Transaction Costs of Web 2.0
We’re all encouraged to adopt web 2.0 philosophies and technologies. In fact, soon we’ll reach a point where a company that isn’t embracing web 2.0 will be considered behind the times. But amid this hype, people often forget the transaction costs involved in adopting something new.
According to economic theory, everytime a product or service changes hands in a free market, transaction costs are incurrred. The amount of these costs depends on the type of transaction and the amount of information that the buyer and the seller may have at that time. Information systems are often designed with the expressed purpose of reducing some of the transaction costs within an organization.
However, when you design a system to reduce the transaction costs it may infact create new uncertainities and through that new transaction costs. These new costs can be higher than the gains realized by introducing the new system. This may well be the case with certain web 2.0 influences.
For example, creating a participatory environment in which employees can collaborate and share information in an easy to use manner is healthy. But it may serve as a major distraction. The wrong types of information maybe shared or other more pressing business priorities may get ignored if your employees are spending too much time collaborating on tasks that aren’t necessarily that important.
Therefore, when adopting web 2.0 technologies in your organization, think hard about the current and future transaction costs involved. Think about the new uncertainities created and how your organization will need to manage them.
