Governance & Commercialization: Payment APIs and Platforms

Whilst writing my series on IP Commerce Platform updates last week, I spoke about the concept of governance as it relates to Federated Identity and Commerce Business Rules.  It would appear that the discussion of governance was rather prescient, albeit unintentionally*, given other discussions late last week.

There was a series of inter-related commentary related to the topic of platform governance that deserve mention. I have pulled brief quotes from each of the posts, but encourage you to read them in their entirety.

The first, and really the genesis of the discussion, was from Brad Burnham (on the Union Square Ventures blog) and is entitled Web Services as Governments:

A lot of people have begun using the term ecosystem to describe these big platforms. That captures their decentralized, emergent character, but ecosystems do not have a central point of control. Apple decided to eliminate third party analytics between one release and the next. That doesn’t happen in an ecosystem. The right analogy is a government.

This was followed by an analysis piece from Bob Warfield (on the SmoothSpan blog) entitled Web Services (and Platforms) as Governments:

In the end, companies have to decide what they are.  If their primary purpose is to be a platform, they rely on others to a greater or lesser extent for their livelihood.  They must decide as “governments” how to treat the merchant class.  They need to worry about how they will be regarded by that class.  In many of the cases cited, the problem is these organizations are not primarily focused on being platforms.  They want to own it all.?

Following this, Derek Pilling (a Managing Director with Meritage Funds) authored a piece entitled Platforms:  Of Governance and Taxes on his Non-Linear VC blog.

Governments get their revenue from the collection of taxes; and the government gets to set its own tax code. The same goes for platforms, they get to determine how they will monetize their platform. If you are building on a platform, make sure the tax code is well established, stable and predictable. If the tax code is not clear, you are at risk.

As I said above, reading these posts (in the order indicated) and comments is an excellent thought exercise and will greatly deepen your understanding of Platforms as a business strategy.

Derek, in particular, makes a extremely interesting…and extremely important…point.

At the end of the series last week, I mentioned the importance of “commercialization” for a Software Company leveraging not only APIs in general, but Payment APIs in specific.

But what does the commercialization process truly encompass?

What must be taken into account when choosing a platform provider for your payments integration needs?

Commercialization, in general, goes far beyond the initial step of integration.  Adding payments to software is only the first step in bringing a commerce solution to market.  Upon completion of the integration, the solution must be sold…your customers (in most cases) will need merchant accounts with service providers…that merchant is boarded to the processors systems…there is ongoing support requirements…the need to determine monetization (revenue for your software business) and cost (what does it take to integrate)…etc.

If integration is an event, commercialization is the business.

As the posts above highlight, in varying levels of detail, “APIs” are not sufficient to solve your business needs.  This is why, when I speak with our software company and developer partners, I reiterate the fact that it is not just the tools that are important…it is the people and the process that drive success.

IP Commerce is platform company.

That decision was made upon corporate inception.  That decision is still core in our interaction with the software community.  The Commerce APIs are free for usage…our “tax codes” are clear. Our success is driven by your success.

But, most importantly, we are intimately familiar with the process that you will undergo to achieve success.  This understanding has been bred by interacting with, and enabling innovation, on behalf of software companies over the last 5 years.

Choose your partners wisely.

What’s your perspective? Agree? Disagree? Anything to add? Critiques? The comment form is below…?

* I’m not entirely certain whether “unintentional prescience” is possible…but, nonetheless

June 14, 2010

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