The latest “Library Systems Report” was published in the May issue of American Libraries. Subtitled “Fresh opportunities amid consolidation,” the report features the latest rounds of consolidation that continue to shape the library technology industry. As a systematic view of the library technology industry, the annual report brings together data from a variety of sources and provides some observations and predictions based on the events that transpired within the previous year. Vendors submit data on sales and personnel via a questionnaire as well as a narrative section that describes the year's major accomplishments. The report also considers other sources, such as press releases and system installation data from Library Technology Guides.
This year's report comes on the heels of the acquisition of Innovative Interfaces by ProQuest, an event that stands as one of the most significant in the ongoing rounds of mergers and acquisitions that have shaped the industry. With Innovative in its portfolio, ProQuest makes an incremental expansion of its presence in the core market of academic libraries and gains entry into the public library sector.
The Ongoing Stage of Consolidation
The library technology industry has seen substantial consolidation, with an ever-narrowing slate of companies responsible for providing technology products and services to libraries. Recent events have brought technology products into top-level companies that are also major providers of content resources and services. Follett Corporation, EBSCO Information Services, and ProQuest offer product portfolios spanning workflow tools used by library workers, content offerings for library patrons, as well as discovery and analytics tools.
Consolidation means a narrowing of suppliers oriented to libraries, but it also can result in opportunities for innovation. This dynamic is a main theme of the “Library Systems Report.” Historically, mid-level companies have struggled to keep pace with library expectations in the forward development of critical enterprise-level products such as integrated library systems and comprehensive discovery services. The companies in the higher tiers have the massive development capacity needed for ambitious product development. Important products such as Alma, WorldShare Management Services (WMS), EBSCO Discovery Service, Primo, and Summon have come out of these consolidated companies. While these products may not meet expectations in all ways, they each depend on content components such as global knowledge bases and comprehensive discovery indexes as well as modern technology platforms that exceed the development capacity possible in smaller companies.
Impact on Product Choice
Libraries rightly express concerns with the paucity of options available when it comes to purchasing new technology systems. A decade ago, a library would expect to choose between three to five qualified products when considering migrating to a new system. In today's environment, a library may find only a couple of acceptable options.
The consolidation among vendors has fortunately not meant rapid demise of the products involved. Acquired products have almost always seen a very long product lifespan, often with the same trajectory as would have transpired under their incumbent vendors. The library market demands a gentle approach regarding product strategies. If a library perceives that the system that they use will be phased out following an acquisition, they will be much less inclined to move to any new product from that vendor. Providing ongoing support and development for acquired products represents an important investment if the vendor expects to retain the associated library customers and to attract them to any new products in the long term.
The last couple of decades of the library technology industry reflect a good record of the retention of acquired products. SirsiDynix has continued Horizon, an acquired product, alongside its own Symphony ILS, providing equal support for both. Its newer BLUEcloud suite of applications receives most of its development attention and has been designed to work with either Symphony or Horizon. In the early phase of SirsiDynix merger, decisions were made to discontinue Horizon and the new Corinthian ILS under development. Backlash from this strategy was strong and led to the reinstatement of Horizon. It took SirsiDynix several years to recover from this ill-fated strategy, which has stood as a lesson for the playbooks of all the mergers that have since transpired in the industry. Ex Libris reinvigorated Voyager as it continued to support its own Aleph ILS and eventually developed Alma as a forward migration path for both. When ProQuest acquired Ex Libris, both Summon and Primo were treated as strategic discovery services and subsequently a new Central Discovery Index was created to populate both products and their distinctive interfaces. Polaris has continued to be promoted as a strategic ILS for public libraries following its acquisition by Innovative. Virtua, acquired by Innovative at about the same time, has not been actively marketed, but continues to be supported. The Library Corporation continues to support the Carl.X line of products it acquired in addition to its own Library.Solution.
Mergers and acquisitions have not been as kind to products still under development. The acquisition of DRA by Sirsi Corporation meant the demine of Taos, a new generation product in its late development phase. As noted, Corinthian did not survive the SirsiDynix merger. ProQuest Intota largely fell victim to the acquisition of Ex Libris, though Intota Analytics continued to see some ongoing use. More recently, the Inspire platform under development by Innovative is in jeopardy following the ProQuest acquisition. Innovative's proposed next generation platform, branded as Inspire, was not yet complete with no production implementations at the time of the merger. Terminating a development effort toward a new product not yet completed means that some libraries considering its future use will need to make new plans. It would be much more disruptive to discontinue a product once it has begun its implementation phase.
A New Wrinkle
Since the the “Library Systems Report” was finalized for publication, events have transpired that have a bearing on some of the observations made in the report. Although the acquisition was positioned as final, the Federal Trade Commission (FTC) subsequently initiated a review of the transaction. The possible integration of Innovative's products under Ex Libris have been put on hold. Innovative will be operated as an independent company under the ownership of ProQuest until the review has been completed.
The acquisition of Innovative Interfaces by ProQuest was announced in December 2019 and closed on January 16, 2020. The FTC initiated a non-public review of the merger in February 2020. ProQuest issued a statement acknowledging the review on March 13, 2020. No specific timelines of the review have been given, though it seems likely to be settled by the end of 2020. During this period, no intermingling of personnel, technologies, or intellectual property is allowed between the companies, and they will continue to compete for customers. ProQuest executives emphasize their full cooperation with the review.
From my layperson's perspective, informed by information from the FTC website, possible outcomes would include:
- Approval of the merger, leaving ProQuest free to integrate Innovative's products into its existing businesses.
- An agreed order requiring ProQuest to make specific divestments before merging the companies.
- A termination of the merger.
Mergers involving companies over a certain threshold ($200 million, $376 million after Feb 27, 2020) require approval by the FTC. It is unclear why this review commenced after the close of the merger and not as part of the customary pre-merger approval process as outlined by the FTC.1
Some of the industry outcomes anticipated in the report depend on whether the acquisition of Innovative by ProQuest remains fully intact following the FTC review. The report noted, for example, that Ex Libris was able to dramatically transform the academic library sector through the success of its Alma library services platform. OCLC contributed to this transformation via its WorldShare Management Services at approximately the same timeframe, but attracted a relatively modest share of the academic library market. Based on Ex Libris' established business strategy of aggressive product development, it is reasonable to anticipate that it would execute a similar approach in the public library sector. As a standalone company, Innovative has seen declines in its academic library business and has been a strong competitor in the public library sector. The backing of ProQuest and Ex Libris could potentially enable Innovative to make more dramatic contributions to the public library sector.
This issue of Smart Libraries Newsletter features a study of the dynamics of the academic and public library sectors. While it highlights some of the current and historical positions of Ex Libris and Innovative, it makes no assertions regarding the thresholds of anti-competitive scenarios relative to the FTC review of the acquisition of Innovative by ProQuest.
- “Premerger Notification and the Merger Review Process,” Federal Trade Commission, https://www.ftc.gov/tips-advice/competition-guidance/guide-antitrust-laws/mergers/premerger-notification-merger-review.