Thursday, October 8, 2015

Another perspective on ProQuest buying the Ex Libris Group.

The dust has settled a bit and I’ve had the opportunity to talk to senior executives at both ProQuest and Ex Libris Group about the recent announcement that Ex Libris has been acquired by ProQuest.  Now it’s time for us to sit back and start analyzing what has just happened to a couple of the major suppliers of library automation, and by any measure, this was a BIG event.  

I wrote a series of posts about Library Service Platforms several years back (2012). They apparently met a real need in the profession, as those posts have been viewed over 40,000 times as of today and since the time they were posted. The first post in that series is still very valid, but much of what I’ve said about the companies in subsequent posts has since changed. Of the companies I wrote about then, VTLS was sold to Innovative, Kuali/OLE has gone through massive changes in structure and backing (it’s open source, but not totally, at least not by the classical definition), WorldShare by OCLC has matured a great deal, but the organization behind it is still convulsing with changes under the new OCLC leadership and finally, there is Sierra by Innovative which now seems to be in a very questionable spot.  

In fact, when it comes to Innovative I’m predicting that we’ll see ownership changes of that company as soon as they can be arranged.  You simply don’t force out the CEO on a day’s notice, install a new CEO from the equity owner company and likely do so with any plan other than finding out how fast you can sell the company.  The problem for Innovative (and I told this to previous CEO shortly after he arrived at the company) is that they’ve stayed with the old architecture way too long.  Now whoever buys the company is going to be facing the massive task of totally rewriting and/or developing a new platform that is a true multi-tenant, cloud based architecture, i.e. a truly competitive Library Service Platform, (see this post for a definition).  That's a sizeable task that is slow, costly and has a target market of shrinking size.  My guess is the previous CEO was probably pushing to do that investment and when the equity owners looked at what that was going to cost and the return-on-investment, they decided to pursue another path with their money.  Parts of that sound familiar?  Yes, that would serve as an excellent segue back to the ProQuest / Ex Libris announcement.

Now there have already been a couple of excellent posts published that analyze this acquisition announcement in some detail and do so quite well and are generally very fair.  If you haven’t read the post by Marshall Breeding and the post by Roger Schonfeld, I’d certainly recommend you do so.  

Trying not to repeat what Marshall and Roger have said, here’s where I see important differences from what they’ve said in their posts:

  1. ILS’s vs LSP’s.  Integrated Library Systems (ILS’s), even when hosted in the cloud, and Library Service Platforms (LSP’s) are radically different architectures with huge implications for the future of library technology and thus libraries.  I detailed all this in a post, I’ve already mentioned a couple of times, but it’s worth saying again, multi-tenant software is the future.  Simply hosting multiple virtual instances of an ILS is not an LSP and will not get you where you need to go in another 3-10 years.  It simply won’t. If you go down that path you’re going to eventually get left behind -- way behind.  If you choose that path, understand it’s only good for the short term. (See my post on the “coming divide” for a full explanation).  I would also take serious exception with Schonfeld’s belief that libraries may not need this kind of technology in the future because they’re resources are becoming increasingly digital.  While the latter is true, it doesn’t make the former true.  Most libraries still have massive print collections and as a recent article in the NY Times described, we’re seeing publishers printing more books each year as the e-book business has seemingly hit a plateau, at least for now.  Library management systems will be around for a long time to come.
  2. Content-neutrality.  Let’s not lose sight of the fact that we’ve lost another “content-neutral” discovery vendor as a result of this acquisition.  That’s not a good thing for libraries, although most librarians ignore this reality.  In the end, I believe they’ll regret doing so. We’ve had yet another check-and-balance removed from our supply chain. This post explains why content neutrality is so important and why that loss carries a potentially high price for libraries.  So, in this regard, this is not good news.  OCLC with their WorldCat offering remain our only content-neutral discovery solution at this point outside of open source solutions (which don't’ have an aggregated metadata database like Primo Central, which provides important functionality for libraries).
  3. Equity Ownership.  Ex Libris is no longer held by equity investors. It’s no secret that I’m not a fan of equity ownership of major suppliers to libraries. I understand how equity ownership works and I’ve detailed my related concerns previously in this post. Yes, Ex Libris did well under equity ownership for the very reasons I outlined in my post.  But the fact remains, they could have done even better and invested even more in their products and services had they not been sending so much of their profit to the equity owners.  I’m hoping with that aspect of the ownership now removed from the equation, we’ll see some accelerated product development is some much needed areas, like the discovery system, course management system integration tools, and the some other needed product areas.
  4. Intota’s Future.  Despite what company executives will tell you, Intota has been languishing and a full product has never been released into the marketplace.  That reality has come at a steep price for ProQuest, as other companies now own large portions of the targeted high-end LSP market.  Of course one of those products was Alma by Ex Libris, now part of the ProQuest holdings.  So there is plenty of speculation that Alma will become the premier offering and Intota will eventually fade away entirely or the functionality that exists will be merged with Alma.  Certainly that’s possible although company executives deny that and insist the choices will remain.  However, I think there might well be another outcome.   Alma has long been aimed primarily for the academic, corporate and national library markets.  Which leaves public libraries and smaller academics thirsty for some competition in LSP offerings tailored more to their specific needs.  They really only have OCLC’s WorldShare at this point and I can easily see ProQuest re-aiming Intota towards those markets.  However, if I was betting, over the long-term, I'd go with Intota slowly merging with Alma and there being only one platform left, although possibly with two names to accent the different markets being served.
  5. Primo vs. Summon Discovery Systems.  As Marshall pointed out in his post, these products both have large and very devoted installed bases.  Neither product will disappear anytime soon, although pure business logic will dictate that over time, they will slowly meld together from the core outward until they are one.  But this will take many, many years and I’d agree with Roger Schonfeld, the future of discovery systems in general is more questionable than the future of these two product offerings in particular.
  6. Will Ex Libris remain a separate company?  Yes, for now, I think that’s a safe bet.  But it’s important to look at ProQuest acquisition history here and to note that over time, other companies that have been purchased have been slowly absorbed (remember Serials Solutions?) with only the product names remaining as vestiges of those firms.  But for now, yes, it makes total sense for these organizations to largely remain separate.  At least until company cultures are merged, operations are merged and everything is stabilized.
  7. What’s EBSCO’s next move?  Good question.  Clearly both Ebsco and ProQuest are trying to assemble end-to-end technology solutions for libraries.  Ebsco needs an LSP in their offerings.  They might be working on one behind the scenes.  Many people are speculating that buying Innovative or Sirsi/Dynix could be a step in that direction.  It could be, but as I outlined above, it’s a very problematic one because neither firm’s products are multi-tenant architecture needed for a real Library Service Platform.  So, a total rewrite would be required for them to turn that offering into the needed solution. Ebsco has a real challenge in front of them.  

What’s the bottom line here? I personally have a lot of respect for both of these companies and their teams. From a business point of view, it is a very good move.  Library automation is a tough and challenging field.  These companies have very smart people at the helm. Right now, they have all the right people saying all the right things.  But that’s normal at this stage of an acquisition.  What will matter is what actually happens in the weeks and months ahead.  So stay tuned.  Walking the talk is much harder to do.