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					The InterParty Project
Business models and governance issues




                   Norman Paskin
                   International DOI Foundation

                              doi>
Topics

         • Scope and assumptions

         • Business model

         • Governance model

         • Organisation

         • Conclusions
Scope and assumptions
                                                      InterParty

Workpackage 4
Governance and business models

             • “Draw up a specification which will integrate
               data models, registration and access
               procedures within the operating contexts of a
               range of rights mediation agencies across a
               number of sectors in the cultural heritage and
               creative industries”
             • Economic demand
             • Scenarios for governance and business model
             • Draft business/exploitation plan
             • Define a governance structure
             • Identify legal instruments
                                                                      InterParty


Some fundamental assumptions

                          • InterParty will be a “closed” network
          From               – Open only to organisations with metadata to
                               share, and identification schemes to support
“business requirements”
         section             – Membership criteria will need to be defined as
                               part of the Governance model
                          • Members will join InterParty because
                            they perceive a common benefit from
                            interoperation
                             – At a minimum, access to “common metadata”
                               held by other members to improve the quality
                               of their own data
                             – Potentially, automated machine-to-machine
                               “transaction”
                          • Individuals and organisations will only
                            be identified within the InterParty
                            network if information about them
                            appears in one or more sets of data
                            created or held by an InterParty
                            member
                                                           InterParty

<indecs> Directory of Parties
Outline specification

                  • Process “distributed and delegated” which
                    increases the need for governance
                  • Who should be enabled to establish unique
from section 10     identities? (authentication)
  of DP spec.
                  • Who can be allowed to declare metadata
                    [links, assertions] in a central Directory?
                  • “The opportunities for financial impropriety
                    in such a model could be considerable”
                    (fraudulent claims of rights etc)
                  • “Like any registry…will require mechanisms
                    for identification and resolution of
                    disputes…& security an issue”
                  • Operation will have costs …these should not
                    unreasonably exclude participants
Business model
                                                            InterParty

Business model

 Viability is determined by :
 • What will the business cost to run?
 • What can the business charge?

 “Annual income twenty pounds, annual expenditure nineteen six,
 result happiness. Annual income twenty pounds, annual
 expenditure twenty pound ought and six, result misery”.
 Charles Dickens, David Copperfield, 1849
                                                           InterParty

Business model

 But this is too simple…

 Also:
 • What will it cost to establish the business?
 • The toll bridge analogy:
     • €2 per car, 1400 cars/day = €1m/yr
     • running costs €800K/yr. Net: €200K profit?
     • but: €30million to build the bridge

 The conundrum of building infrastructure
 • “external” finance:
     • (1) shareholders etc – a private good
     • (2) grants - a common good
 • “internal” finance:
     • users via a self–financing system
     • (but even then, cashflow issues)
 • Implications for organisational structure and funding
                                                                            InterParty

Business model: status



  • Insufficient data to produce a definitive proposal for funding
      • i.e. to go to a bank
  • Indicative models can be produced
      • i.e. to go to a next step of discussion with likely users/funders
  • Based on estimates, similar or analogous activities
  • Weakest areas:
      Expected numbers of data and users
      Pricing sensitivity estimates
      Detailed technical architecture and hence costings
      Investment requirements
                                                                  InterParty


Costs: high level activities

  Technical infrastructure
  • Capacity, scalability, throughput, response times:
      needs requirements (numbers and service levels)
      insufficient information for detail costing at this stage
  • Versions of infrastructure:
      e.g. starting with distributed, but then central?
  • Could be outsourced

  Data management
  • Critical
  • Capacity, change requests, mutations, link dispute procedures:
      needs requirements (numbers and service levels)
      insufficient information for detail costing at this stage
  • Could be outsourced

  Policy
  • Largely independent of technology and data
      except that e.g. distributed data raises more issues
  • Not easily outsourced
Technical costs

                  • Initially conceived as distributed
                    multiple data sets, with integrating
                    search process providing a single

    ?
                    integrated response
                     – Searching over the “common metadata” from
                       different datasets held in different locations
                  • Ultimately, InterParty is likely to require
                    some centralised indexing
                     – Current theory and practice suggests that
 “Resolution           distributed network searching without any
  Service”             centralised service becomes increasingly
                       inefficient as the number of data sources
                       grows beyond a fairly small number
Distributed v central reliability

  Average reliability     Number of        Collective
  of source access         sources          reliability

     99% (fail 1/100)          1             99%
     99%                      10             90% (1/10)
     99%                      50             61% (1/3)
     99.9% (fail 1/1000)      5              99.5% (1/200)
     99.9%                    50             95% (1/20)
     99.99% (fail 1/10,000)    50            99.5% (1/200)


• Informal consensus is that there are 50+ likely IP sources
Conclusion:
• A central index/database will be needed
• Must be costed into build at some point: cost? One-off/ depreciated?
• CrossRef comparison:
    200 data sources, search across 20 metadata elements: scalable: $1m

• Project deliverable D8 contains indicative models which assumes
€100K-250K pa for “central technical costs”
• Possible that “central technical” could be one IPM for annual fee
Non-technical: “policy” costs

Project deliverable cD8 contains some indicative business models
including these costs

Staff, office and non-technical support (figures based on IDF example)
    Some key elements:

• Staffing:
   Development and implementation of policy,
   SLA management, etc
   Technical development (or outsourcing of it)
   Marketing, promotion, business development
   Office costs
   Depending on levels/numbers: €50K- €500K

• Legal counsel: IPM agreements, IP issues, patent claims etc : €100K

• Liability insurance: €10-30K minimum
    [note consequences of incorrect identification]
What would users be willing to pay?

                      • Access to a shared metadata and
                        identification resource can substantially
                        reduce costs of data creation and
                        maintenance for all members of the
Valuing this depends    InterParty network…
on each organisations
                      • …while at the same time improving their
current costs
                        data quality and thus the services that
                        they offer
                      • There is an underlying assumption that
 Cost justification
                        all Parties whose data appears in the
 requires exemplary
                        database will have an active interest in
 business cases
 (cf IDF White paper)   disambiguation
                         – Greater certainty of identification in
                           circumstances where this is advantageous to
                           them
What would users be willing to pay?
•   Not enough data for a definitive question and analysis
•   A mix of fixed and variable fees:

Project deliverable D8 contains indicative business models including models of
• Low fixed/high variable: €0 per annum/ €1 per query

•   High fixed/low variable: €30K per annum / €0.03 per query

Two ends of the spectrum deliberately chosen.
     (spreadsheet allows any variation)

(comment: “€5k should a fair membership fee”)
In each case, min. no queries guaranteed (to value €20K)
(comment: “users should commit to a minimum level of use to ensure real
   testing”)

•   5 year model assumes gradual growth
•   input numbers are estimates/arbitrary to give a +ve result
•   price/demand elasticity (1.2m versus 3m) is a simple assumption, not based
    on any economic model
•   At present, no differential for creating links (adds value) versus using links
     – This was suggested as a possible incentive requirement
Low fixed, high variable fees
InterParty Organisation 5 Year Indicative Model - InterParty Members only with
no membership fee
All value data in Euro

                                                      Revenue


                                  InterParty Members (IPM)

              Number      IPM Base       Min "Match" Match vol.     Euro per      Revenue
              of IPMs        Fee         Fee per IPM  Per IPM        Match        per IPM
      2004            2              0        20,000     60,000       1.00           60,000
      2005            4              0        20,000     60,000       1.00           60,000
      2006            6              0        20,000     60,000       1.00           60,000
      2007           10              0        20,000     60,000       1.00           60,000           1.2 million
      2008           20              0        20,000     60,000       1.00           60,000
                                                                                                      queries

                                                      Results
                          Revenue versus Costs

             Revenue                                            Costs
                           C entral                                                              Result -
             IPM Total                                              Non-tech
                          Technical         Staff      Office                     Total C osts Revenue vs
             Revenue                                                Support
                            C osts                                                                 C ost
      2004      120,000      100,000        217,000     150,000         250,000      717,000    -597,000
      2005      240,000      150,000        230,000     150,000         150,000      680,000    -440,000
      2006      360,000      200,000        245,000     150,000         150,000      745,000    -385,000
      2007      600,000      220,000        258,000     150,000         150,000      778,000    -178,000
      2008    1,200,000      240,000        271,000     150,000         150,000      811,000      389,000
High fixed, low variable fees
InterParty Organisation 5 Year Indicative Model - InterParty Members
                                 only
All value data in Euro

                                                 Revenue


                                  InterParty Members (IPM)

              Number      IPM Base Min "Match" Match vol.      Euro per      Revenue
              of IPMs        Fee     Fee per IPM Per IPM        Match        per IPM
      2004            2       30,000      20,000   150,000       0.03           50,000
      2005            4       30,000      20,000   150,000       0.03           50,000
      2006            6       35,000      20,000   150,000       0.03           55,000
      2007           10       35,000      20,000   150,000       0.03           55,000                 3 million
      2008           20       35,000      20,000   150,000       0.03           55,000                 queries


                                                 Results
                          Revenue versus Costs

             Revenue                                       Costs
                           C entral                                                         Result -
             IPM Total                                         Non-tech
                          Technical    Staff      Office                     Total C osts Revenue vs
             Revenue                                           Support
                            C osts                                                            C ost
      2004      100,000      100,000   217,000     150,000         250,000      717,000    -617,000
      2005      200,000      150,000   230,000     150,000         150,000      680,000    -480,000
      2006      330,000      200,000   245,000     150,000         150,000      745,000    -415,000
      2007      550,000      220,000   258,000     150,000         150,000      778,000    -228,000
      2008    1,100,000      240,000   271,000     150,000         150,000      811,000      289,000
Sample analogous organisations (1)

    • CrossRef (www.crossref.org )
        Publishers International Linking Association (PILA)
        DOI Registration Agency
        In house technical services
        5 staff
        200 data sources (members)
        Adding 3 million records per year
        Centralised index/ database
        Membership fee up to €2k per year
        Input fee
        Use fee
        Non-member access fee (by license)
Membership fee
on sliding scale




    Input fee


    Output fee
Sample analogous organisations (2)

    • CERL (www.cerl.org )
        Consortium of European Research Libraries
        Hand Press Book Database
        34 members
        Outsourced technical services
        1 full time + 2 part time staff
        Membership fee €8k per year
High fixed or high variable costs?

High fixed costs (IPM membership fee):
    – More certainty of budgeting – under control of agency
    – Raises barriers to entry: may be disincentive to join
    – Few but large IPMs
    – Scale is a critical factor in making IP a success.

Low fixed costs:
   – Risks operational deficit (variable costs not under control of IP
       Network agency)
   – More likely requirement for some guarantee of funding?

Compromise?:
   - Some minimum paid use as a condition of entry / membership
   - Some incentive for link creation
   - Reduce risk by guarantor loans?
Business models

Key questions are: how to finance:
1. Deficit incurred during operational start up (cashflow)
2. Creation costs of the infrastructure (see earlier)

One possible answer examined:
• based on early EAN/UCC physical bar code model and DOI model
• A creating, member-based, organisation
• Migration from this to an operational model as the infrastructure is
  built/used

Project deliverable cD8 contains indicative business models including
   one model of: High fixed/low variable/member support
• €30K per annum / €0.03 per query / €5K supporting membership

This has not been worked into a detailed scenario but compare IDF.
Limited experience: needs to be supplemented by loans etc.
No conclusions have been made as to viability in this case
Supporting Members and IPM mixed model

       InterParty Organisation 5 Year Indicative Model - Supporting Members and InterParty Members
All value data in Euro

                                                             Revenue

             Supporting Members
              Number      Fee
      2004           5      5,000
      2005           8      5,000
      2006           9      5,000
      2007
      2008
                    10
                    11
                            5,000
                            5,000
                                                        Only about 5% of total income in this example
                                                        cf IDF currently 55% (higher fees and numbers)

                                  InterParty Members (IPM)

              Number      IPM Base Min "Match" Match vol.               Revenue
              of IPMs        Fee     Fee per IPM Per IPM      c/Match   per IPM
      2004            2       30,000      20,000   150,000      0.03       50,000
      2005            4       30,000      20,000   150,000      0.03       50,000
      2006            6       35,000      20,000   150,000      0.03       55,000
      2007           10       35,000      20,000   150,000      0.03       55,000
      2008           20       35,000      20,000   150,000      0.03       55,000



                                                             Results
                          Revenue versus Costs

               InterParty Organisation Membership Fee Revenue                       Interparty Organisation Costs
                                                                        C entral                                                     Result -
                                                                                                          Non-tech
             Members         %         IPMs        %     Total Revenue Technical     Staff      Office                Total C osts Revenue vs
                                                                                                          Support
                                                                         C osts                                                       C ost
      2004       25,000     20%        100,000    80%         125,000     100,000    217,000    150,000     250,000      717,000 -592,000
      2005       40,000     17%        200,000    83%         240,000     150,000    230,000    150,000     150,000      680,000 -440,000
      2006       45,000     12%        330,000    88%         375,000     200,000    245,000    150,000     150,000      745,000 -370,000
      2007       50,000     8%         550,000    92%         600,000     220,000    258,000    150,000     150,000      778,000 -178,000
      2008       55,000     5%       1,100,000    95%       1,155,000     240,000    271,000    150,000     150,000      811,000     344,000
Sample data
 •   Bookdata publisher file
        No. of Publishers 24,475
        Annual deletions 1,650
        Annual additions 3,304
        Annual mutations: 2,124
        (total annual changes: 7,078 (29%) )


 • LOC Name Authority File
        No. of parties: 5.5 million
        Annual deletions 7,200
        Annual additions 270,000
        Annual mutations: 91,000
        (total annual changes: 368,200 (6.7%) )


 • Swedish National Library authority file
        No of records: 80,000
        Annual deletions 4,000
        Annual additions 10,900
        Annual mutations: 16,000
        (total annual changes: 30,900 (39%) ) (but developing new system)


 • Not a statistically valid sample. Total: 400K changes (cf 1.2m- 3m in model).
 • “No figures exist for numbers of catalogues, authority files etc” (IFLA)
Organisation options
Likely model


                                                       InterParty
                                                       System
Site 1   Site 2        Site 3    Site 4    Site 5




Org 1         Org 2             Org 3          Org 4   InterParty
                                                       Members




  C1     C2       C3       C4     C4      C5     C6         Clients
Operational roles                       One possible model                                                 InterParty




                                                                                                     Operating
                                                                                                     Entity
                                         Site 1   Site 2        Site 3     Site 4         Site 5




                                         Org 1         Org 2             Org 3           Org 4     Participating
                                                                                                   Members




                                           C1     C2       C3     C4       C4       C5      C6       Clients

                                                                                                                        3




    Clients: register IDs with agency
    (or registered by agency on behalf of client)
                                          One possible model                                                 InterParty



Operational roles                                                                                      Operating
                                                                                                       Entity
                                           Site 1   Site 2        Site 3     Site 4         Site 5




                                           Org 1         Org 2             Org 3           Org 4     Participating
                                                                                                     Members




                                             C1     C2       C3     C4       C4       C5      C6       Clients

InterParty Member:                                                                                                        3




    • agreements with clients*
    • use of Interparty Network (terms?)
    • metadata collection /added value*
    • PIDI deposit, link creation, etc
    • provision of, or to, Value Added Services
          by agreement*, etc

               * specific to each Participant
Operational roles                          One possible model                                                 InterParty




                                                                                                        Operating
                                                                                                        Entity
                                            Site 1   Site 2        Site 3     Site 4         Site 5




                                            Org 1         Org 2             Org 3           Org 4     Participating
                                                                                                      Members




                                              C1     C2       C3     C4       C4       C5      C6       Clients

                                                                                                                           3




    Interparty Network: operating entity
        • minimal common agreements
        • link (assertion) maintenance
        • resolution of disputed links?
        • service integrity:
        • rules for relationships etc?
        • policies e.g. archiving, testing, etc
Additional roles ?                     One possible model                                                 InterParty




                                                                                                    Operating
                                                                                                    Entity
                                        Site 1   Site 2        Site 3     Site 4         Site 5




     ?                                  Org 1         Org 2             Org 3           Org 4     Participating
                                                                                                  Members




                                          C1     C2       C3     C4       C4       C5      C6       Clients

                                                                                                                       3




    Interparty Network: operating entity
        • development of the system to “make it better”
        • exploit new technologies
        • provide new opportunities to members (cost
        effective?)
                                            InterParty


Model for cost recovery



                             Operating
           Operating costs    Entity

               €
                                              €

           Costs/N
                                 Org

                                                  €

                                   Client
                                             InterParty


Development/operation tension

   development spend       cost management

    Development               Operating
       Entity                  Entity




           M           &          Org




                                    Client
                                                       InterParty


Governance




                          Interparty




             ?                               Org


 Or just a federation of the participants?
                                                   c
                                                                                 InterParty


Instruments

Interparty Network (Agency)
• e.g. US not-for-profit Delaware corp; EU equivalents
• By laws – often template
     • Examples exist e.g. IDF, IPA, CrossRef, etc and could be made available
• Membership criteria
• Board, elections, representation
Straightforward to create, requires leadership and funding

Agreement between Agency and IPM
• Standard agreement on equal terms for all
• IP issues – who owns what, who can access and copy what
• Financial obligations
• Technical obligations (how is data presented, when is data updated, etc)
Not straightforward; few precedents, many unique requirements, and often many
undecided issues, e.g.:
• What happens if an IPM withdraws?
• Legal obligations (“who says” and who relies on that?)
• “I’m a special case because…”
 May necessitate a developmental activity (example: IDF)

Agreements between Agency and suppliers
• Standard commercial agreements including: Technical infrastructure (machines, SLA);
Data (escrow issues; roll back, audit trails); Specific tools, Licences, etc
Straightforward since they follow commercial models
                                                                          InterParty


Conclusions (1)

• There is a need
Over 50 potential IPMs : sources of data/users
    – Informal consensus estimates
    – Implication: centralised indexing is a requirement (€)

•   Sufficient demand for a system with over 1 million uses per year
     – 3 sampled sources total 400K party identification steps per year

•   No clear costed benefit to yet determine economic basis of participation
     – Case study in a few potential IPMs?
     – Need to have this as well as the intellectual argument: standards work
       hard to finance

Hence business case is not yet made

•   But sample models indicate the numbers will work at reasonable(?) levels
    with some mix of fixed/variable elements
•   Need better estimates of real numbers and willingness to commit
                                                                          InterParty


Conclusions (2)

•   Investment is needed
     - cashflow during start up
     - up-front investment in creating technical infrastructure
     – Attempting to create by bootstrapping without cash investment is
       impossible or very difficult (DOI, Crossref)
     – Identify four or five key sponsor organisations to spearhead
       development (CrossRef model)

•   Analogous membership based organisations exist
     – Governance and legal instruments can be modelled or based on these
     – Caution re underestimating legal and developmental costs of creating
       this entity
     – Several sensitive commercial and political issues (security, privacy,
       liability, misrepresentation…)
The InterParty Project
Business models and governance issues
                                                                InterParty


Interparty in 1943…


 "So complex is reality, and so fragmentary and simplified is history,
 that an omniscient observer could write an indefinite, almost
 infinite, number of biographies of a man, each emphasizing
 different facts; we would have to read many of them before we
 realized that the protagonist was the same man. Let us greatly
 simplify, and imagine that a life consists of 13,000 facts. One of
 the hypothetical biographies would record the series 11,22,33...;
 another, the series 9,13,17,21...; another, the series
 3,12,21,30,39.... A history of a man's dreams is not inconceivable;
 another, of the organs of his body; another, of the mistakes he
 made; another, of all the moments when he thought about the
 Pyramids; another, of his dealings with the night and with the
 dawn. The above may seem merely fanciful, but unfortunately it is
 not."

  (Jorge Luis Borges “On William Beckford's Vathek”; 1943)

				
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