The library automation industry continues to evolve, and the pace is accelerating. The succession of business transitions and other events shaping the business environment greatly influences the technology products and services available to libraries. Amidst many different threads of activity, the trend is a concentration of resources in the support and development of a fewer products, each of which finds use in more libraries in ever broader global regions. An interesting set of industry dynamics can be seen across a range of business models and in both proprietary and open source developments. The majority of the large companies in the industry operate under the ownership of private equity firms. In the past year or so some of the transitions in this arena included the sale of Innovative Interfaces by its co-founder Jerry Kline to a pair of private equity companies; the subsequent acquisition of Polaris from a group of private investors; and recent the sale of VTLS from by its founder Dr. Vinod Chachra to Innovative. SirsiDynix, a portfolio company of Vista Equity Partners, recently purchased EOS International from its co-founder Scot Chatham. The ownership of Ex Libris changed from Leeds Equity Partners to Golden Gate Capital.
Ownership by one of the private equity firms usually means stability and business strategies focused on growth. These firms do not invest in businesses unless they are well established, profitable, and in markets that offer the potential to increase revenue and profit over time. Although the investment strategies of each private equity firm differ, they generally avoid risk and have moderate expectations for earnings. Venture capital firms, in contrast, invest in companies— often-startups—at an early phase of their business cycle, where the possibilities range from dramatic failure to meteoric success. Private equity gravitates toward safe bets, but ones with potential for improvement. The new owners can increase revenue through expanding into new markets, developing new products or services, reinvigorating existing products, marketing more aggressively, and acquiring related businesses. More disciplined leadership might increase profits through elimination of redundancy among consolidated businesses and shifting to more efficient models of software development and product support. Acquisition by a private equity firm marks the stronger companies in an industry, not the weaker ones.
Nonprofit OCLC has also played a part in consolidation. Primarily through its EMEA division, OCLC has acquired a variety of ILS technologies. Its most recent acquisition was the Dutch company HKA (Huijsmans en Kuijpers Automatisering). Earlier acquisitions included PICA, Fretwell-Downing, Sisis Informationssysteme, Amlib, and Bond.
As businesses consolidate in the industry, the products available to libraries will likewise narrow. The classic business strategy aims toward a single strategic flagship product that will eventually become its sole focus. In the library automation arena, such a strategy will usually be phased in over a relatively long period. Libraries do not tolerate major disruptions to their existing automation strategies and are much more amenable to shifting to new generation products on their own schedule and as they reach the point where they need new technologies to meet their operational requirements.
When a consolidated company is initially assembled, product strategy will usually play out in a series of phases. During the initial step, all of the products continue to see development, support, and even marketing as was seen before acquisition. In organizations that have acquired multiple products, the second phase usually involves the emergence of a preferred product that will be marketed to new customers, but support and some level of development will continue for the other products under the corporate umbrella. It is not until middle or later phase that concerted development is focused on a single flagship product, either one built anew or by enhancing one of the incumbents. Only upon completion of the new product and when it has reached some level of adoption in the market, can the company relent on the support and development of its other legacy products. If that new product is compelling, libraries are more likely to migrate voluntarily. Companies that have withdrawn development and support prematurely have been punished in the marketplace, seeing library customers flee to other alternatives. Several case studies in consolidation and product strategy can be seen in the last decade of the library technology industry:
- Sirsi Corporation and Dynix were originally consolidated under the ownership of CEA Capital partners. Vista Equity Partners acquired SirsiDynix shortly thereafter. Launching an aggressive product strategy, it abruptly positioned Symphony as the single flagship product at the expense of Horizon and the development project for Corinthian, a next generation system that was terminated. Following a challenging period where many customers fled to alternatives, SirsiDynix has since reinstated its commitment to Horizon. It focused its development on the new BLUEcloud Suite of products, whose new-generation interfaces and functionality operate with both Symphony and Horizon. The difficulties of its initial abrupt approach demonstrate the consequences of short-circuiting the phases of product transitions critical for this industry and have helped ensure that other consolidated businesses avoid disruptive product strategies.
- Ex Libris has followed a business strategy focused on research and development, allocating a higher percentage of resources to this area relative to competitors. The company had developed successive generations of its own Aleph ILS since the early 1980s. It took in Voyager from Endeavor Information Systems in 2006 through a consolidation by Francisco Partners, which had acquired both companies. Following the acquisition, support and development for both ILS products continued. An initial phase of development saw the creation of Primo as a discovery environment designed to operate with Aleph and Voyager, as well as any competing ILS product. The company's most ambitious development effort produced Alma, a system built from the ground up as a new-generation library services platform specifically designed for academic and national libraries and for consortia. This model of product development requires the most investment, but also imposes the least disruption on libraries that rely on its legacy products.
- OCLC has acquired a larger number of legacy ILS products than any other entity in the industry, yet its product transition strategy shows less clarity. The organization has invested in the development of WorldShare Management Services as its new-generation library services platform. It also continues to provide support for the well-established ILS products of its acquired companies. So far the adoption of WMS has been seen mostly in libraries in the United States migrating from legacy ILS products outside the OCLC fold. The only pocket of internal migrations is seen in Australia among a number of libraries running Amlib. It is yet to be seen to what extent the libraries using the other products acquired by OCLC will eventually opt for WMS.
- As Innovative Interfaces enters into the ranks of consolidated companies, it will be interesting to observe how its product strategies unfurl. Each of the companies involved is at some stage of developing new-generation products. Innovative itself has seen great success in rolling out Sierra as a major step in technology underpinnings relative to Millennium, with a more services-oriented architecture and exposing a set of APIs for more open access to its data and functionality. Polaris was in the early stages of developing LEAP to provide new Web-based interfaces and design elements for its Polaris ILS. VTLS has designed and developed Open Skies as a unified product suite that brought together the functionality of its Virtua ILS, VITAL digital asset management platform and Chamo Discovery. The initial messaging suggests that the company intends to focus on the development of a single platform that will leverage the development capacity of all three incumbent organizations.
Internal consolidation has happened within several of the industry giants, including a reorganization that brought together EBSCO Publishing and EBSCO Information Services. ProQuest has fully integrated Serials Solutions. Follett School Solutions has consolidated multiple library and school‑oriented businesses within Follett Corporation. These internal consolidations in very large companies result in more unified product and service offerings.
A very small number of open source library automation products have emerged as viable contenders among the proprietary offerings. Koha stands as the most widely used open source ILS and has been adopted by many thousands of libraries around the world. A growing set of firms have emerged providing support services for Koha. Those devoting resources to migration, hosting, and support services far outpace those involved in its development. Evergreen has established a significant presence among public library consortia, with Equinox Software as the dominant service provider. Kuali OLE is being developed through a major project partially funded by the Andrew W. Mellon Foundation, under the governance of the Kuali Foundation, and the efforts of a group of leading academic libraries. HTC Global Services has been contracted to perform much of the software engineering and product management for the project. Even though the business models differ, I would anticipate in the open source arena similar long-term patterns of ever larger numbers of libraries converge on a very limited slate of products. This scenario may prove to be beneficial as the development resources available are channeled on a small number of products rather than diffused among many. The challenge in the open source community involves coordinating the efforts of a globally distributed set of developers relative to those developed inside large corporations able to more closely manage software development processes. Despite differing product strategies, the long term outlook for the industry clearly involves fewer products, offered by consolidated companies of ever-larger size to libraries in many global regions. I would anticipate that in the course of the next decade we will see these product strategies play out to realize the goal of a single flagship product for each of the major corporate entities and the eventual demise of their currently second- tier or legacy products.
In this current phase of the industry, a number of medium-sized and small companies remain outside of the fray of mergers and acquisitions and consolidated companies. While some may be able to survive as independent companies serving a specific niche within the industry, I would anticipate that additional companies will opt to be acquired over the next decade. Smaller companies with limited development capacity are often unable to develop new-generation products as their current product lines become increasingly dated. Company founders or executives may seek exit strategies as they approach retirement. Those of limited size generally see at best modest growth in revenues over the course of the years. Factors such as these will fuel the ongoing consolidation of the industry.
This scenario of a consolidated industry will benefit libraries only if the technologies created through these large companies with immense development capacity prove to be more robust and capable than previous generations of library automation products that may not have lived up to expectations. If these new-generation products do not ultimately provide capabilities more in tune with library realities and especially with the expectations of library users, then the library market will respond accordingly. Should products prove to be ineffective in functionality and not a good value in price, I would anticipate a further movement toward open-source alternatives or even the emergence of new start-ups with the potential to disrupt the established industry giants. So while I see major trends underway towards ever larger organizations capable of providing technologies more powerful than have been available to libraries in the past, I don't see that trajectory as inevitable. The entities that develop technologies for libraries cannot relent or falter, but will succeed only to the extent that they provide compelling benefits.