Summary: The first standards development organizations were formed more than 100 years ago. For the next seventy years, the formation of additional organizations followed an evolutionary course that regularized the process of developing standards, and culminated in the existence of an international infrastructure comprising hundreds of formally recognized, national standards organizations, as well as a much smaller number of global organizations, each with its own recognized area of acknowledged expertise. Beginning in the 1980s, however, new industries based upon computer technologies grew increasingly restive under this formal system, and began to form new organizations most often referred to as “consortia.” These organizations were typically more narrowly focused than the “de jure” bodies, but at the same time were international rather than national in their membership. This variance was appropriate, because the standards that the new consortia were formed to create were intended for global rather than national implementation, and also because the companies that launched these new organizations were themselves multinational in their operations. As time has passed, these consortia have become very numerous, numbering in the many hundreds, with more being formed on a weekly basis. Today, they dominate standards development in the information, and to a lesser extent, the communications technology industries. Most recently, similar organizations have begun to be formed in other industries as well. This article is part of the ConsortiumInfo.org Essential Guide to Standards, which can be found at http://www.consortiuminfo.org/guide/.
I – Why a Consortium? The Historical Background
While standard setting has been an important aspect of industrial society for over a hundred years, the formation of unofficial, fast-acting standard setting and promotional consortia is a more recent phenomenon. Given that the first wave of consortia was not formed until the late 1980s, the consortium process has only recently begun to be seriously studied.1 While various aspects of the economic and antitrust impact have provoked academic and regulatory interest, as yet, there has been no systematic effort to formalize the structuring of consortia, or to standardize vital aspects of their operation, such as their systems of governance and the establishment of intellectual property policies and procedures.
The immediate precursors to consortia are the standards development organizations (or “SDOs”), which are the official (abroad) and unofficial (in the United States) bodies that set standards on a national basis. Typically, these organizations cover a wide variety of technical areas, have established policies and procedures, and are expected to provide a hearing to any and all interest groups. In the United States, the American National Standards Institute, or ANSI (www.ansi.org) is such a world-recognized “de jure” body.
Rightly or wrongly, a feeling arose in the late 1980s that the SDOs acted too slowly to provide useful standards in the fast-paced world of technology. Further, their dedication to permitting all parties to participate in standard setting led some companies wishing to create products based on standards to feel that their needs were not being directly enough met.
The result was the explosive formation, beginning in about 1987, of a myriad of unofficial groups of companies, each usually formed to create a standard to address a single commercial need. While these groups of companies were generally willing to admit anyone as a member, their value proposition was usually attractive only to other interested companies, and their recruiting efforts were targeted at this same limited group. Although government agencies and universities might at times join, especially where reduced rates for their participation were available, end-user participation was rare at the corporate customer, and individuals need not apply at all.2
The name given to each of these groups of companies was the same categorical label historically given to a single purpose joint venture of a group of companies: a consortium. In today’s technology world, that generic term has taken on a secondary meaning, defining any collection of companies (and, as noted above, sometimes, universities and government agencies as well) which for a finite time period work together to promote the commercial success of a new technology based product or service. Frequently, although not always, the central activity of the consortium is agreement upon, and promotion of, a technical standard (or standards) which is necessary to permit the products of multiple vendors to work together. In our modern, interconnected world, the need for such standards continues to expand — a trend that is likely to sustain, and even accelerate, for many years to come.
The need for standards is obvious. Common agreement is essential to permit end users to purchase the products (from pipe fittings to computer peripherals) of multiple vendors and know that they will all “plug and play” together when they are assembled into a single system or network. Without standards, disparate companies would more frequently promote competing technologies, resulting in expensive strategic mistakes by companies backing the wrong standard, mistrust by end users in the marketplace, rapid obsolescence of products based on “losing” specifications, and the delayed development of markets for new goods and services.
The classic example of such a debacle is the competition that raged between the two camps of corporate contenders backing, respectively, the Betamax and VHS video recorder standards. The battle had its genesis in 1975, when Sony released its first Betamax VCR. One year later, JVC, another Japanese company, released its own VCR product, based on the VHS format which ultimately prevailed. Tellingly, Sony had offered to license the Betamax technology, which many believed to be superior, to JVC. JVC declined the offer, due to the fact that its own product was nearing commercial release.
The result of the protracted struggle for market share that followed was confusion for the consumer and costly marketing struggles for the vendors, all of which acted to the detriment of vendors, video rental shops and consumers alike. For years, the market was split between vendors which manufactured VCRs in one, or both, formats, and bitter commercial as well as legal wars between Sony and JVC. Since the full development of the new manufacturing (as well as movie resale) marketplace was dependent on the emergence of video shops, the emergence of each of these related industries was delayed by the need to stock two copies of each movie title, to meet the needs of the rental customers who for some years were as apt to buy a VCR recorder in one format as the other.
Eventually, after a complex market process that remains the subject of avid study, VHS prevailed. Sony itself capitulated and offered its own VHS format machines in 1988.3 Given the near-universal familiarity of VCR’s, this struggle remains as a prominent example of how not to launch a new product which is dependent upon interoperability. But there are also more obscure examples of the same type of failure that have played out less visibly to the public eye.
Suffice it to say that by the late 1980s, it had become apparent to many players in the industry that achieving consensus on an ever increasing variety of technical criteria was essential to commercial success. At the same time, the pace of innovation and adoption was increasing, and the viewpoint arose that the existing SDOs did not provide a sufficiently nimble forum to meet the needs of many technology-based product vendors.
II – What is a Consortium?
Frequently, a consortium is acknowledged to be a limited time venture launched to achieve a single goal (e.g., defining the specifications of a computer “bus” — see www.vxibus.org). Sometimes, a consortium will have a broader mission, and will seek to set multiple standards necessary to enable the evolution of a new category of business services and products (e.g., enabling the development of products and services based upon geographic information services — see www.opengis.org).
Structurally, a consortium can be anything from a loose, unincorporated affiliation of companies, to an incorporated entity with offices, marketing, technical and administrative staff and a multi-million dollar budget. In between, the most common structure is as a joint venture, under a joint venture agreement. Often, this structure involves two classes of participants: “Promoters” and “Adopters”. The former are full members and co-owners of any jointly developed technology. As such, they have sole control over any standards or specifications developed. The latter can receive license rights from any Promoter to the specifications developed by the Promoters in order to create products or provide services based on the specifications, but have no control over the specifications themselves.
For a variety of reasons, it is our opinion that this joint venture structure is an undesirable legal form. These reasons include the possibility of joint liability for some members as a result of the acts of other participants, lack of a legal entity to sign third party agreements, pass through taxability of revenues not expended within a given calendar year, and the need for a complex joint venture agreement which every member needs to subject to legal review. The pervasiveness of this model arises from its common (and more appropriate use) as a vehicle for commercial joint ventures created for the exclusive use of a small number of “by invitation only” participants. For an extensive discussion on the formation of consortia, see http://www.consortiuminfo.org/forming/
III – The Future of Consortia
Today, consortia are firmly established as a means to achieve an increasingly necessary end. Yet the landscape upon which they play remains dynamic. With the explosion of Internet usage in the mid-1990s, the pace of formation of consortia markedly decreased, as the rate of innovation and change outpaced the ability of even consortium-based efforts to achieve consensus before the goal of consensus had become obsolete.4
During this period of rapid change, standardization often occurred through a combination of brute market forces (e.g., the victory of Microsoft Explorer over Netscape’s Navigator browser) and the grass-roots efforts of a global network of individual engineers in setting up the raw infrastructure of the Internet (e.g., through the Internet Engineering Task Force).
After the Internet and the World Wide Web had taken firm hold, however, the stage was set for an even broader resurgence of standard setting, since now a means existed whereby anything could be connected to everything, and the commercial motivation to participate in that capability became extreme. Not surprisingly, a diverse array of consortia was created to address the telecommunications, software, wireless and other aspects of this new opportunity.
More recently, aggressive budget-cutting resulting from the technology recession that followed the bursting of the Internet bubble once again slowed the pace of consortium formation. During some months In 2001 and 2002, almost as many consortia were merged as formed.
As this essay is being written, a new dynamic is impacting the standards and consortium worlds, as the commercial potential of open source software in general, and the Linux operating system in particular, is becoming more apparent.5 While the goals of the open software movement are in some ways compatible with those of corporate standard setters, the process and the participants are far different. Early experiments in melding these two cultures and methodologies are already being tried.6
In the years that are yet to come, the consortium model will presumably continue to evolve, despite the current prevalence of a myopic focus on the here and now and a certain lack of introspection. Whether that evolution will be deliberate and productive, or reactive and erratic, remains to be seen. One goal of this site is to encourage those who are serious participants in the standards arena to become more aware of this process, and more proactive in guiding its evolution in productive paths. Why? Because standards are too important to be left to chance.
NOTE: If you participate in the standards development process or are a member of the management of a standard setting organization, please feel free to contact Andrew Updegrove if you have questions about this topic.
End Notes
1 Perhaps the most comprehensive and useful single volume work on consortia is Carl Cargill, Open Systems Standardization: A Business Approach, Saddle River, NJ: Prentice Hall PTR, 1997.
2 Fifteen years later, a number of consortia have created membership classes or value propositions that are suited to corporate end users. Individuals are still rarely accommodated in consortium structures.
3 Incredibly, the long-vanquished Betamax standard was not formally abandoned by Sony in Japan until 2002. The Sony-JVC video format wars, waged in the public eye, have achieved sufficiently mythic proportions to merit an entry at the “urban legends” website. See http://www.geocities.com/Athens/1401/betamax.html, which presents an informative and balanced review of the process.
4 To recount, second-hand, a quote ascribed to Carl Cargill, one of the most acute observers of consortia and standard setting, “During the early Internet days, the best you could do was to read the hoof prints in the dust and try to determine in which direction the herd had already gone by.”
5 See “What does Open Mean? (A Guide to Open Source and Open Standards)”
6 See the UnitedLinux Consortium, a cooperative research and development joint venture by means of which four vendors of business Linux operating system software are developing and commercializing a single version, while allowing other industry participants to give their input on desired features and other matters of mutual interest.