Thursday, May 30, 2013

Library Service Platforms and the Issue of Costs

As I speak and talk with librarians around the world concerning the new Library Service Platforms, one place I find that there is a large disconnect in the marketplace is when it comes to the issue of pricing/costs.  

What’s happening is that we have two very different perceptions of the pricing models coming to the negotiating table. 

Library Service Platform (LSP) providers are using a pricing model that is based on the idea that you no longer have to run the computer and thus you don’t need to house it, power it, maintain service agreements on it or even necessarily retain the staff to run it.  They look at the streamlined workflows that are possible using these new systems and again, see efficiency in resource utilization that they feel has value for which they can charge.  As a result, they think you can, and should, reallocate all those costs to the cost you’re willing to pay for the new Library Service Platform.   Furthermore, because these new platforms are the latest in technology, organizations developing them do what any technology company does, particularly when the competition is scarce, they’re charging premium prices for cutting/bleeding edge technology.   Those librarians wanting to help shape these products are frequently willing to pay these higher prices in order to be on the front edge and to have that opportunity to shape the products.   LSP providers extract profit from these early adopters to help speed recovery of their high development costs in putting these products on the market.

Librarians, on the other hand, come to the negotiating table thinking they’ll finally be able to use those previously assigned computer systems to support other projects they’ve delayed doing.   Being chronically understaffed and underfunded, they see it as an opportunity to reassign staff to develop new services they know are long overdue in being offered and believe their providers understand they can’t afford to pay more for the technology.  So they don’t see the savings the LSP providers think they should see and given the associated LSP pricing models are in fact, seeing is an overall increase in direct costs they’ll have to pay to move to this new technology.   

Both sides are right and both sides are wrong in their assumptions and that’s why we have a problem.

What is lacking in this analysis by librarians is that they will be able to offer new (and really quite exciting) services and if they’re smart library leaders, they’ll select and design those new services by carefully assessing those that will create new value and differentiation for their membership/users.   When they do that, ultimately, they’ll be positioned to reverse some of the trends we’ve seen for years, such as the steady decline in the percentage of the university budget allocated to the library.  The librarians, based on these new services, will then able to request and justify additional new revenue that they are in no position to realize today, based on their current technology operations.  

Of course, librarians also have to realize that LSP providers are business operations and owe their shareholders and/or collaborative members the duty of trying to realize the best return on their investments.  So, the pricing models are not as unfair as librarians tend to think.

LSP providers, on the other hand, need to pay attention to the situation of libraries and realize that multi-year payment plans should afford libraries the opportunity to move to these new systems, realize the potential of new services based on these platforms and, at the same time, have the opportunity to work with their funding authorities to justify higher financial resource allocation and pay higher costs later in the agreement life.  Keeping system costs no greater than the library is currently spending, during the initial two years of the agreement, would provide libraries this opportunity.    

The other alternative is what we’re seeing libraries do now, which is to react in shock at the pricing of the new systems and to push out their plans to adopt these new LSP’s.  This isn’t good for any of the involved parties because libraries need to move to these new platforms so they can offer the new services they make possible and the vendors need the revenue these sales generate in order to keep developing these platforms at a fast pace.  

What we really need here is for Librarians and LSP providers to spend some time talking and listening to each other so they can find workable solutions for all involved.  Time is of the essence here.  Perhaps a meeting could be assembled at ALA, the Charleston Conference or elsewhere to engage in such a conversation?