1. Finding business models for identity products is REALLY hard.
2. If you ever think of getting an iName, this stuff is pretty confusing.

If you’ve read my previous posts, you should have a basic understanding of XRI/XDI (the technology behind iNames) and know that it is now an “open” standard. But what does that mean? A few things:

1. The XRI/XDI specifications are managed by their respective Oasis (the XML standards body) technical committees.
2. The patents that govern the technology have been licensed exclusively to XDI.org, a non-profit public trust organization.
3. Anyone can implement the technologies for any purpose without the prior consent of XDI.org.

So how does Cordance, the company that bequeathed the patents to XDI.org ever hope to make any money (which if you refer to the companies history has been a pressing issue for some time)? Well as part of the bargain for handing over the rights to the XRI/XDI technologies, Cordant was granted the right of first refusal to be the GSP (Global Service Provider) for any Global Services XDI.org might want to offer for the first 15 years after the Global Registry Service went live (2005). Let me attempt to unpack this.

As I explained before, XRI and XDI are cool technologies because they allow extensible, persistent, permissioned, granular connections between two data elements (like people). Now imagine if the unique identifiers for each data element could be resolved using a web browser by referring to a global registrar (like domain names) for each of these data elements. Essentially using simple syntax, you could define what elements about you any website in the world had access to. Cordance, along with Neustar (a giant registrar infrastructure company that runs among other things the .biz domain) has built this global registry.

Since Cordance is the defacto GSP for all XDI.org services, they are essentially the wholesale registrar (think Network Solutions) of high level XRIs (think names and companies). Cordance also authorizes iBrokers (think GoDaddy) to retail these high level XRIs. If you’ve followed the history of Network Solutions, you will understand this can be a pretty valuable business. VERY valuable in fact, IF web browsers spoke XRI/XDI by default (which they don’t).

If they did, however, not only would Drummond‘s patience with the technology finally pay off, it would hugely simplify building a powerful identity layer into the internet. More broadly, it would make it possible to build persistent, granular “trust contracts” that would make it MUCH easier for all of us (people and companies) to control what information we would like to share with each other.

As to whether this will ever happen is very much in the air. I hope, however, that by explaining how difficult it has been for Cordance to free the technology and yet still make enough money to provide a meaningful service, we can understand how difficult the “business model” problem for identity companies is going to be to crack. In my next (and final) post on iNames, I’ll write about the mysterious Ootao and its founder Andy Dale.

Let’s jump into the wayback machine to 1995. Netscape is still crashing your computer every time you run it because it’s a memory hog. Drummond Reed‘s teamed up with Peter Heymann (ex-Microsoft, ex-Warton MBA guy–nice!) to build a company called Intermind (the first company to own the XRI/XDI patents). They’ve been working on this “Communication Objects” technology that’s kind of like RSS, and by 1997 they’ve raised around $17 million and have a team of 70 people. One morning Drummond wakes-up and Microsoft has dropped an open standard that competes directly with his proprietary one and his business evaporates. What do you do?

Well, you first probably try to shop around your intellectual property (which he did, to Netscape in particular). Assuming you don’t have any takers (which he didn’t), you probably learn from your mistake and make sure the next time you try to implement a standard, you make it an open one (which is what Drummond did). He joined the P3P (privacy platform preferences) technical committee and let Tim Berners Lee know that even though Intermind held patents that might cover what they’re trying to implement, he wanted to play open this time.

Now let’s fast forward a few months and note that Microsoft is playing a VERY heavy role in the P3P TC. Let’s also note that Netscape has noticed and is (belatedly) trying to get involved. If you’re Netscape and you see Intermind on the TC, you probably think, “Hey, isn’t that the company that was trying sell us the patents covering all this stuff”. As Netscape you probably bring this to the TC’s attention too, which they did. Tim Berners Lee asks Intermind to make a declaration of their intent about these patents.

Okay, so remember a few posts ago how Drummond’s like the drummer, who’s the only consistent member in a band that keeps changing names and members? Well Intermind has a brand new CEO from the telco industry (who shall remain unnamed because he’s about to make a big mistake). Drummond, remembering back to that painful morning when he got out-opened by Microsoft, thinks the obvious thing to do is to declare that Intermind intends to release the patents to an open standards body. Telco CEO says he’s got a better plan and announces that Intermind will charge royalties. Now wakeup to WSJ articles claiming you’re holding the internet hostage, lose your place at the P3P table, and remember really hard that next time you’re introducing a standard, it better be open.

Fast forward a few more years–new CEO, $30 million more, IP in a public trust (XNS.org), specification being managed by OASIS (the XML standards body). So far so good, but how do make money? Well, new CEO wants to build enterprise software based on the now open standards. Good idea. CEO doesn’t know how to sell enterprise software (bad), Dotcom crash (very bad), 9/11 (tragic). No more company–join the crowd.

What do you do? Well, remember, you’re Drummond Reed and you love this technology, so you get new investors, new CEO, and make one(?!!) more go of it. That company is Cordance. In my next post I’ll explain the relationships between XDI.org (formerly XNS.org, but same public trust of IP), Cordance (iNames Global Service Provider), Neustar (iNames Registrar Infrastructure Provider), and iBrokers (iName retailers).