New Demands on Information Management

Processes
Scott M. Shemwell, D.B.A
March 2003

CIOs told Gartner they now rank "providing guidance for the board and executives" as
their leading management priority, up from sixth on the 2002 list. Their top technology
priorities are securing systems from internal and external threats, followed by better
integrating applications to provide greater data availability throughout the enterprise.
– Bernadette Hearne
Editor, e-business Chemicals Newsletter
March 26, 20031

Abstract
Awash with data, organizations are facing new demands on their information
management processes. Security, corporate governance compliance, and real-time
asset management, are among the set of information driven activities that today’s
executive must address. Rather than be intimidated with these new demands, leading
companies can deploy information management systems that can further competitive
advantage.
Today’s information systems are mature, add shareholder value, and are the backbone of
high performing organization. Overcoming the Information Paradox will further separate
those firms that “get it” from those that do not. To be certain, there are many new
demands on firms and the information systems that enable organizations, but none that
cannot be overcome.

Introduction
Corporate officers and their auditors are under increased scrutiny to insure that publicly
traded firms report a “true” picture of the financial performance of the organization.
Moreover, the very ethics policies and enforcement processes of the firm must also be
divulged. The Sarbanes-Oxley Act of 20022, places new and specific demands on
Directors, certain corporate officers, and financial service professionals that is potentially
onerous. Specific record keeping policies must be adhered to and failure to comply can
3
lead to prison sentences up to 20 years on criminal charges of obstruction of justice.
Timely information regarding the status of dispersed assets has always been a
prerequisite for optimizing revenue and cash flow, but never more than today. The
double edge information sword that has been unsheathed is the demand to have a better
understanding of the exposure the global energy firm has to potential terrorism. The
infrastructure that fuels the world’s hunger for petroleum is very exposed to the mischief
4
of malcontents or downright destruction by those so inclined. Critical, “real-time”
information about the status of revenue producing assets, especially unmanned facilities
New Demands on Information Management Processes

will enable rapid response regardless of whether an outage is the result of a natural
disaster such as a hurricane or otherwise.
Finally, the petroleum industry faces increased pressure from stakeholders to increase
asset performance. Not only investors, but local communities, government agencies, and
environmental groups expect specific organizational behavior and appropriate
documentation of conduct.
Recessions are cathartic events. While the mettle of the strong is tested, the weak often
demise. As part of this renewal process, mergers and acquisitions change the
competitive landscape. Smart acquisitions may lead to enhanced shareholder value,
5
however, most mergers are dilutive .
Good and timely information clearly enables the modern organization. However, there is
an Information Paradox. Management is expecting Information Technology (IT)
organizations to reduce costs, while at the same time expecting greater information
security. Conversely, for many of the reasons articulated in this paper, management
must have more information quicker.

The Information Paradox

As the demand for information increases as articulated in this article6, IT budgets are held
in abeyance.7 Organizations expect more from work processes, individual contributors,
technology resources, and supply chain partners. With recessionary pressures and
global uncertainty, companies must do more with less.
Can management expect IT to provide more timely, even real-time information to
executive dashboards, substantially reduce the budget, and insure corporate information
systems are secure? Seemingly a paradox, the answer is yes!
Critical information systems are robust and secure when architected properly and
appropriate data management, applications software, and communications protocols are
used. Modern software is built for the Internet economy and enables firms to generate
Internet Economies ahead of their competitors. Attributed to John Malone, CEO of TCI,
“we’ll end up with a much lower marginal cost structure and that will allow us to under
price our competitors.”8

Economic Transaction Costs

Economically, organizations exist because their internal transaction costs are less
expensive than if they acquired goods and services externally. The networked economy
allows organizations to extend their business model beyond the physical limits of the
organizational boundaries and capitalize on a global supply chain. Network economies
reduce transaction costs and value is realized when the marginal cost of new information
9
exceeds the costs of acquiring and processing that information.
In other words if the economic value of secure, accurate, and timely information is greater
than the costs of that information, then it adds value to organizational processes. Thus,
the Information Paradox can be solved using today’s technology intelligently employed to
capitalize on intuitional processes. Cutting this Gordian knot using technology and
change management instead of continuous improvement from the status quo can
leapfrog a firm wielding the knife into a higher competitive orbit.10

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New Demands on Information Management Processes

Governance and Information

Competitive issues aside, Sarbanes-Oxley demands a greater level of disclosure and
provides for significant personal penalties for non-performance. Regulatory reporting has
taken a new level and one can expect that in order to rebuild public trust, publicly traded
firms will not only be required to, but will want to increase the level of information made
available.
According to The Business Roundtable, “it is the responsibility of management to operate
the corporation in an effective and ethical manner.” The report goes on to state, “it is the
responsibility of management, under the oversight of the board and its audit committee,
to produce financial statements that fairly present the financial conditions and results of
operations of the corporation, and to make the timely disclosures investors need to permit
11
them to assess the financial and business soundness and risks of the corporation.”
Corporations, particularly asset intensive industries must have access to capital. Capital
markets value the management team and subjectively make assessments whether that
team can deliver value.12 Continued access to these markets requires that management
be seen as able to perform, not just report compliance but truly demonstrate that the firm
and its supply chain partners are operating effectively and ethically through enhanced
visibility.13
Governance is all about the transparency and timeliness of information flow. Firms must
provide specific financial reporting that must be grounded in a certain understanding of
the status of revenue producing assets, costs, and capital structure. Firms that enjoy a
low cost access to capital are those that convince investors and debt holders that the
corporation is well managed.
Moreover, as firms continue to rebalance their asset portfolio, lack of access to capital
can result in one of several scenarios. First, growth may be constrained, as the
corporation has to dispose of certain assets to generate the liquidity necessary to acquire
others. Second, the firm may be acquired. In either case, information availability is
critical to achieving the maximum price.
Strong information management processes deliver information that management needs
to provide all stakeholders with good governance. It is the absence of information that
causes market concern.

Assets and Information

Revenue producing assets increasingly demand operational excellence and strong cost
management if financial performance targets are to be met. The petroleum industry is
tasked with effectively operating existing facilities and reservoirs. These challenges
demand that operators rely heavily on the service industry and supply chain partners.
Field operations require information flow among participants as well as the process
control and data acquisition systems associated with the asset itself. This is another area
of transition as engineers continually reassess what the Information Profile looks like.
The Information Profile is defined as that architecture, and set of data and information
required to realize the demand the firm places on the system to optimize asset
performance. Much like the firm’s asset portfolio, it provides the organization with a

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New Demands on Information Management Processes

“snapshot” of its information resources and is the vehicle to upgrade information

processes and systems.
Deploying systemic enterprise information systems is an approach aligned with the
standardization of organizational processes. Birds of a feather, organizational processes
and associated information systems are the vigor of knowledge-based firms.
According to Cambridge Energy Research Associates (CERA), information is an
increasingly important component of operations. Since their initial work researching the
role of information in the upstream sector14 until today, this think tank continues to have a
strong information in energy practice.
Other than corporate governance, asset management is what keeps executives up at
night. Increasing reserves is the sin qua non of the petroleum business. Reliable
information is the fait accompli to asset performance. When it is all said and done,
information flow is pivotal to asset optimization.

Concluding Thoughts
The rules of information engagement are changing. Firms depend on valid, reliable, and
timely information flow to achieve competitive advantage, and adhere to regulatory
requirements. The old ways of visualizing information as either a function of SCADA
(Supervisory Control and Data Acquisition) or back office are gone.
Quality information is critical to enhancing shareholder value. Change is the norm,
however, change must happen quickly.15 When it does not, malaise ensues.
Changes in information flow can dictate cultural transformation. One school of thought
sees the interaction of organizations within a cultural context as the software of the
mind.16 Information provides a level of enlightenment that transcends historic
mechanistic organizational hierarchies. Information flow is an agent of cultural change.
Culture changes slowly and in small increments. It is fallacious to think that just
implementing a top down change management program will structurally change
organizational culture. However, change is a naturally occurring phenomenon and every
individual and organization is constantly undergoing transition, both as a function of
exogenous and endogenous forces.
17
“Petroleum is the lifeblood of current and emerging world economies.” A case can be
made that information flow is the nervous system for the largest business in the world.
Few seem to realize that the energy business is the largest (by far) industry in the world.
18

As the demands on the industry accelerate, the demands for information will keep pace.
In the new world order of 21st century oil and gas industry with its new challenges,
security, asset optimization, and governance information is the binding agent.
For over 15 years, pundits have been proclaiming the arrival of the Knowledge Age.
Finally, this era may be upon us. Timely, accurate, real-time information is not only the
basis of competitive advantage, but insures that the investment community “backs”
management.
The role of information management has already moved from back office or process
control into the executive suite. Information flow from the asset base, supply chain

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partners, the back office, as well as all other aspects of the information value chain drive
new business models. The challenge to the CEO is whether his or her company meets
these criteria. If not, what changes will be required?

About the Author

Scott Shemwell is the Vice President of Energy for Oracle Corporation
and is a leading authority on information and management processes
with more than 100 publications on a variety of business issues. He is an
expert in business process modeling and scenario simulation. He holds
a Bachelor of Science degree in Physics, an MBA, and a Doctorate in
Business Administration.

Endnotes
The referenced web links below were operational in March 2003. The writer makes no
guarantee that these references will remain active. The interpretation of this information
is solely the author’s.
Note: Readers interested in the broad issue of Corporate Governance are invited to
review a wealth of material on http://www.thecorporatelibrary.com/
1
EyeforChem Newsletter. http://www.eyeforchem.com/index.asp?src=hn&nli=og-
c&nld=2/27/2003&news=35684
2
H.R. 3763, One Hundred Seventh Congress of the United States of America.
http://news.findlaw.com/hdocs/docs/gwbush/sarbanesoxley072302.pdf
3
ARMA (Association of Records Managers and Administrators) International. (2003).
Information Management: A Business Imperative – FAQs for Corporate Executives and
Decision-Makers. http://www.arma.org/pdf/rim_imperative.pdf
4
Adams, Neal (2003). Terrorism & Oil. Tulsa: PennWell.
5
Haspeslagh, Philippe C. and Jemison, David B. (1991). Managing Acquisitions:
Creating Value Through Corporate Renewal. New York: The Free Press.
6
Hoffman, Thomas. (2003, March 10). Top Execs Demand Data Now. Computerworld. p.
1, 16.
7
Verton, Dan. (2003, March 10). Tight IT Budgets Impair Planning As War Looms.
Computerworld. p. 1, 53.
8
Gong, Jiong and Srinagesh, Padmanabhan. (1997). The Economics of Layered
Networks. In Internet Economics, Edited by Lee W. McKnight and Joseph P. Bailey.
Cambridge: The MIT Press. p. 69.
9
Shemwell, Scott M. (2002, February). Economic Theory Supports E-Business Model.
Author.

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New Demands on Information Management Processes

10
_______. (2002, December). Disruptive Technologies – Out of the Box. Author.
11
The Business Roundtable. (2002, May). Principles of Corporate Governance: A White
Paper. p. iv. http://www.brtable.org/pdf/704.pdf
12
Millstein, Ira M. (1994, February 25). Distinguishing “Ownership” and “Control” in the
1990s. Proceedings of the ISS Conference. Appendix 7.
http://www.thecorporatelibrary.com/cgii/cgd07.htm
13
DiPiazza, Samuel A. and Eccles, Robert G. (2002). Building Public Trust: The Future of
Corporate Reporting. New York: John Wiley & Sons.
14
(1996) Quiet Revolution: Information Technology and the Reshaping of the Oil and Gas
Business. Cambridge: CERA.
15
Holland, Winford E. “Dutch.” (2000). Change is the Rule. Chicago: Dearborn.
16
Hofstede, Geert. (1991). Cultures and Organizations: Software of the Mind. London:
McGraw-Hill.
17
Economides, Michael and Oligney, Ronald. (2000). The Color of Oil: The History, the
Money and the Politics of the World’s Biggest Business. Katy: Round Oak Publishing.
18
Raymond, Lee. (2003, February 11). Opening Address. CERA Week 2003.

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