The case for open source B2B

Firstly this Wikipedia quote talks about B2B and the industry supporting it:

A trade or barter exchange is a commercial organization that provides a trading platform and bookkeeping system for its members or clients... Commercial exchanges make money by charging a commission on each transaction either all on the buy side, all on the sell side, or a combination of both. Transaction fees typically run between 8 and 15%... It is estimated that over 350,000 businesses in the United States are involved in barter exchange activities. There are approximately 400 commercial and corporate barter companies serving all parts of the world... There are two industry groups, the National Association of Trade Exchanges and the IRTA. Both offer training and promote high ethical standards among their members. Moreover, each has created its own currency through which its member barter companies can trade. NATE's currency is the known as the BANC and IRTA's currency is called Universal Currency (UC).

Transaction charges run to 15%, plus membership fees, and usually tax is paid on all barter trade as if dollars had been received. Brokers often abuse their privilege, spending beyond what can ever be redeemed, and taking the first pick of trades as they become available. All of this is preventing the industry from thriving at a moment when money is being sucked out of the economy and barter should be coming into its own.
So the barter industry consists of many commercial organisations offering accounting and matching services to their client businesses. Some have created an umbrella network which increases the size of the marketplace, but which is by no means universal or 100% compatible with the main networks. The providors' business model each relies on retaining and attracted as many businesses in their silo as possible even at the expense of the others - so they are all competing for members in order to maximise profit. This is very inefficient, and bad for members who benefit from a wider marketplace and lower transaction costs.

At the heart of all this incompatibility and competition is the software. Each provider maintains its own proprietary software, which is either expensive, or decrepit, or both. Most of these applications are from the first generation of web software which was about monolithic applications. These are characterised by being hard to change, especially as they get larger and more complex. The rigidity of these applications is constraining innovation and experimentation. The law, and the web, and user expectations are changing faster than ever and these small software houses can't keep up. The industry is not only carving itself up into silos, but crippling itself trying to maintain so many different software packages to do the same job.

The modern approach to software, (since around 2005) is to use open source frameworks. The framework provides a basic web application with basic tools for display, user management, content management, data manipulation and suchlike, and can be used for a very wide range of applications. This means a large community makes itself responsible for maintaining the framework. Then for more specialised purposes, this same community produces and maintains plugins which allow rapid development of commonly used features. The plugins work together because they adhere to the standards and conventions of the framework. This means, in the case of barter, that 80-90% of the needed code is already written and being used for other purposes. Then typically, a web shop is hired to analyse what is really needed and produce any new modules, to be open sourced and finally a layer of configuration and perhaps a unique graphic design to the site. This approach to software development, using 'layers' of sharing enables a drastic reduction in cost, while as much code as possible is shared.

The barter industry needs to be doing this instead of competing on software. The various providers need degrees of customisation, but underneath, what they want is the same. If software budgets were pooled, each providor would quickly find that they benefitted from the investments of others, they would have a more attractive package to offer their members, and it would be much, much easier to trade accross the network. Also monitoring and regulation would be simpler with a single reporting format. With standard data formats, members would find it easier to migrate to different networks. Exchanges could easily plug-in to a global marketplace. Providors would be able to complete on the efficacy of their matchmaking.

Let me put it another way. The proprietary software model is not working for the barter industry. Simple game theory indicates that once open source is introduced the others will soon not be able to compete. The leading adopter() of an open source framework will have a significant head start in regenerating the industry. And those who don't catch the train will be left in the cold.

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