the interparty project business models and governance issues norman paskin international doi...

The InterParty Project Business models and governance issues

Norman PaskinInternational DOI Foundation

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Topics

• Scope and assumptions

• Business model

• Governance model

• Organisation

• Conclusions

Scope and assumptions

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– Open only to organisations with metadata to

share, and identification schemes to support– 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

From “business requirements”

section

InterParty

<indecs> Directory of PartiesOutline specification

• Process “distributed and delegated” which increases the need for governance

• Who should be enabled to establish unique identities? (authentication)

• 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

InterParty

from section 10

of DP spec.

Business model

Business model

InterParty

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

Business model

InterParty

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

Business model: status

InterParty

• 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 costingsInvestment requirements

Costs: high level activities

InterParty

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

distributed network searching without any centralised service becomes increasingly inefficient as the number of data sources grows beyond a fairly small number

“Resolution Service”

?

Average reliability Number of Collective of source access sources reliability

Distributed v central 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 developmentOffice 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 InterParty network…

• …while at the same time improving their data quality and thus the services that they offer

• There is an underlying assumption that all Parties whose data appears in the database will have an active interest in disambiguation– Greater certainty of identification in

circumstances where this is advantageous to them

Cost justification requires exemplary business cases(cf IDF White paper)

Valuing this depends on each organisations current costs

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

All value data in Euro

Numberof I PMs

I PM BaseFee

Min "Match" Fee per I PM

Match vol.Per I PM

Euro per Match

Revenueper I PM

2004 2 0 20,000 60,000 1.00 60,0002005 4 0 20,000 60,000 1.00 60,0002006 6 0 20,000 60,000 1.00 60,0002007 10 0 20,000 60,000 1.00 60,0002008 20 0 20,000 60,000 1.00 60,000

Revenue versus Costs

Revenue

I PM Total Revenue

Central Technical

CostsStaff Office

Non-tech Support

Total CostsResult -

Revenue vs Cost

2004 120,000 100,000 217,000 150,000 250,000 717,000 -597,0002005 240,000 150,000 230,000 150,000 150,000 680,000 -440,0002006 360,000 200,000 245,000 150,000 150,000 745,000 -385,0002007 600,000 220,000 258,000 150,000 150,000 778,000 -178,0002008 1,200,000 240,000 271,000 150,000 150,000 811,000 389,000

InterParty Organisation 5 Year Indicative Model - InterParty Members only with no membership fee

Revenue

Results

Costs

I nterParty Members (IPM)

1.2 millionqueries

High fixed, low variable fees


Numberof I PMs

I PM BaseFee


Match vol.Per I PM

Euro per Match

Revenueper I PM

2004 2 30,000 20,000 150,000 0.03 50,0002005 4 30,000 20,000 150,000 0.03 50,0002006 6 35,000 20,000 150,000 0.03 55,0002007 10 35,000 20,000 150,000 0.03 55,0002008 20 35,000 20,000 150,000 0.03 55,000


Revenue

I PM Total Revenue

Central Technical

CostsStaff Office

Non-tech Support

Total CostsResult -

Revenue vs Cost

2004 100,000 100,000 217,000 150,000 250,000 717,000 -617,0002005 200,000 150,000 230,000 150,000 150,000 680,000 -480,0002006 330,000 200,000 245,000 150,000 150,000 745,000 -415,0002007 550,000 220,000 258,000 150,000 150,000 778,000 -228,0002008 1,100,000 240,000 271,000 150,000 150,000 811,000 289,000

Costs


InterParty Organisation 5 Year Indicative Model - InterParty Members only

Revenue

Results

3 millionqueries

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 feeon sliding scale

Input fee

Output fee

Sample analogous organisations (2)

• CERL (www.cerl.org )Consortium of European Research LibrariesHand Press Book Database34 membersOutsourced 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


Number Fee2004 5 5,0002005 8 5,0002006 9 5,0002007 10 5,0002008 11 5,000

Numberof I PMs

I PM BaseFee


Match vol.Per I PM c/Match

Revenueper I PM

2004 2 30,000 20,000 150,000 0.03 50,0002005 4 30,000 20,000 150,000 0.03 50,0002006 6 35,000 20,000 150,000 0.03 55,0002007 10 35,000 20,000 150,000 0.03 55,0002008 20 35,000 20,000 150,000 0.03 55,000


Members % IPMs % Total RevenueCentral

Technical Costs

Staff Office Non-tech Support

Total CostsResult -

Revenue vs Cost

2004 25,000 20% 100,000 80% 125,000 100,000 217,000 150,000 250,000 717,000 -592,0002005 40,000 17% 200,000 83% 240,000 150,000 230,000 150,000 150,000 680,000 -440,0002006 45,000 12% 330,000 88% 375,000 200,000 245,000 150,000 150,000 745,000 -370,0002007 50,000 8% 550,000 92% 600,000 220,000 258,000 150,000 150,000 778,000 -178,0002008 55,000 5% 1,100,000 95% 1,155,000 240,000 271,000 150,000 150,000 811,000 344,000

Supporting Members

InterParty Organisation 5 Year Indicative Model - Supporting Members and InterParty Members

InterParty Organisation Membership Fee Revenue

Revenue

Results

Interparty Organisation Costs


Only about 5% of total income in this example cf IDF currently 55% (higher fees and numbers)

Sample data

• Bookdata publisher file No. of Publishers 24,475Annual deletions 1,650Annual additions 3,304Annual mutations: 2,124(total annual changes: 7,078 (29%) )

• LOC Name Authority FileNo. of parties: 5.5 million Annual deletions 7,200Annual additions 270,000Annual mutations: 91,000(total annual changes: 368,200 (6.7%) )

• Swedish National Library authority fileNo of records: 80,000 Annual deletions 4,000Annual additions 10,900Annual 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

Site 1 Site 2 Site 3 Site 4 Site 5

InterPartySystem

C1 C2 C3 C4 C4 C5 C6Clients

Org 1 Org 2 Org 3 Org 4 InterPartyMembers

Likely model

Clients: register IDs with agency (or registered by agency on behalf of client)

I nterParty

3


Operating Entity


Org 1 Org 2 Org 3 Org 4 ParticipatingMembers

One possible modelOperational roles

InterParty Member:• 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

I nterParty

3


Operating Entity



One possible model

Operational roles

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

I nterParty

3


Operating Entity



One possible modelOperational roles

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

I nterParty

3


Operating Entity



One possible modelAdditional roles ?

?

Operating Entity

Org

Client

Operating costs

Costs/N

€

€

€

Model for cost recovery

InterParty

Operating Entity

Org

Client

M &

cost management development spend

Development Entity

Development/operation tension

InterParty

Or just a federation of the participants?

Interparty

? Org

c

Governance

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…)

InterParty

The InterParty Project Business models and governance issues

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)

InterParty

the interparty project business models and governance issues norman paskin international doi...

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