O'Reilly has branched out and is doing a European version of their popular OSCon. It seems like speaker notifications finally started flowing a few weeks after they initially planned. So far, I know that my Introduction to the Codehaus talk has been accepted. I haven't heard yet about my more OpenXource-esque proposal about OSS-centric business models, but I have my fingers crossed. I look forward to seeing you there.

In the Open

Recently we've been working with JotSpot on building an application in the open. We had dual goals of both creating another tool for the Xircles Community Platform and to build some enthusiasm in the JotSpot developer community. Being a completely new platform (though, based on established Wiki principles), JotSpot has a typical chicken/egg problem. Developers don't necessarily want to be the first to jump into something new. By developing an application in the open, we hoped to allow potential developers to live vicariously through us.

What We Built

JotSpot itself is a pretty agile, allowing folks to quickly develop one-off applications that they might've typically built in Excel or other lightweight "platforms". In tandem with this, we figured an a project-management application in the mode of agile processes would be only fitting. Plus, it'd benefit Xircles.

So, we built AgilePlanner a useful tool for developers. These same developers can pretty easily change and extend AgilePlanner to suit their own needs. And in the spirit of opensource, everyone will benefit.

The Method

While developer AgilePlanner, we blogged about our activities, particularly asking questions and demonstrating that we indeed did not know it all. This drew many great responses from the community of spectators and agile method experts. We learned more about agile methods, and they learned about working with Jot.

We've currently got a few people who are submitting proposals to Google's Summer of Code to continue development on AgilePlanner. OpenXource wins by getting a better tool for Xircles. JotSpot wins by getting more developers exposed to their platform. And Google wins by gaining massive goodwill from the opensource community and creating potential future superstar employees. All in all, creating AgilePlanner as an opensource project, in the open, has had no downside, and many significant advantages. It just goes to show that the intellectual property of coding does not necessarily have the most value.

While our previous articles (such as Capturing Value at the Edges) have focused primarily on the community of customers, there are many instances where your own supplier community is also vitally important. When your organization acts as a market-maker, both communities must be addressed equally to truly seize the opportunities available.

Market-Making

Also known in some circles as a middle man, a market-maker is an entity that facilitates both ends of a buy/sell transaction, typically making a profit on the spread. One of the much-heralded benefits of the internet is the reduction of the need for middle-men. Instead, it is claimed, buyers and sellers can find each other directly, reducing the cost of doing business.

Obviously, this has not entirely been the case. Consumers still like one-stop shopping and suppliers prefer having fewer interactions to move their products. Transactional costs have not been reduced to zero, and every transaction still maintains some fixed cost in terms of time and effort spent. Larger transactions then incur a lower cost as a percentage of the deal. This is similar to paying the $2.50 ATM fee on a $20 withdrawal or a $200 withdrawal. In the first case, the transactional cost is over 10%, while in the second, it's an order of magnitude smaller.

Market-makers can aggregate these transactions into fewer larger transactions, providing value to both ends while still realizing a profit.

Examples

EBay and PayPal

EBay, particular when paired with PayPal, represents a market-maker. Consumers effectively have one-stop shopping, and suppliers likewise have basically one entity to deal with. EBay reduces the transactional friction through both its reputation system and the PayPal payment system.

Google AdSense and AdWords

Google's AdSense and AdWords advertising network is a true market-maker, in that buyers and sellers never directly interact at all. From each perspective, Google is the only buyer of space, and the only seller of space. If each website had to make arrangements to sell its advertising space, the cost of doing so may end up being prohibitive. Likewise, if each seller of advertising had to contract with each site to arrange for display of its ads, the same would be true.

A quick browsing of the web will turn up many websites that make a handful of dollars a month selling space through AdSense. The transactional cost without Google would make the effort futile.

The Supplier Community

In the Google world, the multitude of blogs and sites selling advertising space are the suppliers. Google, being a trusted market-maker makes it easy for these small suppliers to realize income where not previously possible. Google treats the supplier community well, in this case. They provide tools necessary to sell the space easily, incurring virtually no transaction costs for the supplier, regardless of the number of buyers.

Market-makers profit on the spread in each transaction. Since the consumer side of the market is fairly evident and strong, these middle-men should concentrate on the supplier community. By investing in the supplier community, they can increase the value of the goods supplied and also increase their own margin. Google can help suppliers, through education and tools, increase the value of the space they provide to advertisers. EBay can help sellers make their products more attractive and help increase stock turn-over.

Micro-Economies

When a Fortune 100 company buys products from another Fortune 100 company, their sheer size makes them their own market maker. General Motors can buy advertising from Time-Warner fairly easily, without much of a transactional cost due to the size and number of transactions they do on a regular basis.

When either end of the transaction is a small entity, the transactions themselves tend to be small, and can benefit from a market-maker between the consumer and supplier communities. In effect, the middle-man is a community proxy, allowing outsiders to address the multitude of members as a single entity.

becomes

Micro-economies can finally occur when the transaction costs of doing business become low enough to realize actual profit. An organization that sits between communities of suppliers and consumers can reduce the transactional costs by aggregating them into fewer larger transactions. Without them, the entire community would evaporate.

Traditionally middle-men have been seen as purely adding costs ("we eliminate the middle-man!"), but positioned correctly in a potential micro-economy, the middle-men become the enabling factor, helping grow the entire market.

While the internet was claimed to allow direct connections between the supplier and consumers, the real value comes from allowing small suppliers and small consumers to do business on a larger scale through aggregation as enabled by a market-maker. Ultimately, the market-maker has to treat both ends fairly, or the market will find other avenues to conduct business. All three parties are in essence fungible.

The Creative Commons Open Licenses are very popular for content creators. You will see the CC images on many sites, especially blogs.

One of the features of this set of licenses is that they are easy for people to choose between. When you visit will ask you:

• Allow commercial uses of your work?
• Allow modifications of your work?
• Jurisdiction of your license
• Format of your work

Recently, I have noticed a few opensource development projects being licensed under the Creative Commons, rather than a *GPL/ASL/... license.

I think that this trend will actually continue. Developers are not lawyers, and we need to offer a nice simple way, asking them questions about how they want to distribute their opensource code.

Creative Commons will likely be the vehicle to help.

The slides from my presentation (PDF) are now available online. Thanks again to Chariot Solutions for hosting this conference and giving me the opportunity to speak.

Please see the Master Index for more articles.