Thursday, March 15, 2012

Libraries handcuffed

It's a very disturbing and alarming trend.  There seem to be a number of company announcements lately where librarians are committing to very long term (7-10 year) agreements with their library software automation vendors.  This is, to be quite honest, a mistake.  

Everyone understands libraries are under financial stress. Some automation vendors, in response to that situation, have occasionally forgone their annual maintenance increases. Others have not and libraries have struggled to find money to cover the increased costs.  So, it is not surprising that librarians are receptive to a proposal from vendors that offers them a "no increase" or guaranteed cap in return for signing a very long time agreement. It controls costs and locks up budgetary requirements far into the future?  It sounds like a good idea, right?   

Not really and here’s why:  

The typical library software automation supplier sees anywhere from 25-50% of their total annual revenues coming from those maintenance contracts, and in the case of vendors who aren’t selling a lot of their existing products/services or developing new products to create new sales, this percentage can be even higher.   Obviously, this means those maintenance contracts are a major source of revenue not only for day-to-day operations of the vendor, but of equal importance, in determining the overall valuation of the company.  Valuation is extremely important for a company that is owned by equity investors as these investors are operating within a window of time and they have a exit plan, at which point that valuation will determine, in part, how much money they’ll make in selling the company.  So it is to their distinct advantage to be able to say to the prospective purchasers of the company, that “x” amount of their revenue is recurring and is virtually guaranteed for “x” years into the future.  It simply makes the company worth more, and by quite a lot, if a substantial portion of that recurring revenue is in this classification.   

Plus, as you might expect, all the vendor is obligated to do here is to supply the maintenance services on the product specified.   But here is a key point - most vendors use some portion of that maintenance revenue to fund new releases of the product or in developing totally new next-generation products, which might get offered to the existing customers at a discount.  However, in most scenarios, the vendor is under no obligation to do that.  So, if short-term equity investors own the company, this is money that can be drawn straight down the financials to the profit line, simply by not performing these activities, by stretching out the time interval between deliveries of new versions of the software or by reducing the staff that does this kind of work in the company.  Here is where the difference between working with ownership that has a long-term view and those that have a short-term view comes into play.    Obviously, a vendor who does this type of profit extraction for too long will end up with customers who are displeased and will want to begin shopping around for alternatives.   So, they’ll lose customers, right?  Yes.  Except if the librarians have signed a ten-year agreement, they can’t go anywhere.  They’re handcuffed and for a very long time.  Yet, if the company owners, as happens all too often with equity ownership, have a five year window for their exit, that long term issue isn’t their problem, it belongs to the next owner, so quite honestly, they’re not terribly concerned about it.  They’ve got a plan to make their money and then head for the door, which is what matters to them.  Ownership that has a long-term view, understands this kind of profit extraction will come at a very high cost and thus will not pursue this path.

What makes the short-term scenario all the more disturbing for librarianship is that clearly we’re in a period of massive change when it comes to library management software.  As Marshall Breeding said in his Tech Trends at Midwinter ALA 2012: “Especially for academic libraries, the current models of automation no longer meet current and future needs.”   

When we look at the field, we see two suppliers, OCLC and Ex Libris that are offering true next generation, cloud based, multi-tenant software solutions (respectively WorldShare and Alma).  These products offer the potential to radically restructure the future of library automation and consequently librarianship.  Serials Solutions InTota might well join this class, but it is simply too early to say that for sure.   

Most other suppliers are simply offering hosted (SaaS) versions or enhanced hosted versions of their long-standing products (Innovative’s Sierra and SirsiDynix’s Symphony appear to be in this class) and thus, it is hard to see any alternative but to classify them as anything other than “current models” albeit with the advantages offered by the hosting of systems (but note this is NOT the same as a true cloud-computing, multi-tenant software solution!).    I’m sure some will want to argue this point, but follow my logic here and draw your own conclusions. 

The new products have been built from the ground up and are giving serious attention to the new streamlined workflows that are now possible because they can combine processes that were previously done in silos (for example print & electronic journals, electronic resource management, acquisitions, etc.).  For libraries, this means you’ll be able to run your backend operations far more efficiently and take people previously assigned to these tasks and assign them to new value-add services where the libraries can provide new value for their members (for example, analytic driven services, data set management, eScience and mobile services are just a few that come to mind).   

Products that haven’t done this complete rewrite of their code are carrying much of the logic of  their previous generation software over into their “new” products.  You can tell this is the case when you see a product description contains phrases like this: "maintains vendor's rich history of functionality and workflow integration" or the system “will provide all the benefits of proven, stable business logic", or if says it  “blends the best features of product X and product Y”, two products owned by the vendor but that are now being replaced by the “new” product.   Ask yourself this: If it's really new, how can it be proven?!?   Only if they're reusing existing code, can a vendor say that with any integrity.

The previous generation of ILS products have literally hundreds, if not thousands, of people-years of development in them and yes, rich functionality has been the result. But again, the only way that could be maintained this soon after announcement of a "new" product is if you're using the code from the old product.   It simply and logically is not possible to make that statement any other way.  

This has further implications for the library in that if the “new” product is using the same workflows used in previous products, then the library will have to staff at the levels of the past in order to support the old functionality.   It is yet another way that librarians are handcuffing their libraries when they tie on to this vision of the future of library management solutions.  Really streamlined workflows that reflect today's library environment can't be accommodated by old software logic.   It requires new software to be written (why else would all these other organizations be making the massive investment to do this?!)

Here is the bottom line.  These next generation products are largely going to place libraries on two widely divergent pathways.  Those libraries that understand and use the real power of the next generation of library management software will be capable of focusing their limited resources on offering superior librarianship on top of all types of knowledge and information resources.   Those libraries that have been handcuffed to software solutions and vendors that have “taken-the-money-and-run” are going to be left madly scrambling to catch up from a pathway that lead them far away. 

If you’re a librarian leading a library, think twice before signing long-term agreements for any of today’s offerings, be it the new or old. Your library needs to stay flexible, agile and be able to move quickly to address an ever-increasing rate of change in our environment.   

Please, don’t handcuff your library.

[Notes:  Photos used in this post are copyrighted by iStockPhoto, are used under license and can't be further re-used or distributed without your purchasing them from]