Today I would like to kick-off on a slightly scholarly note by introducing the concept of transaction costs. The theory was first developed by R.H. Coase in his 1937 paper The Nature of the Firm and further elaborated by O.E. Williamson in The Economics of Organization: The Transaction Cost Approach. Both ended up winning the Nobel Prize in Economics for their contributions in analysing and describing the cost of participating in a market. I would like to apply this concept to using software and discuss some of the transaction costs that may prevent a person from using an IT system. When defining the concept, the economists were focussed on analysing transaction costs such as taxes or price controls. If you consider that economic behaviour is, at its core, the constant decision making of the actors in an economic system guided by the scarcity of certain resources (e.g. food, money, time, attention) and the corresponding incentives of controlling a chunk of said resources (e.g. financial gain, increase in autonomy, less pain), this concept can easily be applied to users of software. Anything that hinders or inconveniences the use of an IT service shall be considered a transaction cost for this exercise.
Authentication and Login
With the proliferation of web-based applications, the first transaction costs arise from poorly crafted authentication mechanisms. Ease of use (easy to remember password, low transaction costs) faces off against strong security (complex password, multi factor authentication, higher transaction cost). Smart solutions such as extending single sign-on authentication or federation to IT services is currently the common way of keeping transaction costs low, while maintaining sufficient security.
While most software provides multilingual interfaces, it is the actual content that may still raise transaction costs for non-native speakers. Multilingual content must cover as much scope of the application as possible without impacting the consuming or creating of information (e.g. through poor translations, high maintenance cost for keeping language versions synchronised, etc.). Short of highly functioning automated translation tools, standardised and encapsulated content blocks are the key enablers for multilingual content.
Usability and Design
Unfortunately, nearly all enterprise software I have come across suffers from “featuritis”, growing from a willingness of most software companies to add almost any feature to match requirements in a competitive bidding process. As these features may not organically fit into the product, adding the feature impacts usability. Poor design and overloaded interfaces probably account for the highest transaction costs in continuous usage.
Information and Context
In my view, social media platforms are leading the way in displaying large quantities of information in an easily consumable format. Business platforms, on the other hand, are often extremely poor at this. One aspect especially important in business solutions, is easily providing the “so what” through information design. Essentially, this requires a user interface to provide sufficient context around the displayed information to enable the user to make an informed decision based on the displayed data. A pretty good indication that this is not working in a solution and creating transaction costs, is if users are exporting data to spreadsheets in order to create their dashboards.
Just a few years ago, users would have been fine accessing business information from their workstation. Today, that does not cut it. Information needs to be readily consumable on any device. Waiting to access information on a specific device has become an unacceptably high transaction cost, especially for younger users.
At Alyne, we know that our solution must minimise transaction costs for users if we want to be successful in bringing topics like IT governance, IT security or risk management down from the proverbial “Ivory Tower” and grow our users to the next maturity levels. We are putting a lot of thought into how to make this happen and can’t wait to see our users respond to Alyne. Stay tuned.