October 2006

Model Public Policy Framework on Interoperatibility

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One of the many promises of technology is its ability to improve interaction and provision of services to a country’s citizens. Targeting interoperability as a goal in computer procurement can bring benefits to governments and to civil society as a whole

The world’s IT sector now consists of 1.1 million businesses that support 11 million high-paying IT jobs, generating US$900bn in taxes and US$1.7trn per year to the global economy (IDC 2005). The economic and productivity benefits resulting from information technology use positively impact individual economies and individual citizens. Therefore, growth of the technology sector and increased use of technology is a useful goal for policymakers. A steady stream of studies suggests that a proven means of promoting IT growth is through a combination of choice in adopting technical standards combined with strong intellectual property protection to inspire the private sector and the smooth functioning of government and business IT systems.

IT sector investments have been shown to directly increase a country’s Gross Domestic Product (GDP) and productivity.  In an international study commissioned by NASSCOM, India’s National Association of Software and Service Companies, researchers found that a 10% increase in IT capital investments increases GDP by 3.6%, and a 10% increase in labour hours can increase GDP by up to 4%. By contrast, in economies with less IT capital (economies that are underinvested in IT), a 10% increase in IT capital yields only a 1.6% increase in GDP, and a 10% increase in labour hours has no statistically significant impact on GDP. The conclusion to be reached is that the more a country invests in IT, the more overall economic and productivity benefits will be gained.

There also appears to be a link between economic growth and software investment. The NASSCOM study compared countries that invested more in IT, those gaining greater GDP and productivity benefits, against those less invested countries. The study found that the countries that invested more in IT capital were proportionally more invested in software. The average IT investment in economies more invested in IT was 38.7% in 2003 and is expected to increase to 40.2% in 2007. In contrast, the average annual software share of IT investment in economies less invested in IT was only 17.2% in 2003, and is expected to be virtually unchanged at 17.7% in 2007.

Why do technology standards matter?

Technical Standards for IT have been around as far back as the 19th century with the adoption of the Morse code, the world’s first ‘digital’ standard. Craig Barrett, Intel’s Chairman of the Board said it best: “The world is getting smaller on a daily basis. Hardware, software and content move independent of, and irrespective of, international boundaries. As that increasingly happens, the need to have commonality and interoperability grows. You need standards so that the movie made in China or India plays in the equipment delivered in the United States, or the Web site supporting Intel in the United States plays on the computer in China.”

More efficient delivery of e-Government: One of the many promises of technology is its ability to improve interaction and provision of services to a country’s citizens.  In an effort to stem costs and speed efficiencies, the decentralization of procurement has in some cases led to absence of interoperable computer systems. Targeting interoper-ability as a goal in computer procurement can bring benefits to governments and to civil society as a whole. For example, because of technical standards devices that implement the 802.11 WiFi standard, any device that uses the standard can communicate over a wireless network. Another example is that documents implementing the HTML and HTTP standards can be incorporated seamlessly into Internet web pages.

Standards defined: A standard is a technical specification that is widely used.  It may be a formal specification developed or approved by a formal or industry standards body like the International Standards Organisation (ISO), or a de facto or “proprietary” standard that is widely adopted in the market place without formal standardi-sation. Any type of standard, including formal standards, may require the licensing of intellectual property rights.

Interoperability defined: The ability of software and hardware on different machines from different vendors to share data. Interoperability is not a requirement for use of the same products or a single source of products: Interoperability does not involve making different types of products and technology homogeneous, but rather enabling effective communication of data between very different products and technology implementations. Interoperability can be achieved through one or more of the following. This includes implementation of market driven standards through market competition; development of software that is “interoperable by design”; voluntary publication and licensing of proprietary technologies and intellectual property; and, formal collaborations among businesses and governments to create interoperable systems, and use of standards developed in international standards bodies.

Open standards: ‘Open’ describes the adoption, not the content or use, of standards. Open standards are a set of technical specifications, developed or approved through a consensus process, that are widely reviewed and agreed upon, published in sufficient detail to permit a variety of implementations, and publicly available for use on reasonable and non-discriminatory (RAND) terms.

Open standards may contain intellectual property, licensed at reasonable license fees.  Another common misperception is that ‘open’ standards cannot include specifications covered by intellectual property protections. Quite on the contrary; many of the most popular consumer and IT products worldwide, including the DVD video disc and the GSM mobile telephone, are based on open standards that incorporate the technology of numerous commercial companies that is patented or otherwise protected by intellectual property. Such technology is included in the open standard with the agreement that affected rights owners will license their intellectual property on reasonable and non-discrimi-natory terms to those using the standard.

The word “open” is sometimes used erroneously to characterise the nature of the license or intellectual property used to distribute the standard.  In most cases, the erroneous use centres on whether the technology specifications described in the standard may be implemented or exploited royalty free, a concept that can equate to open source-like licensing. Importantly, open standards are not the same as open source.

Open standards does not necessarily mean open source. These two terms are often – mistakenly – used interchangeably. Open standards are technical specifications. Open source is a type of software (open source software or OSS) governed by a particular type of intellectual property license approved by the Open Source Initiative (about 50 different forms of the license) that can be used to implement an open standard.

There are three very common mistakes. First, some assume that open source means open standards.  Just because a product is distributed under an open source license does not necessarily mean that it implements the same open standards as any other open source software program. Also, since OSS code can be freely modified a product that is initially open standards conformant may be altered by a user in a way that breaks its interoperability.

Second, there is an assumption that non-open-source software does not use open standards. Again, this is false. Proprietary products can and do incorporate open standards to assist in interoperability development.

Third, there is the misconception that implementation of a standard must be ‘free’ in order for standard to be ‘open’.  As described above, open standards regularly require intellectual property licenses or contain other requirements that require a reasonable and non-discriminatory fee.

Proprietary or de facto standards are a viable alternative. As noted above, the result of the various efforts of achieving interoperability can result in a specific standard.  How these standards are shared is often a result of the economic decisions, business terms, legal structures, and practicalities of research methods governing the collaboration or research.  In addition, it is important to acknowledge that each of these factors may determine whether or not the interoperability effort is ever pursued.  Therefore, as with innovation and creativity in the IT space generally, incentives to develop interoperable technologies can be governed by market demand, by potential for profit, and a number of other practicalities.

How can interoperability be achieved?

Just as interoperability is a goal of government and the private sector, it is also a business imperative for the IT sector. As demand for interoperability has increased, the IT sector has responded. Numerous national and international bodies – formal and informal – have developed in the market to help promote interoperability.

The goals of interoperability can be accomplished through a variety of independent and interdependent means, which have already been discussed above. However, it is important to note that the said methods of achieving interoperability often evolve over time. As industry and consumer needs change, the nature of the interoperable element or “standard” may evolve. For example, the pursuit of a proprietary standard by a group of companies may make the most sense under certain circumstances because the standard can be adopted more quickly and because it is likely that only a few organisations will rely on the standard to achieve interoperability.  Later, if that proprietary standard becomes more broadly known and implemented by other organisations, it may rise to the status of a de facto market standard. At that point, the standard may also be contributed to an open standards organization, such as the International Telecommunications Union (ITU) or the International Standards Organisation (ISO), for ratification as a formal open standard in order to achieve wider implementation, for example Microsoft’s OpenXML, a proprietary technology that has gained broad popularity, has been submitted to the European Computer Manufacturer’s Association (ECMA) for formal open standardisation.

Implementation of market driven standards: Consumer choice is a powerful tool to drive interoperability. The market place has delivered a number of de facto technology standards. For example, Adobe’s market strategy to give away its PDF reader coupled with the product’s ability to maintain document integrity on the worldwide web drove consumer choice to PDF. Today, this is a globally accepted file format for transfer of electronic documents. The IT sector depends heavily on market-driven development of such de facto standards, given the speed of technological development and the relatively slow pace of formal standards proceedings.

As governments consider policies to achieve interoperability, they should keep in mind that the marketplace has been an important force in selecting technology winners and losers. Indeed, consumers and not government are the best judge of how and if technology works for them. For example, consumers chose the VHS Video format over the Betamax format. Similarly the proprietary MP3 compression format is the preferred choice of consumers today for portable music. In each of the listed means of achieving interoperability, there is a necessary element of market testing required to ensure the success of an interoperability effort.

Seamless provision of business services: While the primary purpose of this article is to focus on government interoperability through the adoption of technical standards that are ubiquitous and its relationship to the industry, it is important to note that businesses are equally impacted by interoperability issues. As with government, the technology sector is responding. On a daily basis, technology companies reach out to customers in all segments of the economy – finance, education, healthcare, manufacturing, retail – any business with multiple destinations, multiple computers or multiple data points that need to be able to speak to one another.  These issues often are addressed on a case-by-case basis, building these solutions to the interoperability needs of the user.

Government can help advance interoperability by embracing techno-logy neutrality, promoting industry driven standards, and  promoting strong intellectual property protection.

Three principles of model public policy framework

A Model Public Policy Framework as such is based on three principles – Technology Neutrality, Promote Industry Driven Standards, and Foster Strong Intellectual Property Protection.

Principle (1) Technology neutrality: Avoid policies that would mandate or prefer specific technology solutions, standards implementations, platforms or business models.

Hong Kong, one of the world’s most successful economies, maintains strict technical neutrality in government procurement of IT assets using an open and transparent bidding process. Similarly, in July 2004, the US Office of Management and Budget issued a circular reminding agencies that procurement efforts were intentionally technology neutral.

It must be ensured that government policies aimed at promoting interoperability remain objective and performance-based.  Procurement acquisitions should incorporate criteria that include the following – embrace a definition of interoperability focused on the goal – interoperability – rather than on the means to obtaining the goal; review total cost of ownership; secure competitive and fully loaded service plans as a condition of government purchase of IT; consider ease of use as purchasing criteria; and, review security and seek assurances from vendors as to the integrity of their products.

Principle (2) Promote industry driven standards: This includes allowing industry to lead in promoting interoperability including by developing voluntary, industry-driven, consensus-based standards; ensuring that government interoperability programs are based on a clear set of publicly accessible technical standards; letting the market work in the standards-setting process; and, providing a legal framework and regulatory framework that supports an industry-driven open standards process. Where government is the representative to a standards setting body, ensure there is a strong consultative process in place, open to all potential industry participants.

Principle (3) Foster strong intellectual property protection: This includes supporting the role of intellectual property both in promoting and developing technology, and in promoting interoperability; avoiding policies that impose compulsory licensing requirements in procurement practices; and, respecting IPR and encourage this as a tool for innovation.

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