The dramatic shifts that redefined the industry in 2006 precipitated turmoil in 2007, which made companies that avoided major business transitions more attractive and sparked explosive interest in open source alternatives. Some companies held a steady course and benefited from the fallout. The consolidated entities formed by recent acquisitions stand as formidable competitors in their respective market sectors, wielding vast resources to retain-or even strengthen-their industry positions.
Sales of new integrated library system (ILS) products dipped 15%, offset by increased procurements of replacement interfaces and tools for managing electronic content and creating digital collections. The overall library automation economy held even with aggregate revenues at $570 million. A majority of companies increased their workforce in 2007.
Strategies for a zero-sum game
Several factors limited opportunities to sell traditional library automation systems this year. The higher-end market of public and academic libraries has saturated; fewer libraries have legacy systems in immediate need of replacement. Recent migrations from legacy systems have largely run to completion. Many libraries still use Dynix Classic, though most have made procurement decisions. Other libraries considering ILS replacements are holding off, hoping better options will emerge soon, especially on the open source front. Libraries feel a sense of urgency to acquire next-generation interfaces that will allow them to cast aside library catalogs that work more like the web of 1998 than 2008 and gain tools to manage ever-growing collections of electronic content.
In this tough market, Innovative led the industry with sales of Millennium to 79 new clients and 95 contracts overall. SirsiDynix inked 121 contracts for Unicorn, with 51 of those to new customers. In the K-12 school market, Follett Software Company led with 639 sales of Destiny Library Manager for Districts. In the small to midsized public library arena, Auto-Graphics provided AGent VERSO to 47 institutions. Open source vendor LibLime contracted with 29 libraries for Koha Classic and 28 for Koha Zoom for a total of 57. Polaris moved into the ranks of the large municipal libraries. In a year of plummeting sales to academics, Ex Libris had only 29 Aleph sales, though it climbed a notch among the Association of Research Libraries (ARL) members by adding New York University.
Industry prospects remain strong, however. As legacy migrations run dry, the 1,612 organizations running Horizon, which represent over 4000 library facilities, introduce new potential contracts. Though SirsiDynix aims to entice these libraries to adopt Symphony through irresistible incentives, other challengers will compete for their business. For K-12 school automation, the inevitable transition from PC-based systems such as Athena, Winnebago Spectrum, and Circulation Plus to districtwide web-based systems has just begun. Interest in open source library automation software will fuel the growth of a new breed of companies. In the zero-sum game of the library automation economy, gains here will be offset by losses among the traditional vendors.
International markets offer strong opportunities, as does non-ILS library automation software. The concept of decoupling the front-end interface from the back-end ILS has become well established, presenting openings to sell these products even when a complete ILS replacement is out of the question.
The industry's changing face
The consolidations and private equity buyouts of 2007 involved major shifts in product strategies that had repercussions throughout the industry, with direct impact for thousands of libraries.
Vista Equity Partners, a $1 billion private equity firm, acquired full ownership of SirsiDynix, as its previous venture capital owner, Seaport Capital, recovered its investment at peak value. The three months following the acquisition brought tumultuous change for SirsiDynix (including staff reductions) and its customer libraries. CEO Patrick Sommers made an abrupt exit in mid-February along with most of his team.
Following Sommers's departure, Vista principal Martin Taylor stepped in as interim chief executive, building the ILS product strategy on Unicorn and jettisoning development of Horizon 8.0, previously positioned as its future platform. This left Horizon 8.0 beta test sites and adopters either to fall back on their incumbent systems or make an accelerated migration to Unicorn. The 7.x version of Horizon will continue to receive limited support for the intermediate term. This new plan came as startling news to the libraries that had based their automation plans on Horizon.
By June 2007, when Gary M. Rautenstrauch became CEO, SirsiDynix had selected Symphony as the brand for its flagship automation system. A direct descendant of Unicorn, Symphony will incorporate key features and characteristics of Horizon to make it a suitable migration path. Unicorn libraries will see Symphony as a routine upgrade.
Under Rautenstrauch's leadership, the company has moved to moderate the effect of changes previously announced and build a more positive reputation in the industry.
The major transitions of 2007 make it extremely problematic to describe accurately sales over the last two years. SirsiDynix reported more contracts signed for Horizon in 2006 (94) than for Unicorn (71). The contracts signed for Horizon in 2006 through early 2007 remain uncertain. Some of these libraries have elected to proceed with their implementation of Horizon, while many chose Unicorn, and others have gone to competitor systems. Fifteen sales of Horizon were made in 2007 prior to the product transition announcements. The 121 total contracts signed for Unicorn/Symphony reported for 2007 remain unverified and may include some business also represented in 2006, as the company develops new contracts for libraries that made recent Horizon commitments.
The proportion of Horizon libraries that ultimately choose to adopt Symphony looms large. Defections will result in the diminishment of a giant; a high retention rate will foster continued growth. Even in difficult times, libraries have a propensity to continue with an incumbent vendor. A partial review of libraries signing for Horizon in 2006 shows about one-third with Unicorn implementation underway or complete, many with a completed Horizon implementation and no immediate plans to migrate, and a minority exploring other options.
Other business and product transitions
Changes at OCLC resulted in a more unified global organization. OCLC completed the purchase of OCLC Pica, of which it already owned two-thirds. Overall, OCLC was reorganized to represent its international presence better, and the entire organization now operates under the OCLC name. In early 2008, OCLC purchased EZproxy from Useful Utilities, a small company based in Peoria, AZ. EZproxy, installed in over 2400 mostly academic libraries, aids those institutions in providing access to their subscriptions of e-content to off-site users.
Cambridge Information Group (CIG), parent company of ProQuest, continues to position itself as a top competitor in library automation and related services, in addition to its major role as a publisher of electronic content. Serials Solutions is the main automation-related CIG company and offers a complete suite of products to help libraries manage all aspects of their e-content collections. Just acquired by ProQuest in February 2008, WebFeat will be merged with Serials Solutions to give CIG a commanding presence in this arena. CIG also owns Syndetic Solutions, the dominant provider of book jackets, tables of contents, and other enriched content layered into library catalogs. In June 2007, CIG subsidiary R.R. Bowker acquired the Amsterdam-based creator of AquaBrowser, Medialab Solutions, giving CIG an immediate position in the hot market of next-generation library interfaces.
LibLime, a 2005 start-up specializing in open source software services, acquired the Koha division of Katipo Communications, Ltd. Katipo created the original version of Koha in 1999 for a small consortium of libraries in New Zealand. LibLime, though still a small company, gains a presence in the Australasia region and the ability to tap the expertise of Koha's original developers.
A new generation of interfaces
Ever-growing dissatisfaction with older model catalogs has mandated new library interfaces incorporating Web 2.0 features such as RSS feeds, user tagging, and reviews. Behind-the-scenes ILS operation matters less than the patron's experience. This new genre of products enables libraries to make drastic improvements to their online presence in less time and at a lower cost than a complete ILS replacement. These products sync with any major ILS but require a certain amount of effort to integrate fully into the library's technology infrastructure.
These new interfaces attempt to provide a single point of access to all library content, including subscribed e-content products, through an integrated federated search component or through harvesting of metadata into local indexes. These products enable libraries to break away from outdated interfaces and deliver library content and services on a par with other destinations on the web, like relevancy-ranked search results, faceted navigation, visual appeal through book jacket images, and good graphic design.
AquaBrowser pioneered the replacement interface genre. Beginning in 2004, developer Medialab struck a deal with The Library Corporation (TLC) to market its product in the United States and Canada, and, in 2005, TLC became its exclusive distributor. By June 2007, TLC sold AquaBrowser to more than 120 libraries. With Bowker's acquisition of AquaBrowser, TLC lost its exclusive deal, prompting the development of its own next-generation public library interface, Indigo, a graphically attractive interface dubbed "library positioning software."
Ex Libris completed initial development of Primo, its product for "discovery and delivery," which launched for live use at several libraries by year-end. Designed for large academic libraries and consortia, Primo's complex architecture includes integrated link resolver, federated search, and many features geared toward delivery of electronic content. In Primo's first year, Ex Libris signed 12 contracts, representing 77 libraries.
Encore, the next-generation interface from Innovative Interfaces, was designed for both public and academic libraries. Innovative developed the product with a large group of libraries prior to its public debut in 12 customer sites in October 2007. By year-end, Innovative had made 72 sales of Encore. Its fast-paced development and warm reception in terms of sales counter the conservative stereotype sometimes associated with Innovative.
VTLS introduced Visualizer, its next-generation interface, in early 2008. This product emphasizes "total exposure," providing libraries with a tool for delivering access to all collections, the online catalog, institutional repository, local digital collections, or other collections of interest.
SirsiDynix announced in November 2007 that it is developing its next-generation search product based on technology from Brainware, also owned by its parent company. This replaces its partnership with Fast Search and Transfer (FAST) for a new search platform.
In addition to commercial products, a number of library-built open source projects have emerged, such as VUfind created at Villanova University. The University of Rochester's eXtensible Catalog received a new round of funding from the Andrew W. Mellon Foundation to work toward an open source next-generation library interface.
Library investments in e-content continue to rise in tandem with patron expectations for immediate access to authoritative information. Link resolvers and federated search platforms have become necessities for any library with a growing collection of electronic subscriptions, while electronic resource management (ERM) systems help libraries automate internal processes such as selection, licensing, and procurement.
Ex Libris, which pioneered link resolving in 2000, holds the lead with 1,646 installations of SFX. Serials Solutions' 360 Link has only 806 installations but added 122 new libraries in 2007 compared to 61 new sales for SFX. Serials Solutions has had some success in convincing libraries to switch from SFX, among them the State University of New York, a major Ex Libris account. Another contender in the link resolver business is Innovative's WebBridge, which gained 58 new sites, bringing the total installed to 340.
Libraries of almost all types see federated search tools as an essential part of their offerings for patrons. It's unrealistic to make patrons search the many content packages individually. WebFeat, which dominates the federated search business, was acquired by ProQuest/Serials Solutions in early 2008. Serials Solutions gained another 252 clients for 360 Search, offered exclusively through Software as a Service (SaaS), for an accumulated total of 426 libraries.
Ex Libris's internally developed MetaLib for federated search garnered 30 new sales in 2007, bringing installations to 1,325. Innovative developed Research Pro internally, though it incorporates components of MuseSearch technology. With 66 additional adoptions in 2007, installations rose to 187.
Index Data, an open source development and support vendor, developed a new open source federated search environment called MasterKey and partners with multiple companies, including LibLime and CARE Affiliates, for marketing and support.
MuseGlobal provides the technology for federated search and content integration products offered by a number of companies involved in library automation but increasingly in other industries as well. It maintains a fairly low profile in library automation.
ERM systems provide automation for the internal management of a library's e-content subscriptions. This genre has been evolving since 2002, with Innovative's initial launch of Electronic Resource Management. In 2007, Innovative made 39 sales, lifting its installation base to 235 and preserving its overall lead. Ex Libris made 36 sales of Verde and Meridian, and Serials Solutions 72 of 360 Resource Manager.
Though Serials Solutions is a relative newcomer in some of these product categories, it has become a formidable competitor. Its SaaS approach has strong appeal for many libraries, and its KnowledgeWorks database of e-journals has earned a reputation for accuracy and completeness.
Focus on patron services
Public libraries demand automation products designed with a narrow focus on service to library patrons. Larger publics require systems optimized to handle high-volume circulation. Publics of all types require web interfaces that maximize their collections and deliver personalized patron services.
Innovative Interfaces won favor among many midsized to large public library systems. Some of the big wins include the Stark Library Consortium and the Akron-Summit County Public Library system, both in Ohio, and Lower Shore Library Consortium of Maryland. Polaris succeeded in attracting a full range of public libraries, including large countywide systems such as the 20 libraries of the Onondaga County Public Library System in upstate New York and the 23 libraries in Pennsylvania's Westmoreland County. Polaris also broke into the ranks of the municipals with contract awards from Phoenix, moving from a Carl system, and Dallas, replacing an aging DRA product. The six libraries in Howard County, MD, opted for Koha following a rocky experience with Horizon.
Many smaller libraries cut deals for first-time automation or replacement of aging PC-based systems. States such as Kansas, characterized by large numbers of small rural libraries, exemplify this new front. Success in attracting these libraries involves low-cost offerings with minimal in-library technical requirements-a natural fit for SaaS. This subsector relies on a strategy that attracts larger groups of small libraries while maintaining lower costs. When dealing with typically underfunded rural libraries, companies realistically expect lower revenues per library automated.
Many small libraries, or consortia of small libraries, selected Auto-Graphics' AGent VERSO and Koha from LibLime. The Central Kansas Library System opted for Koha with support from LibLime; the Southwest Kansas Library System gave the nod to AGent VERSO. Apollo from the new company Biblionix was the favorite among small libraries in Texas.
Academics shore up e-content capabilities
Academic libraries in 2007 had to find better ways to manage burgeoning collections of e-content, improving interfaces for the web-savvy Facebook generation. Upcoming challenges include using technology to help better position library services on institutional courseware and e-learning portals. Although a number of academic libraries purchased a new ILS in 2007, other products generated a large portion of industry revenues. Academic libraries consider link resolvers and federated search products necessary to their infrastructure, while interest in ERM systems remains tentative. The initial round of replacement web interfaces this year forecasts a higher volume in 2008.
Ex Libris stands as the largest company with exclusive focus on academic and research libraries. In the prestigious ARL ranks, Ex Libris captured the consortium of libraries that includes New York University (NYU) to replace its existing Infor Advance system with Aleph. NYU elected not to go forward with Virtua from VTLS. In 2007, Ex Libris focused much of its attention on Primo, marketing it to its own ILS customer base and beyond.
Innovative, however, is a larger company overall and sold far more products to academic libraries than Ex Libris, with 79 new academic library customers selecting Millennium compared to 26 that chose Aleph. Innovative outsold Ex Libris in other categories as well, with Encore, Electronic Resource Management, and Research Pro outpacing comparable offerings from Ex Libris.
While Serials Solutions has no involvement in the ILS business, it has become a major supplier of automation tools in other categories. Its 360 family of products have proven extremely attractive to academic libraries.
Publics vs. K-12
School library automation faces significant change, both in terms of shifting technology and in product transitions. Schools today favor centralized web-based systems where a single installation can serve the entire district. Their needs go beyond the library-to managing inventories of textbooks and other resources and supporting required assessment programs.
Follett Software Company (FSC) dominates the K-12 market with well over half of all U.S. schools running one of its products. The company offers a single integrated environment to manage libraries, textbooks, media resources, and other assets. Today, FSC characterizes its mission as more broadly focused on managing educational resources throughout a school district, rather than simply automating the school library.
FSC acquired its main competitor, Sagebrush Corporation, in 2006. Now, transitions from these legacy products loom large. Accent has been withdrawn, with remaining sites receiving limited support. Winnebago Spectrum and Athena, the older PC-based systems from Sagebrush, receive support but are no longer sold. Sagebrush positioned InfoCentre as the migration path for Winnebago Spectrum and Accent. Although FSC produced a new release of InfoCentre in 2007, it's not a long-term contender.
Follett's course is set on Destiny. It has created versions for both districts and individual schools. Destiny, with its more school-specialized features, will not necessarily appeal to the small publics that adopted its PC-based systems. In 2007, sales of Destiny overwhelmingly went to school libraries.
Hundreds of small public libraries had adopted Winnebago Spectrum, Athena, and Circulation Plus; many have upgraded to InfoCentre. Even though these products were built primarily for schools, they allowed publics the opportunity to automate affordably. As public libraries migrate away from these three systems, they will gravitate toward lower-cost products specifically designed for public libraries. These public libraries represent new opportunities for companies offering such solutions.
Knowledge management & special libraries
Automation in special libraries bears little resemblance to other library types. The products that serve these libraries function more as enterprise information management environments than traditional integrated library systems. The bulk of their activity involves serials and all kinds of electronic content. Special libraries often manage and distribute the reports and research created within the organization and provide global services.
The top competitors for special libraries in corporations and law firms include EOS International, SydneyPLUS, Inmagic, and SoftLink. Keystone Systems specializes in libraries that serve persons with visual disabilities, and CyberTools for Libraries works primarily with libraries in the health profession.
Key automation trends for special libraries involve greater deployment of SaaS offerings and transitions from desktop installations to web-based systems. The products in this area continue to shift further away from the traditional library automation models into the realm of knowledge management.
Open source gains support
Last year marked the launch of the open source ILS into the mainstream; it received major attention in the press and at library conferences. From a business perspective, open source ILS contracts represented a very small portion of the library automation economy. The success of early adopters' implementations has already diminished skepticism. Many indicators suggest that open source ILS contracts will displace larger percentages of traditional licensing models in each subsequent year.
The sharply narrowing product options resulting from consolidation among the top commercial companies sparked interest in open source alternatives. This year's dislocations notwithstanding, the majority of companies in the industry have kept to their knitting, maintaining a high level of continuity in their products, support options, and new products in response to customer needs.
The foundation of the library automation economy based on licensing of closed source software has cracked. Time will tell whether the fissure opened will remain narrow or whether the underpinnings of the industry have begun a permanent shift. As open source options gain wider adoption, the library automation economy will not likely shrink; the portion of revenues for services will increase as capital costs paid for licenses decreases. SaaS offers great advantages on the open source front. The conventional belief that libraries need more in-house technical support for an open source system evaporates when the vendor assumes responsibility for hosting and maintenance.
The years leading up to 2007 can be characterized as the pioneer days of open source ILS. Early adopters developed systems anew, as Georgia Public Library Service PINES did with Evergreen, or extended existing systems, as Nelsonville Public Library, OH, did for Koha. Beginning this year, the paths have become more established, the products have matured, and a number of companies stand ready to assist libraries.
Over 100 libraries committed to open source ILS implementations in 2007. A group of university libraries in Ontario, including Laurentian University, have plans underway to extend and implement Evergreen. The province of British Columbia in Canada will follow a phased, opt-in implementation of Evergreen, called Northern Pines. Libraries selecting Koha included the Crawford County Federated Library System in Pennsylvania, the libraries of the Indiana Shared Library Catalog, Howard County Library in Maryland, and Ashtabula County Libraries in Ohio. On the academic front, the Westchester Academic Library Directors Organization, NY, will be implementing a shared Koha installation for many of its members.
The open source companies seem especially anxious to attract libraries affected by the narrowing product options. In early 2008, Equinox established a partnership with Alpha-G, a consulting firm with expertise with the SirsiDynix Horizon system. The initial collaboration between Equinox and Alpha-G involves the migration of Maryland's Kent County Public Library as it moves from Horizon to Evergreen.
In 2007, the companies involved with open source library automation software matured and proliferated. The slate of companies based on open source library automation software includes Index Data, LibLime, Equinox Software, and CARE Affiliates.
At least in this early phase, open source library automation involves a smaller-scale economy. Revenues derive mostly from hosting, services, and custom development. The basic business model assumes the absence of the license fees collected by the traditional companies. For these firms to prosper, they must deliver the high-quality services libraries value and for which they will be willing to pay.