How a Technology Throwdown Unexpectedly Revolutionized Plant Accounting
I recently started a blog series that aims to tell some of my most important learning experiences in my three decades as an energy controller. Lesson 1 was about the risks of following the herd and settling for the status quo. I talked about my experience with the legacy plant accounting solution and the fact that over the course of three years it never settled our month correctly, not without heavy lifting, workarounds, and significant costs. This brings me to today’s lesson, which in a nutshell is about being receptive to change and embracing pivotal transitions.
Somewhere along the way with our plant accounting software, there was a hair that broke the camel’s back. My team at Agave (a Yates Petroleum subsidiary) decided to invite a few solution providers to demonstrate that their tech was up to the task of settling our unique business, which could be called a “throwdown” today.
For our existing plant accounting solution provider, this was their last chance but instead of rising to the occasion, they gave us an ultimatum: call off the event and ignore the other vendors and they will fix everything. Well, we had already been down this road, so we proceeded as planned, just without our current solution provider in the room. Their passive-aggressive tactic banked on everyone else flopping. What followed was both a comedy of errors and a virtuoso performance.
The plant accounting throw down was broken into two phases. The first part would prove whether the solution could “ante up” by handling basic allocations from the tailgate back to a couple of producers. Phase two would determine if the software could tackle the Yates “optionality” business model in which the software would have to accommodate the complex needs of our primary facilities and multiple backup plants.
The legacy plant accounting solution had already struck out, leaving four other teams to go to bat: a one-man band, an ERP vendor, a development team that worked out of a garage, and a Tulsa-based startup. Joining the Agave review team was a high paid consultant, fluent in the status quo solution, and skeptical of everything else.
Things got off to a rocky start after we realized that the first plant accounting solution was 100% Excel-based. The garage developers improved the outlook a bit by getting 70% of the allocations right and things really started to look good when the ERP vendor got 100% correct. Or until we discovered they had cheated by doing the calculations in Excel beforehand and hardcoding the results into their software. You’re out!
At this point, everyone in the room – me, a measurement expert, and our plant accounting consultant – had a bit of stomach acid, but especially our consultant who had “I told you so” written all over his face. Enter the guy from Tulsa. He sits down, cracks his knuckles, and asks for a Diet Coke. He then pulls up a web browser and proceeds to knock the ball out of the park. Halfway through his first act performance while he was explaining how volume contracts are set up my whole accounting team gangs up on me and say, “we have to buy this.” His allocated results matched 100% but we threw a curveball by asking him to change up the volumes and rerun. They matched again.
The guy from Tulsa had proved the worth of his software in just half of the four hours we had set aside. We had planned on asking him and the garage guys back for phase 2 the next day but he wanted to know if he could take a stab at the next challenge right there on the spot, which involved bypassing 30% of the gas to a new second plant that also reprocesses the residue gas from the first plant. He did it in 15 minutes. We didn’t need a phase 2, we had our new plant accounting solution and even our surly consultant admitted it was amazing.
Expect the unexpected. In this case, who could have anticipated that a reputable software vendor would resort to cheating by hardcoding their allocation results. But the big surprise is the software vendor from Tulsa who reminded us all of David and Goliath. When great moments like that happen, embrace the change.
Legacy technology and legacy solution providers aren’t off the hook just yet. Lesson 3 will explore why their business model is flawed and how this costs energy companies big.
|Kevin Throneberry, Kevin Throneberry is a Certified Public Accountant with 30 years of accounting and information technology experience including auditing of various industries and 13 years accounting and management with a midstream oil and gas company. Co-leader of Section 355 Tax-Free Spin of the company reducing tax liability by 150 million dollars. He recently secured one of the top three multiples for mid-stream sales and mergers. Kevin has extensive knowledge and skillset in W Energy Software mid-stream products, TIPS Gas Processing, QCM Contract Management, PGAS Gas Measurement, and IBM Cognos.