First, there would be search costs, such as finding different suppliers and determining if their goods were appropriate. Second, there would be contracting costs, such as negotiating the price and contract conditions. Third, there would be coordination costs of meshing the different products and processes. Coase called these “transaction costs.” And the upshot was that most corporations concluded it made the most sense to perform as many functions as possible in-house. All this leads to what we and our colleagues call “Coase’s law”: A firm will tend to expand until the costs of organizing an extra transaction within the firm become equal to the costs of carrying out the same transaction on the open market. As long as it is cheaper to perform a transaction inside your firm, keep it there. But if it is cheaper to go to the marketplace, do not try to do it internally.
But the Internet has caused transaction costs to plunge so steeply that it has become much more useful to read Coase’s law, in effect, backward: Nowadays firms should shrink until the cost of performing a transaction internally no longer exceeds the cost of performing it externally. Transaction costs still exist, but now they’re often more onerous in corporations than in the marketplace
Open source solutions companies ---- Digium, Medsphere, Pentaho, and SugarCRM
yet2.com
When bringing in external ideas, companies can never assume that ready-to-go ideas are truly ready to go. Unless one is talking about generic scientific knowledge or technologies that are easily understood or codified, there can be substantial costs involved in operationalizing external knowledge in its new context. In such cases, technology transfer can be as expensive and time consuming as independent R&D.
Blogs ---- Bioethics, CancerDynamics, NodalPoint, Pharyngula, and RealClimate
In the mid-1990s, scientists discovered that tiny chemical landmarks inside or near genes are posted at regular intervals along the DNA molecule, like road signs and mile markers on a stretch of highway. These landmarks, called single nucleotide polymorphisms (SNP), could be used to create a catalog of the ever so slight genetic variations that make some individuals susceptible to disease.
As Francis Collins, a director at the National Human Genome Research Institute, put it, “SNPs serve as a blinking light on DNA sequences showing there is something very interesting here—for example, something that is contributing to diabetes.”
Amazon is renting access to the whole raw database of roughly ten billion Web documents so that anyone with the time or inclination can build their own search tools and data-mining projects with it. Indexes are hard to build and maintain, requiring a lot of computer horsepower, storage, and bandwidth. But once you’ve built a copy of the Web index, there’s plenty of imaginative ways you can tweak it to produce valuable new applications and services, and perhaps entirely new search engines. Again, it’s all done via Web services. There are no licensing fees for developers. Just “consumption fees,” which, according to Jeff Barr, are pretty reasonable: one dollar per CPU hour consumed, one dollar per gig of storage used, one dollar per fifty gigs of data processed, and one dollar per gig of data uploaded if you are putting your new service up on their platform. By treating the index as a salable asset instead of a trade secret, Amazon is really ripping apart the traditional wisdom of search engines. The Alexa index is now a platform for participation that anyone can harness without investing millions of dollars in crawl, storage, processing, search, and server technology