cause the group to agree…..”something has got to change”.
What causes technology to fail is generally a combination of two factors (a) the group contemplating change did not fully understand the level of preparation required to build a new way, and (b) the person selling them the software did not fully explain/disclose the level of preparation required to build a new way.
We humans tend to marginalize in advance the amount of effort required to deliver success. This reminds me of another interesting quote:
“No one remembers the amount of money that was saved on the project that failed.”
Posted on July 12th, 2014
A TRUE STORY
There is a substantial operator that owns a large number of portable frac tanks. The total number of frac tanks owned by Operator X substantially exceeds the number required by its drilling operations (even after giving effect to consideration of spares, maintenance, logistics, etc.). Despite this material excess, the operator is in the practice of renting a significant number of additional tanks in order to meet its operational needs. This sounds like a riddle.
Operator X drills in many regions across the US. Each region has its own management, profit & loss statement and performance-based bonus plan. Employees are paid to complete as many drilling projects as possible. This is where the mystery reveals itself.
Operator X’s various regions are competing with each other. In order to avail themselves of today’s market they are vying for internal resources to complete as many projects as possible (making hay while the sun is shining]. As a result…regional/district managers have been hiding assets [FRAC TANKS] from each other causing excesses in some regions and shortages in others. The shortages must then be covered with rentals.
This human dynamic occurs across a number of oil field equipment categories and is hiding the fact that, in one operator’s case, there is an equipment market overhang not a real shortage. Individual aspirations inside the larger entity are negatively impacting the enterprise as a whole.
Posted on July 1st, 2014
by Chip Davis
Apache recently filed suit in Bexar County against two oil field service companies for customer billing fraud. The complaint asserts that, among other things, the service providers (a) overcharged for services provided, (b) charged multiple times for the same service classic (“work ticket shell game”), and (c) charged for services never provided. Based on the elements of the suit revealed by the press, I can speculate how this happened.
First – It’s all going too fast | The speed of activity in the oil industry is so great that customers do not have the resources to match new field tickets up against requisitions/contracts prior to the time of payment. Yes I know this sounds crazy.
Second – It’s all going too slow | The audit function designed to sample test field tickets reviews but a small percentage of the whole and generally several months after payment has occurred. Yes I know this sounds crazy.
Third – I have only one set of eyes | Operators must rely upon on-site, eye witnesses (in remote locations) to confirm receipt of services. Apache had an employee who was willing to sign-off on false field tickets making the witness requirement not a viable internal control.
I know for a fact there exist technologies that prevent the above (Apache probably knows this as well). While I believe Apache wants its $1.5 million back, I separately believe this lawsuit involves hundreds of millions of dollars. I have got to believe Apache understood the benefit of a public filing as an effective theft deterrent (to all others) and this involves a ton of money. This is a strategy put in place until such time Apache is able to develop a more operational approach (using new technologies etc) to deal with the issues. The additional takeaway is that the filer believed the problem of fraud bad enough to take this course (again…me speculating but they have my attention).
Posted on May 24th, 2014
We have seen a number of investment prospects that base their growth case on a theory called “consumerization”. This theory posits that an application (“app”) useful to one person outside of business will reveal itself to be useful in a business context such that it propagates and self organizes into an enterprise level platform. These “consumerization” apps are expected to start on a single iPhone and spread thereafter.
In adopting a platform an enterprise must agree that the platform is a positive incremental or replacement means of communicating/interacting and this is no small decision. History has shown that these types of decisions are never left to the populace but rather are controlled by leadership. It is human convention.
So for the theory of consumerization to work, one must believe that the app is so powerful that it will swell from the bottom and force leadership to respond to the popular will. Sounds like revolution.
Revolutions, while necessary, can occur only so often. It does happen but the odds of triggering a revolution are low. There is, in the market, an over abundance of expected revolution. Based on this I believe the consumerization theory of business software investment as a portfolio strategy is implausible.
Posted on May 16th, 2014
Today we met in Houston, Texas with the CIO of a large oilfield service company to demonstrate technologies our fund was reviewing for investment. We learned the following:
- Personnel capabilities and project requirements are generally matched haphazardly and based on “tribal knowledge”.
- Oil & Gas supply chain is undergoing a significant geographic change making process improvement difficult to manage (see and execute).
- Physical security is becoming increasingly important and is now a priority. Remote solutions are sought.
- Supplier performance measurement is an interesting area for consideration.