OITJ Interview—Peter Flanagan, TransZap

TransZap/Oildex president Peter Flanagan talks to Oil IT Journal about its hosted solution for e-invoicing and settlement. TransZap has succeeded where the e-commerce ‘portals’ failed by supporting large companies with high tech payment solutions and smaller users on QuickBooks. Flanagan describes some of the ‘Web 2.0’ technologies that are set to enhance ASP usability.

How does Oildex SpendWorks fit into the e-commerce picture?

Operating oil companies (OpCos) receive a huge number of invoices especially while drilling. A midsize to large independent operator might have 12-20,000 invoices per month (see for instance the Chesapeake article, OITJ Vol. 11 N°1). This can involve quite complex activity between remote field offices and HQ. In the US this also means Sarbanes-Oxley tracability. OpCos make perfect candidates for a move from the invoice payment ‘paper chase’. Studies show that payment of an invoice costs in the region of $15-20. Oildex brings this down to $5 with our ASP* service. There are also considerable business intelligence benefits to be gained from going digital.

How does it work?

Oildex supports a network of thousands of suppliers submitting e-invoices. Some larger suppliers like Halliburton and Schlumberger are used to providing e-invoices but not everybody is equipped for this. Our three tiered service offering allows all companies to benefit from e-commerce. Companies submit invoices through the Oildex website either electronically or by keying them in. Big companies subscribe via XML and HTTPS using industry standards. For smaller companies, QuickBooks is the prevalent technology. Next we offer workflow support of the payment process. Invoices are ‘moved around’ digitally for approvals. Accounting codes are tied to well field tickets and distributed around the country from field to head office. All this used to be done with internal company mail, scanning invoices and using document management systems. Today, SpendWorks lets people do this in a Microsoft Outlook type interface with electronic workflows. This offers significant scaling benefits as industry activity ramps-up. One Oildex customer quadrupled procurement in three years without hiring anyone.

And your third tier?

In oil and gas, sales are rather straightforward; the gas price is determined by referring to the Henry Hub. But there is considerable potential on the bottom line for improvement. Our new business intelligence offering which is just about to be released, addresses the issue of reporting timeliness. In the past, reporting lagged spend by at least thirty days. The level of detail of traditional business intelligence also leaves a lot to be desired. There may be a hundred line items in a frac job, all of which got lost doing it the old way. Now all such information is there, available for analysis. Oildex is working on a new data warehouse and GUI so that anyone can look and analyze at the data. Real time business intelligence is now available within 48 hours of the activity.

Who uses your technology?

We were the first to go to market in 2002 and have three years of use by early adopters. We are now entering the mainstream.

In your Chesapeake announcement last month you made a lot of Software as a Service (Saas) and Application Service Provision (ASP). How important is this to your offering?

Critical. Our e-payable is entirely enabled by ASP/SaaS technology, including our workflow offering. Even larger companies with their own workflow tools (like Chesapeake) will use some of our SaaS technology for instance to map accounting codes to line items.

Some of this has been attempted before—like with PetroCosm and Trade Ranger.

Yes we saw them flame out! We did the same thing as the portals but with private VC funding. These e-marketplaces brought in technology from outside, we built an industry-tuned solution. Oil and gas is invoice-driven not purchase-order driven. A verbal order, or a master contract driven ordering process is the norm. You only know the real cost of a job after the fact.

Do you leverage the API’s PIDX standards in this space?

Sure, we are an active member of OFS Portal and PIDX, where we participate in the business messaging workgroup. The PIDX XML standard for invoices is in use by all OFS Portal members.

What do you use for your own formats?

XML is interesting technology. All our internal stuff is in XML. This is also deployed in our other line of business—Joint Venture reporting with CheckStub Connect. Production from 500 companies (40% of the US onshore total) is reported through Oildex. The technology started out as an EDI-based solution operated through General Electric. Today SpendWorks touches around 1,000 companies.

Who are your flagship e-payables clients?

Anadarko, Chesapeake, and mid market companies.

So how do the majors do it?

They have adopted private exchanges. Chevron for instance, like most majors, is an SAP shop. It acquired technology from Ariba for gathering XML data from OFS Portal members. Smaller suppliers key their data into the system. But even the majors lack our market penetration with suppliers.

Can you co-habit with SAP?

Our clients tend to look to us to manage the spend process. But we do integrate SAP systems if required. Some companies just use us for e-invoice delivery. The ecosystem is evolving—majors are customizing SAP workflows. As I said before, our latest offering, the next big thing, is a new business intelligence solution. The software is currently in beta.

Tell us more about SaaS.

Something was lost with the move from client-server to the web. ASP applications have been criticized as unresponsive. They are not so rich and seem ‘clunky’. This is why travel agents don’t use Travelocity! One weak link in many current ASPs is Citrix. So we are looking at newer technologies which put some of this performance back in the system. There are multiple lines of attack on this problem—AJAX, Smart Clients and much of .NET sets out to address these issues. Microsoft VISTA is another big push in this space.

What technology do you advocate?

Funny you should ask! Our workflow solution makes significant demands on the client and users want performance. Users would also like to work offline while in the field. Our new SpendworksUnplugged provides an Outlook-style interface—going beyond the browser, leveraging much more mature technology.

* Application service provision—hosted software.

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