On Demand solutions transform the economics of production reporting

In drilling, experience has always been the best teacher, and improved efficiency and safety have topped the drilling report card.   

Peter Black, EnergySys Limited, UK

Oil and gas operators need and want production reporting and allocation systems that are easy to use, with sophisticated reporting capabilities, flexible data management, and robust storage and audit mechanisms. They want to know that they have a verifiable history of all of their data, accessible to analyze and use as the basis of forecasts. They want to be able to extend their systems when new fields or wells are introduced, or when business rules or partners change. They want to be able to focus on their business, rather than on the mechanisms by which reporting is done.

However, even given the importance of accurate reporting and secure data storage, it is still difficult to justify the costs and complexity of traditional systems. Complex setup means that implementation times can stretch to six months or more, and the results are frequently highly customized and inflexible to change. Even after hardware and software is selected, and procurement and implementation is complete, ongoing maintenance and support of IT assets can be a difficult and time-consuming task. The return on investment, if it ever comes, is certainly far into the future. On smaller assets or those with short predicted life-spans, it is clear why it is so natural for users to conclude that it is less troublesome and more cost-effective to maintain manual systems on paper or spreadsheets.

Successfully addressing these problems demands novel thinking and radically different delivery models. On Demand solutions are the answer, dramatically reducing complexity and costs while enhancing power and flexibility.

WHAT IS ‘ON DEMAND’?

On Demand may be best understood as a reinvention of the Application Service Provider (ASP) model that was much hyped at the end of the last century, only to largely disappear amid underwhelming reports of user adoption. Slow network speeds, exaggerated claims for performance and functionality, lack of clarity in terms of costs, and concerns for security ... it was probably a combination of all of these factors that created significant barriers to adoption. Most of all, the approach was undoubtedly immature and probably ahead of its time.

Notwithstanding that history, there is no denying that recent years have seen a quiet revolution taking hold. The Google search engine is so widely used that its name occupies a place in the dictionary, but the infrastructure that powers it is a mystery to most users. One key characteristic is the ease with which the tool can be adopted and, equally significantly, replaced with an alternative like the Yahoo! search engine. Complex applications, including business management and collaboration suites, are being provided online; Salesforce.com and Google Apps deliver services to significant horizontal markets for project management, CRM and office applications. These are all examples of On Demand service provision, or Software as a Service (SaaS) as it is also known, and they deliver rich functionality across the web at low, or even no, cost.

Taking these as samples, the key characteristics of SaaS may be summarized as:
• Configuration and delivery across the web
• No client installation: just the web browser
• Robust, reliable “invisible” infrastructure
• No need to specify server hardware or software
• Low (sometimes very low or zero) subscription fees per user per month
• No hidden costs
• Rapid deployment with limited setup costs
• Low barriers for entry or exit
• Essentially unlimited highly reliable storage.

Some of the consequences of this apparently innocuous list are actually revolutionary in nature. Low barriers for entry and exit, combined with simple and low per user, per month pricing, create a dynamic and competitive market. There is no need to procure, install and manage hardware, and no need to buy software and manage versions and updates and patches. New releases are delivered quickly and without service disruption.

Ultimately, SaaS is about freedom. The freedom to pay only for what you use. The freedom to identify a competitive offering that gives you more for less, and to move with little or no penalty. The freedom from worry.

CHALLENGING COMPLEXITY

The need to challenge complexity is closely tied to one of the other key drivers of the modern oil and gas industry: cost control. There is a need to drive value from every asset, particularly given uncertainty over hydrocarbon prices and the need to ensure the economic feasibility of smaller or more mature assets.

Complexity adds cost. Complexity delays ROI. Complexity causes support issues and reduces choice. However, most initiatives to cut IT costs have not addressed complexity, and are best categorized as attempts to “do the same thing more cheaply.” Outsourcing and offshoring, and standardization on a restricted list of vendor-specific applications, have simply reduced business flexibility and lowered service quality. If anything, they have added to the complexity, hiding a higher total cost of ownership behind lower headline day rates.

SaaS places responsibility for complexity, its costs, and the reduction of those costs, on to the place where it belongs: the solution vendor. SaaS business models transform a traditional product-supplier relationship into one based on service provision; it thereby changes the dynamic, and it forces different behaviors. By buying services, oil and gas companies can focus on their core business, rather than on IT procurement and maintenance. It is a situation not substantially different from other areas of supply; if there is little appetite to own the drilling rigs that are the backbone of their operation, then why is IT different?

RETHINKING PRODUCTION REPORTING SYSTEMS

The relevance to production reporting systems is clear. Users of such systems tell us that cost of ownership is a key concern, in many cases preventing the adoption of such systems for some assets. Changes occur frequently, as new wells and fields are added (Fig. 1), business rules for allocation of product are modified, and new data items are defined and new information is stored. Metering errors have to be corrected, historic calculation results have to be adjusted, and a complete audit trail must be maintained.

Fig. 1. Graphs of production from various fields; screen shot taken from a SaaS service over the web.

Spreadsheets provide the flexibility to respond to such change, but they do not offer security, automation, data integrity, data management, version control or audit records. They do not easily limit access to data, and the job of reporting is not easily separated from the job of calculation. Linking data across spreadsheets is cumbersome and error-prone, so the tendency is to build one massive spreadsheet that contains all the data and calculations. Such a spreadsheet is not easily linked with other systems and does not provide unequivocal records of data exchanged. The functionality to support multi-user access, as well as access across the web, introduces further complexity and is unfamiliar to most users.

Despite all of the above, the spreadsheet does represent the right core model for production reporting and allocation, given its power, flexibility and ease of understanding. However, this must be encapsulated in a form that addresses the shortcomings identified above; traditional approaches to software provisions are not the answer, as they place far too great a burden on the customer. A SaaS delivery model must be part of the solution to reduce barriers to adoption and increase ROI.

REALIZING THE VISION

SaaS systems now exist. Application services in an easy-to-use form are available at any time, from anywhere, securely via a standard web browser. The pricing model is both simple and transparent, and is a fraction of what was possible previously. While much of what has been achieved in this area represents the result of truly innovative technology development, an equal proportion of the advance is a direct consequence of the adoption of a different mindset.

For example, mandating that it must be possible to do system configuration over the web changes the way the underlying products are built. Aiming to reduce the man-time services required to implement such systems to the minimum possible makes it impossible to build from the ground up every time, and makes it essential to have pre-built templates that capture, at the very least, the essence of each business domain. The goals of responsiveness to change and reduction of maintenance costs translate into a need for extreme flexibility in the creation or modification of business rules and data models, as well as in the drive to ensure that business users are more productive more quickly. Most fundamentally, rapid deployment and the opportunity for end-user configuration automatically mean that there can be no place for programming skills in system configuration.

And while customers might be initially concerned with security, when they choose a SaaS service, they can expect, and will receive, high standards of data-center security, with multiple redundant systems, controlled access and encrypted offsite backups. The best of the emerging providers will be able to demonstrate that they and their partners have a commitment to the highest standards for data protection through adherence to the information security management standards BS7799 and ISO/IEC 177991.

BUILDING THE PARTNER ECOSYSTEM

Another facet of On Demand is the reduction of reliance on a single provider. Open tools for configuration mean that support and service can be purchased from any of a wide range of third-party suppliers, rather than just the original vendor. Such competition drives down costs but also allows customers to select the most appropriate partner, probably based on their specialized knowledge in a particular area, for each application. Again, traditional business models for IT have generally enforced a strict lock-in to ensure a steady stream of repeat services business. SaaS completely undermines this approach.

CONCLUSIONS

On Demand (or SaaS) software delivered as a service will transform our industry. It exactly meets the aspirations and goals of its customers, in that it transfers responsibility for a key but potentially non-core function in a way that truly works. Clients pay for results, and stop paying when the service is no longer needed. We, as vendors, are focused on delivering a service, not a product, and this significantly changes the dynamics of the relationship. The question is not whether this change will happen, but to what degree.