Transaction Cost Economics in Software
Ecosystems
Wilco van Duinkerken - Utrecht [email protected] - June 19th 2009
Did you ever ask yourself one of the following questions?
Should I write a software component myself or buy/use it
from somebody else?
I’m using an open source component,
when do I start contributing?
What are the “hidden” costs of using external
components?
How can I limit the costs and risks of using external components?
How to govern the relationships with my component providers?
m-w: gov·ern (\ˈgə-vərn\) : a) to control, direct, or strongly influence the actions and conduct of b) to exert a determining or guiding influence in or over <income must govern expenditure> c) to hold in check : restrain
Transaction Cost Economics• Initiated by Coase, 1937
• Defined by Williamson, 1971 and going strong
• Researched in the fields of a.o. Human Assets, Procurement, Oil & Gas, Electricity, Music Industry and Outsourcing
• Little empirical research of TCE in IT
• No proof (yet) of TCE in the product software industry
• You can do/ produce something internally (yourself) or buy it from the market
• One can buy “from the market” using different governance modes
• The governance modes differ in the amount of control, flexibility and costs
The Basics
Governance modes• Markets
• Hierarchies
• Short term contract
• Long term contract
• Service Level Agreements
• Open Source License
• Open Source Contribution
• Alliance
• Joint Venture
• Master Service Agreement (Raamwerkovereenkomst)
• SaaS (webservice)
• Partial Ownership (buy shares)
The governance modes differ in the amount of control, flexibility and
costs
A governance mode is chosen based on transaction costs
Transaction Costs
• Are determined by three factors
• Asset Specificity: How specific (and important) is the product or service you are buying.
• Recurrence: How often does the transaction occur.
• Uncertainty: Internal, external and behavioral uncertainty.
Recurrence
Market Coordination
Hierarchy Coordination
Asset Specificity
Low High
Un
ce
r-ta
inty
Low
High
Classical Contract(non-collaborating)
Neo-classical Contract (Collaborating)
Relational contractinternal
governance
occasional recurrent
Governance mode determination by transaction costs
I want to answer the question:
• Can Transaction Cost Economics be applied to explain the governance structure of relationships between buyers and suppliers of software components in Software Ecosystems?
I would like to:
1. Have a group discussion about:What are transaction costs of software components?
2. Have individual interviews on:How do you choose which component to use? and How to govern the relationship with the supplier of this component?
Planning• Group Discussion:
• when: The first week of July (date to be set)
• where: Utrecht University (Beleidslab)
• how long will it take me? ± 90 minutes
• Individual interviews:
• when: Somewhere in July
• where: Anywhere
• how long will it take me? ± 60 minutes
Can I Participate in Both the group and Individual sessions?
Yes, you can :-)
What’s in it for me?1. You will receive a print and/or electronic
version of my thesis.
2. You will gain some insight in your company relations and possible ways of improving these relations.
3. I’m willing to give a presentation about the subject at your company when my thesis is finished.
Want to participate?
• Please contact me:
• E-mail: [email protected]
• Twitter: @sparkboxx
• LinkedIn: http://www.linkedin.com/in/wilcovd
More sources
• Download my thesis so far
• View a summary of my thesis research at http://prezi.com/90808/
