In a move that further consolidates the library technology industry, Ex Libris has entered into a definitive agreement to acquire Innovative Interfaces, Inc. from its private equity investors. Since December 2015, Ex Libris has been owned by ProQuest. In addition to its role as a major content provider to libraries, ProQuest is now responsible for a growing portfolio of library technology products, including major systems for resource management, content discovery, materials acquisition, reading list integration, and research services. While ProQuest faces major competition for each of its product categories, this move substantially strengthens its position in the sector and broadens its scope to include public libraries.
Ex Libris is acquiring Innovative from its private equity investors HCCG (formerly Huntsman Gay Global Capital) and JMI Equity. These firms made an initial investment to gain majority position in the company in March 2012 and acquired the remaining shares of the company from co-founder Jerry Kline in February 2013, giving it full ownership. Following close of this transaction, Innovative Interfaces will be fully owned by ProQuest. Innovative was founded in 1978 by Jerry Kline and Steve Silberstein. The eight-year term of the incumbent ownership arrangement falls on the outer edge of typical private equity investment horizons, so the sale is not unexpected. With this acquisition complete, Innovative can move past shorter term strategies focused on positioning the company for sale and on to expanding its longer-term prospects within a large and stable corporate umbrella.
This event is consistent with anticipated business transitions mentioned in the 2019 Library Systems Report:
“SirsiDynix was acquired by ICV Partners in December 2014. JMI Equity and Huntsman Gay Global Capital gained control of Innovative in 2012. It would be surprising for these arrangements to remain in place much longer, though the time frames are uncertain. Possible next moves might include lateral transitions to new investors and strategic acquisitions by top-level companies in the broader library and publishing sectors. Consolidation involving any of the small or midsized companies in the industry would not be outside the range of possibilities. While predictions are speculative, inactivity would nonetheless be surprising.” (Breeding, Marshall. “Library Systems Report” American Libraries, May 1, 2019)
The acquisition of Innovative comes on the heels of Atairos' new major investment in ProQuest. With the infusion of new capital, it is also not surprising to see the company expand through new acquisitions and product developments.
Ex Libris is a wholly owned business of ProQuest, which is in turn owned by Cambridge Information Group (CIG) and Atairos. CIG, owned by the family of Robert N. Snyder, holds the majority ownership of ProQuest with Andrew Snyder serving as the chair of its board of directors.
As a company with deep involvement with libraries, ProQuest brings significant perspective and experience compared to capital investment companies from outside the industry. A lateral ownership change to another private equity firm likely would have only solidified the constraints Innovative faced in product innovation and in its ability to expand market share.
Details of the Acquisition
The transaction is expected to close in early 2020. Until that time, the two companies will continue to operate independently. Financial details of the acquisition were not disclosed publicly.
Following the acquisition, Innovative will become a wholly owned business unit of Ex Libris and will report through its President, Bar Veinstein. No public announcements have been made regarding changes in Innovative's current executive management.
The board of directors, currently constituted by representatives of the outgoing investment organizations, will be displaced by the ProQuest board.
ProQuest executives stress that this move will not disrupt the libraries using Innovative's products, which will continue to see the same levels of support and development as they had prior to the acquisition. Ex Libris has a reliable record with continuing products gained via business acquisitions. Voyager, for example, was acquired by Ex Libris in 2006 and has seen ongoing development and support ever since. Major institutions, including the Library of Congress, continue to use Voyager.
No changes can be made in advance of the closing. Pro- Quest executives Matti Shem Tov, Chief Executive Officer, and Oren Beit-Arie, Chief Strategy Officer, emphasize that strategies for current and future products will emerge over time in consultation with Innovative customers.
Innovative's Position in the Industry
Innovative ranks as one of the major library technology companies in the industry, similar in size and impact to SirsiDynix, though smaller than top-level companies such as ProQuest, EBSCO, Follett, and Gale. Innovative is about half the size of OCLC in terms of annual revenue. Innovative's products have been deployed in all types of libraries, especially academic, public, law, and medical libraries. The company is active in almost all global regions, though most of its revenue comes from US libraries.
The company has a broad suite of products, which include the following:
- Sierra, the latest iteration of the ILS internally developed by Innovative (This product carries forward functionality from antecedent systems including INNOPAC and Millennium, with significantly enhanced capabilities and a new services layer enabling integration into modern technology environments.)
- Millennium, a predecessor of Sierra, which continues to be used by libraries
- Polaris, an ILS designed specifically for public libraries that was acquired by Innovative (This product was developed by Polaris Library Systems, which marketed it primarily in the United States. Since its acquisition by Innovative, Polaris sales have declined; however, it continues as a major competitor in the US public library arena. Polaris is based on Microsoft technologies, including Windows Server and SQL Server. The product follows a client/server architecture, with new LEAP clients enabling increasing areas of functionality through a web-based interface.)
- Virtua, an ILS gained through the acquisition of VTLS (Innovative no longer actively develops or markets Virtua, and its implementations are rapidly diminishing. Two major municipal libraries, Queens Borough Public Library and Hong Kong Public Library implemented Virtua in 2008. Both have entered review and procurement processes, initiated well in advance of this announcement.)
- Inspire Discovery, which is the initial product developed on Innovative's next generation technology platform (Although several libraries have committed as development partners or early implementors, no libraries are known to have implemented Inspire Discovery as a production service. An important conceptual design feature of Inspire Discovery involves its concept engine, which delivers search results based on additional factors beyond the basic query text to improve relevancy. Innovative had not previously developed an article-level index of its own but has taken initial steps in this product via harvesting metadata from CrossRef.)
- Encore, a discovery interface, which has been widely implemented by many libraries using Sierra (Encore provides modern features, such as faceted navigation and relevancy ranked results, and it may be used to supplement or replace the WebPAC Pro online catalog delivered with Sierra.)
- Encore Duet, which expands the scope of search to also include articles, book chapters, and other content via the EBSCO Discovery Service index (Although this product has been widely implemented in many academic libraries using Sierra, it is no longer offered to new customers since the launch of Inspire Discovery.)
- INN-Reach, a resource sharing and interlibrary loan platform originally developed for OhioLink, which has been implemented in several other major consortia
- Innovative's SkyRiver bibliographic service, which was launched as a competitor to OCLC's cataloging service (Although the momentum of the service has not seen a high level of adoption, it's large-scale bibliographic database and high-quality cataloging services, including BIBCO, NACO and CONSER, can be seen as important assets for Ex Libris relative to the Community Zone resources provided on its Alma platform.)
|Category||ProQuest – Ex Libris||Innovative|
|Integrated Library systems||Aleph
|Library Services Platforms||Alma||Inspire (planned / in development)|
Inspire Discovery (in development)
|Link Resolvers||Alma Link Resolver
|Digital Asset Management||Alma Digital
|Bibliographic services||Alma Community Zone
Alma Resource Sharing (in development)
|Reading List Management||Leganto|
Innovative's position in the academic market has been slipping in recent years, due primarily to the availability of Alma and WorldShare, both developed specifically for academic and research libraries. Although Sierra delivers sophisticated capabilities for managing print collections, it is perceived as less able to manage electronic resources, which represent the largest component of academic library collection expenditures. Innovative had not developed its own e-resource knowledge base or article-level discovery index. Innovative's position with academic libraries was strengthened through a partnership with EBSCO Information Services for access to its discovery index for Encore Duet as well as other electronic resource management tools. The loss of the partnership with EBSCO can now easily be replaced via components available within the Ex Libris product suite, especially the Primo Central Index as well as its knowledge base and link resolver technologies.
The company's prospects were initially bolstered in the academic library sector when it was awarded a major contract to provide Sierra and Encore for Florida Academic Library Services Cooperative (FALSC), which represents all the public university and community colleges in Florida. However, when Innovative was not able to meet the contracted requirements, both parties withdrew from the agreement. FALSC has since entered into negotiations with another vendor, as yet undisclosed. As academic libraries increasingly move toward shared technical infrastructure in large-scale cooperative implementations, the loss of this deal weakened Innovative's ability to compete for future large-scale projects, an area where Ex Libris has become well established.
Although Innovative's customer base spans all types of libraries, its position with public libraries makes its acquisition by Ex Libris especially notable. Although in earlier phases of its business history, Innovative's products were used by more academic, law, and medical libraries than public libraries. In recent years, its public library customers have become the majority (see table 1). Given that nearly 64 percent of libraries using Sierra and almost all those using Polaris are public libraries, this acquisition gives Ex Libris a very strong entry into the public library sector.
The acquisition of Innovative also alters the dynamics relative to EBSCO Information Services, one of its principal competitors in both the content and technology sectors. EBSCO is overall a larger company and commands a bigger share of the market in the content sector. EBSCO Discovery Service leads in the index-based discovery product category, and its products for linking and electronic resource management are very widely deployed, though exact market share statistics are not available. EBSCO in recent years has strengthened its technology offerings, especially those based on software-as-a-service. The company works with almost all ILS companies to facilitate integrations with EDS and electronic resource management components. EBSCO's acquisition of the Stacks website management system strengthens its presence on patron-facing technologies. Most importantly, however, EBSCO's involvement with FOLIO can be seen more as a head-on competitor to Alma, though in very early stages in its product cycle. The mantra behind FOLIO involves giving libraries choice, both within the platform in a library's selection and deployment of components, but also in expanding the options for libraries in an extremely narrow field of viable products. EBSCO's message of enabling choice may be timely in this era of deeper consolidation.
Innovative has had a relatively tumultuous business history since its transition from private ownership. The company has experienced the exit of many experienced personnel and multiple transitions in executive management (as noted in the June 2019 issue of Smart Libraries Newsletter).
- Kim Massana: August 2012 through August 2015
- Albert E. (“Bert”) Winemiller, an operating partner for JMI, served as interim CEO from August 2015 through January 2016. Winemiller continues to serve on Innovative's Board of Directors.
- James Tallman: January 2016 through May 2019.
- Shaheen Javadizadeh: May 2019 to present.
These changes at the CEO level are especially disruptive since they also involve the reformation of a new executive management team and adjustments in strategic and operational priorities. In contrast, Ex Libris has had an exceptionally stable leadership team. Matti Shem Tov led Ex Libris through multiple ownership changes and now heads the entire ProQuest organization.
With a stable of aging product with aging technical architectures, Innovative recently developed a next-generation technology platform, branded as Inspire, to support a suite of new product offerings. The initial component is Inspire Discovery, with plans to eventually create additional components to form a complete library services platform. Given the nascent state of Inspire and mature and modern platforms already within the Ex Libris portfolio, it will be interesting to observe whether its development will continue under the new ownership arrangement.
Ex Libris has consistently followed a business strategy focused on development and expansion. The company has passed through multiple ownership arrangements and has leveraged the investments to create or acquire new products and services to fulfill anticipated demand in the library community. Such a business strategy comes at a high financial cost. The typical private equity playbook prescribes minimizing development and maximizing sales and marketing. Ex Libris, in contrast, has devoted a much higher portion of its operations to product development. This approach may result in lower short-term profitability, but it has apparently worked well in terms of long-term value of the company and its ability to attract new investors. This strategy can also be interpreted as more beneficial to the library community since it has resulted in the development of new offerings rather than extending the life of legacy products.
Table 1: Innovative Interfaces, Inc.
|Innovative Interfaces Product Installations|
|Sales Statistics for Library Systems Report||Installations in libraries.org|
Scale of the Acquisition
ProQuest ranks as one of the larger companies offering products and services to libraries. Innovative, though one of the larger companies in the ILS sphere, is relatively small compared to the entire ProQuest organization and is also much smaller in terms of customers and revenue than Ex Libris.
When counting active contracts to library organizations, Innovative has a customer base of about 1,846 compared to 4,656 for Ex Libris. These contract counts include those made with consortia, multilibrary systems, and standalone libraries, as reported for the annual American Libraries “Library Systems Report” by Innovative in 2017 and Ex Libris in 2018. The profiles of customers across the two companies also differ. Ex Libris has been more successful in projects for libraries and consortia with very large collections with premium financial value. Since many of Innovative's contracts are for public libraries, the number of libraries and facilities involved are larger.
Impact on the Academic Library Sector
That said, this acquisition strengthens Ex Libris' position in the academic library sector. Among the Association for Research Libraries (ARL), for example, Ex Libris currently serves 85 out of the 125 members (65 on Alma, 6 on Aleph, 14 on Voyager). Adding Innovative's customers, Ex Libris's presence among the ARL expands by an additional 19 (14 on Sierra, 4 on Millennium, 1 on Polaris), resulting in 104 ARL members overall. It should be noted that in the global sphere of 20,000 higher educational institutions, its total market share is more modest.
Prior to this acquisition, academic libraries using traditional ILS products, such as Symphony and Horizon from SirsiDynix and Millennium and Sierra, were shifting to library services platforms, including Ex Libris Alma and OCLC WorldShare Management Services. With Innovative now part of Ex Libris, we can anticipate financial incentives and streamlined migration processes for libraries using Sierra and interested in moving to an LSP to transition to Alma. Likewise, libraries using Sierra along with EBSCO Discovery Services may be enticed to shift to Primo.
ProQuest Enters the Public Library Sector
With this acquisition, ProQuest makes its first entry into the public library automation arena, though its content products are well represented in this sector. Ex Libris has previously been exclusively focused on technologies for academic libraries. The products it has launched more recently, including Leganto and Esploro, expanded its focus beyond the library and into the broader institution. Public libraries have distinct strategic technology requirements.
Although a new area for the company, ProQuest enters the public library sector with some experience. While the Ex Libris ILS products were designed primarily for academic libraries, they have also been implemented by a substantial number of public and special libraries. Many large public library system and multi-type consortia have implemented Aleph. In 2018, Ex Libris reported that 558 of its 2,362 remaining implementations of Aleph were in public libraries.
Innovative holds about a 30 percent market share between its Sierra and Polaris ILS products.
Impact of Consolidation
Consolidation in the library technology industry has been aggressive in the last couple of decades. It is important to note that while there has been a narrowing of vendors, the diminishment of products has been remarkably gentle. Very few products have been eliminated through business acquisitions that would not been discontinued by the incumbent companies. Legacy products, even when seriously outdated, follow a long trajectory as they are phased out in favor of modern products.
The consolidation of vendors in general, and this acquisition of Innovative by Ex Libris in particular, puts an enormous burden of responsibility for product development and support in the hands of a small number of companies. The key questions lie in whether the customer support and business infrastructure of these large companies can scale and provide better service than the incumbent companies and whether their development capacity will result in more capable products. As companies grow larger, they inevitably face challenges to deliver favorable customer support relative to smaller organizations often perceived as offering more of a personal touch with their library customers.
The ever more deeply consolidated library technology industry contrasts with previous phases characterized by a larger number of smaller companies. In such a state of fragmentations, the companies developed largely undifferentiated products through much smaller development teams. The standalone ILS companies struggle to develop products able keep up with the rapidly changing challenges faced by libraries. Much of the development energies of the ILS companies in the last decade have gone into the redevelopment of existing legacy products to move forward existing functionality into web-based interfaces and to enable APIs for systems integration.
We can anticipate additional consolidation in the library technology industry in the near to mid-term future. The age of the standalone ILS company may eventually pass in favor of a business environment were library technology is increasingly offered via companies with diverse portfolios of products and services. While the ILS continues to provide essential business infrastructure that libraries depend on for their daily operations, it can also be viewed as a diminishing component of their overall technical ecosystem. Ever more substantial value comes through additional software and content components delivering patron-facing services and that interconnect the library more deeply within their parent institutions, business partners, and peer institutions. While standalone companies generally address these needs though business partnerships, these capabilities can be organic within a large diversified services organization.
The library technology industry, not unlike most other business sectors, favors consolidation and large companies. A business environment where each product falls within a discrete company with its own executive management, financial administration, sales and marketing forces, and development teams involves far more costly overhead than the same products offered under a unified umbrella organization. In sparsely capitalized industries, such as a business sector serving libraries, the pressure to consolidate has reshaped the industry, including both for-profit and non-profit organizations. Libraries naturally fear price increases as a result of reduced competition as well as less innovation and product volatility. These valid fears should also be seen in a context where the incumbent arrangements may not have been sustainable and were also not necessarily meeting library expectations for innovation and affordable pricing. Ex Libris executives state that they are committed to not raising prices as a result of this acquisition.
Many small and mid-sized companies continue within the industry. These companies are often more narrowly focused and address segments of the library community not likely to interest the larger players. Examples include Keystone Systems, which serves libraries for visually disabled persons and Biblionix, which provides the Apollo ILS for small public libraries.
Implications for Open Source Products
We can also anticipate that the consolidation of Innovative within ProQuest will further spark interest in communityowned open source technologies. Libraries generally react negatively to perceived aggressive moves by vendors and especially to the narrowing of options. The acquisition of SirsiDynix by Vista Equity Partners and its rash moves to sunset Taos and Horizon drove many libraries to open source alternatives in the mid-to-late 2000s. Open source ILS products like Koha and Evergreen have continued to see a moderate level of adoption, with a cadre of for-profit and non-profit organizations providing support services meeting or exceeding those from vendors of proprietary products. The open source FOLIO library services platform has crossed important benchmarks and has been implemented in production by at least one library. A large handful of other libraries and consortia have implementations in progress, some pending next phases of development. The community spirit of open source software resonates with the strategies and values of many libraries. Even though open source today ranks as a small portion of the market, we can expect increased uptake in the mid-tolong- term future.