The Importance of Aggregation

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Information aggregators have been around for centuries. My travel agent is a simple example, but there are many others. An independent insurance broker gathers information from many different insurance companies to find the best policy for his customers. A mortgage broker does the same for home loans. Just about any person whose job description includes the word "broker" is an information aggregator.

Like my travel agent, these aggregators can consider only a small number of alternatives at a time, simply because humans are relatively slow at collecting information. The advent of the Web and the possibility of Web services introduce innovative ways of aggregating information that no human could ever have managed.

One example of this innovative aggregation is reverse auctions. In this model, a buyer puts up a flag to indicate that he wants to buy a certain item. Vendors who can provide that item bid against each other until the price is the lowest possible. For large-ticket items, such as municipal salt contracts, this model is already up and running. However, if I wanted to buy a 10-pound box of nails, the cost of conducting a reverse auction would be much more than what I would save, as long as humans are involved.

If I could use computers to automate the process, however, the cost of the auction would be fractions of a penny. If I save a few cents on every 10-pound box of nails I buy, my total savings could be considerable. So how do we get the cost of bidding so low? By using open standards in an intelligent way.