Software vendors often use components of external vendors or open source communities. One way to see how to govern these relationships is by looking at Transaction Cost Economics. In order to help me operationalize Transaction Cost Economics for software vendors I am looking for product software managers that want to participate in my research.

1. Transaction Cost
Economics in Software
Ecosystems
Wilco van Duinkerken - Utrecht University
wilco@sparkboxx.com - June 19th 2009

2. Did you ever ask
yourself one of the
following questions?

3. Should I write a
software component
myself or buy/use it
from somebody else?

4. I’m using an open
source component,
when do I start
contributing?

5. What are the “hidden”
costs of using external
components?

6. How can I limit the
costs and risks of using
external components?

7. 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

8. 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

9. The Basics
• 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

10. Governance modes
• Markets • Alliance
• Hierarchies • Joint Venture
• Short term contract • Master Service Agreement
(Raamwerkovereenkomst)
• Long term contract
• SaaS (webservice)
• Service Level Agreements
• Partial Ownership (buy
• Open Source License shares)
• Open Source Contribution

11. The governance modes
differ in the amount of
control, flexibility and
costs

12. A governance mode is
chosen based on
transaction costs

13. 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.

14. Governance mode determination
by transaction costs
Asset Specificity
Low High
Low Neo-classical Contract (Collaborating)
Uncer-
tainty
Classical Contract
(non-collaborating) internal
High Relational contract
governance
occasional recurrent
Recurrence
Hierarchy Coordination
Market Coordination

15. 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?

16. 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?

17. 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

18. Can I Participate in
Both the group and
Individual sessions?
Yes, you can :-)

19. 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.

20. Want to participate?
• Please contact me:
• E-mail: wilco@sparkboxx.com
• Twitter: @sparkboxx
• LinkedIn: http://www.linkedin.com/in/
wilcovd

21. More sources
• Download my thesis so far
• View a summary of my thesis research at
http://prezi.com/90808/