September 2007

Industry’s Commitment to Technical Standards

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Just as interoperability is a goal of government and the private sector, it is also a business imperative for the information technology sector.  As demand for interoperability has increased, the IT sector has responded.  This article seeks to highlight the role of the IT sector in economic growth, the nature of the IT market and intellectual property protection, a better understanding of interoperability and open standards, and the means by which government can help to ensure interoperability in its own IT acquisitions.

Introduction

Now more than ever, governments and industry are seeking to gain maximum value from their information communications technology (ICT) investments. Over the past 40 years, government and enterprise ICT infrastructures have become increasingly multi-platform, multi-vendor, widely distributed and complex. At the same time, business processes and government services have become more and more complicated, interdependent and dependent upon ICT technologies.

Given this current state of affairs, the ICT industry recognises the increasing importance of systems and software interoperability to enable business processes and government services to change and grow.  Further, the ICT sector is responding to these needs.  There is a high level of interopera-bility in today’s information technology (IT) sector and it is constantly improving. Indeed, it is in the interest of the information technology industry to ensure that the industry continues to respond to customer needs in this area.

However, while there may be agreement on the need for interoperability, the scope and implementation as well as the means to encourage it remain controversial, politicised, and confusing. This article seeks to highlight the role of the IT sector in economic growth, the nature of the IT market and intellectual property protection, a better understanding of interoperability and open standards, and the means by which government can help to ensure interoperability in its own IT acquisitions.

The IT sector now consists of 1.1 million businesses that support 11 million high-paying IT jobs, generating $900 billion in taxes and $1.7 trillion per year to the global economy.  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 strong intellectual property protection to inspire the private sector and the smooth functioning of government and business IT systems to promote tech-nology adaptation and use. Interoperability plays across both of these.

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:

  • 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;
  • Formal collaborations among businesses and governments to create interoperable systems, and
  • Use of standards developed in international standards bodies.

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 standardisation.  Any type of standard, including formal standards, may require the licensing of intellectual property rights.

We have identified three principles that will foster interoperability and therefore the growth of the IT sector as a vibrant creator of both employments and national wealth

Principle 1: Technology neutrality
Principle 2: Promote industry driven standards
Principle 3: Foster strong intellectual property protection

THE ROLE OF GOVERNMENT

Governments remain the single largest customer for the IT sector (20% of sales in the US, 25% in China and 40% in Australia).  In business, large customers naturally sway the direction of product development through their demand.  As such, it is important for government to act as any other customer in the market place.  If government is not conscious of this impact as it procures technology, there could be unintended consequences. In this regard, the roles of government are manifold.

Government Investment: In its capacity as a major investor, government has the ability to directly stimulate the marketplace. As noted in the first section, this investment can have direct economic benefits for the economy and to national productivity. However, it is also important to recognise that how that money is spent could impact product development of the competitive marketplace.  If government requires a specific type of technology be used as a condition of winning a procurement bid– rather than any product implementations that  meet a technical specifi cation – the government is directly driving growth of one type of technology over another. Further, mandates or prohibitions may unintentionally exclude  domestic players who have partnered with different technology producers or are leading in their own product areas.

Government as a Leader-e-Government: e-Government offers the opportunity for greater efficiency in delivery of services to the public. e-Government bidding requirements that mandate use of a particular type of technology, override the market and drive research and devlopment to an area the market may not naturally take it.  In its extreme, this could drive up costs and deliver less competitive, less technologically savvy products. A competitive and open procurement environment ensures that limited government funds for technology purchases are being used efficiently. An open, technology-neutral procurement system ensures that government employees have access to the best, most cost-efficient, state-of-the-art products and services.

Government as a Stimulant to the Local IT Industry: Rational government policies can act as a catalyst to stimulate local IT industry growth. No other entity has more ability to influence the growth and development of the information technology industry.  In this regard, government often acts consciously to develop incentive programmes, such as tax breaks and free trade, to help encourage investment and grow the industry locally. But, governments can also impact the local industry through direct investment – spending procurement dollars. As long as that investment is unbiased, technology neutral, and open to all bidders – including qualified foreign bidders, it has the potential to be market-fostering.

Government as an Advocate of Intellectual Property Protection: As documented in numerous studies and detailed in the first section of this paper, strong intellectual property regimes are a critical foundation for innovation and growth in the ICT sector.  Indeed, intellectual property frameworks arguably are the frameworks that have produced today’s modern IT industry.  In this regard, government procurement that explicitly discourages the working of an intellectual property right also discourages a proven means to innovation.

What is interoperability?

Webopedia (http://www.webopedio.com) defines interopera-bility simply as “the ability of software and hardware on different machines from different vendors to share data.” US law terms it “the ability of different operating and software systems, applications, and services to communicate and exchange data in an accurate, effective, and consistent manner.” Similarly, the European Interoperability Framework defines interoperability as “the ability of information and communication technology systems and of the business processes they support to exchange data and to enable the sharing of information and knowledge.”

Interoperability thus 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.

Why does interoperability matter?

As technology penetration increases, so does business and government dependency on computers.  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 decentralisation of procurement has in some cases led to absence of interoperable computer systems.

Targeting interoperability as a goal in computer procurement can bring benefits to governments and to all customers. 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 Hyper Text Markup Language (HTML) and Hyper Text Translation Protocol (HTTP) standards can be incorporated seamlessly into Internet web pages.

Effective Crisis Management. As has been the case too many times in the last ten years, the power of computers in aiding crisis management has become apparent. The inability of radio and communication devices to interact on 9-11 contributed to confusion in New York.  In the aftermath of the 2005 South Asian Tsunami, the identification of and search for victims was complicated in several locations by lack of cohesive and interactive computer systems. Congressional investigations of the Hurricane Katrina disaster reveal issues with computer communications.

Indeed, battles have been lost and won based on how well communications flow on the battlefield. The absence of interoperability – a nuisance in normal times – is a disaster in a crisis or war time.

Seamless provision of business services. While the paper focuses on government interoperability 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.

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 standardisation.  Any type of standard, including formal standards, may require the licensing of intellectual property rights.

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 reasonably and non-discriminatory (RAND) terms.

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 centers on whether the technology specifications described in the standard may be implemented or exploited royalty free.  Open standards are not the same as open source.

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 information technology 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 (See Figure), including:

  • 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.

Each of these methods to achieving interoperability is discussed below.  It is important to emphasise – particularly for policy makers– that these options are simply a means to an end; ultimately, the goal is interoperability.

In addition, it is important to note that these 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 organisation, 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 XML, a proprietary technology that has gained broad popularity, has been submitted to the European Computer Manufacturer’s Association (ECMA) for formal open standardisation.

Given this potential evolution through the various methods of achieving interoperability, it is important that governments embrace all methods to achieve interoperability in order to promote maximum flexibility and efficiency in the market place.

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.  There are many other examples.  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.  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.

Products that are Interoperable by Design: The marketplace is driving interoperability demands. As legacy systems and new systems increasingly need to interact, customers – whether they are government, businesses, or individual consumers – want all of their components to interoperate. In government, the tax authority’s computers should be able to speak to the department of motor vehicles.  In business, headquarters in Mumbai should be able to seamlessly access documents created in the London office.  And for consumers, their MP3 player should be able to talk to their PC. Businesses are responding by building products that are interoperable by design. Government can help advance interoperability by (1) embracing technology neutrality, (2) promoting industry driven standards and, (3) promoting strong intellectual property protection.

A Model Public Policy Framework based on these three principles would include:

Principle 1: Technology Neutrality

Avoid policies that would mandate or prefer specific technology solutions, standards implementations, platforms or business models.

  •  Spain: In the Spanish Parliament plenary session held in Madrid in December 2005, an overwhelming majority of 290 votes against 15 rejected a proposal mandating open source software.
  • USA: In July 2004, the US Office of Management and Budget issued a circular reminding agencies that procure-ment efforts were intentionally technology neutral.

Ensure that government policies aimed at promoting interoperability remain objective and performance-based. Procurement acquisitions should incorporate criteria that incorporate 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.
  • Review security and seek assurances from vendors as to the integrity of their products.

Principle 2: Promote Industry Driven Standards

  • Allow industry to lead in promoting interoperability including by developing voluntary, industry-driven, consensus-based standards.
  • Ensure that government interoperability programmes are based on a clear set of publicly accessible technical standards.
  • Let the market work in the standards setting process.
  • Provide 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

  • Support the role of intellectual property both in promoting and developing technology, and in promoting interoperability.
  • Avoid policies that impose compulsory licensing require- ments in procurement practices.
  • Respect IPR & encourage this as a tool for innovation.

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