Automation System Marketplace 2002: Capturing the Migrating Customer

A smaller group of larger firms dominate the library automation marketplace. They are largely international, diversified, and privately owned. The mergers and consolidations that marked the recent history of the industry have absorbed the weaker products and companies.

In 2001, the library automation market expanded significantly (17%) and the trend continues. A shrinking number of ever-larger companies control the greatest market share. The many smaller companies still participating represent only a modest portion of the library automation economy. The top ten earners account for 73% of overall industry revenues, while the smallest 20 companies collectively represent only 13%. The software delivered by each company increases in complexity with each new release, owing to tough competition and rising expectations from librarians. Yet, the library market is highly price-sensitive. Libraries need systems of growing complexity, scope, and sophistication, but they have relatively modest budgets for automation. Most library automation companies deal in other products and services to complement their basic systems and to supplement their income. Increasingly, these vendors are creating and delivering content, either printed or electronic, and developing and integrating innovative technologies for a variety of uses for their library customers.

The major event of the year involved the surprise $51.5 million purchase of Data Research Associates (DRA) by Sirsi Corporation. Sales of TAOS, DRA's next-generation system, were lackluster, and the library grapevine heard that the system was fraught with problems, causing numerous big buck customers to back off. The installed base of DRA Classic, MultiLIS, and INLEX sites ripe for conversion was especially attractive to a library company wanting to grow. In this acquisition, Sirsi gained as many as 1000 potential library customers. After four months' deliberation, Sirsi dropped development of TAOS to focus on its own Unicorn system. The long-term result of the acquisition will be a consolidation of library automation options. There was already an erosion of installations of DRA Classic, MultiLIS, and INLEX sites, but now the pace of migration away from these systems will be accelerated. Like sharks at a shipwreck, other vendors will pitch their systems to the DRA libraries, hoping to gobble up disgruntled customers.

At Innovative Interfaces Inc., Jerry Kline bought out the outstanding shares of cofounder Steve Silberstein, giving him sole ownership of the company, founded in 1978. The change is not expected to have any impact on the firm's current or new customers. Scot Cheatham, founder of EOS International, purchased all interests of that organization from Dawson Holdings PLC, shifting it from a wholly owned subsidiary of a public company to a private concern.

Auto-Graphics purchased the assets of Maxcess Library Systems in February 2001 and acquired the WINGS Request Management System from Pigasus Software in June. The Pigasus deal subsequently unraveled, leading to a major legal dispute between the companies.

BiblioMondo, Inc., emerged in late 2000 from the union of UK-based ALS International and Best-Seller, a Canadian company. BiblioMondo maintains a U.S. office in Boston.

Lana Porter left her position as president of epixtech to become a member of the company's board. Mike Skiles, an industry veteran who held top spots at DRA and Gaylord, left the presidency at Auto-Graphics and was replaced by Robert S. Cope.

For the companies that participated in the survey, 2001 revenue from library-related systems and services is estimated to be $530 million, plus or minus $20 million. This is the aggregate of gross sales figures?ome provided by the companies, some estimates. Revenues from ILS system sales, non-ILS library software, hardware sales, maintenance, and library-related services were included as eligible. The total is not worldwide library automation revenue, since it does not include companies that have no presence in North America. The estimated revenue is 17% higher than that for 2000 ($440 million). This increase may not mean out-and-out growth, since last year's revenues were reduced by the post-Y2K effect.

Many of the companies that participated in the survey are not allowed to reveal their revenue figures. In fact, only Innovative Interfaces, of the companies with the highest income, publishes its total. Innovative stands as the market leader, reporting income in the $75?80 million range. Three other companies are believed to have revenues over $50 million; four between $20 and $50 million; three at $10?20 million; and the lowest 18 at less than $10 million.

Library consortia are a major factor in the automation marketplace. As library automation companies become larger and more powerful, libraries work to gain purchasing leverage through large-scale contracts. Such contracts almost always involve a lower cost per library than would be the case if each library purchased the software independently. This year we polled vendors for information on sales to consortia. In Table 4, eight companies reported sales to 42 consortia. The 42 consortia contracts represent the participation of 3380 individual libraries.

Most North American libraries have some form of automation operation, but many still use outdated systems. Many libraries are currently poised, trying to decide whether to migrate to a new system and vendor or upgrade with their current supplier. Over the next several years, the pace at which aging systems are replaced will accelerate.

Some of the legacy systems that libraries are moving away from include Dynix, DRA Classic (which probably will follow TAOS into the history books), MultiLIS, PLUS, ADVANCE, BookPlus, VTLS Classic, GALAXY, and INLEX. The vendor of each of these systems offers an upgrade to its own next-generation system. Libraries tend to shop around, looking at all available systems, rather than automatically selecting an upgrade from their current vendor. Every company faces the challenge of holding on to customers that are ready to upgrade older systems. As libraries consider upgrades, every vendor also sees opportunities to capture customers ready to move away from a competitor's older-generation systems.

Most activity in the North American library automation market involves upgrading and replacing outdated systems. In other regions there are more opportunities to sell new, first systems to libraries. Many of the North American companies are increasing their global marketing efforts.

Library automation is an international business. Several of the companies active in North America have international connections. Endeavor is a subsidiary of Netherlands-based Reed Elsevier's Elsevier Science. Ex Libris is headquartered in Israel. Geac and Open Text are Canadian companies. Sanderson and Softlink are Australian. Geac's new system for North America, V Smart, emerged from the VUBIS product of its Australian operation.

The overwhelming majority of the companies in the marketplace are privately held. For every public company, library automation is a subdivision. Auto-Graphics' businesses are divided between publishing and library automation. Libraries are a small business unit of Geac. Open Text's flagship product LiveLink, with Techlib and BASIS, is part of a smaller division. DRA, now merged with Sirsi, was the only public company solely focused on library automation.

The larger companies, and a few of the smaller ones, have interests far broader than basic integrated library systems. Several offer systems for creating digital collections of images, video clips, and other multimedia content. Notable examples are ENCompass from Endeavor, Hyperion Digital Media Archive from Sirsi, DigiTool from Ex Libris, and VTLS Hi-Res Image Navigator. Ex Libris and Endeavor offer reference linking products, SFX and LinkFinderPlus, respectively. Several companies offer resource sharing systems: Auto-Graphics (Impact/ONLINE), Fretwell-Downing (VDX), and epixtech (URSA and RSS). Follett and Sagebrush, both oriented to the school market, run major book distribution operations. In all, 18 companies indicate that they offer some sort of digital library product.

In this intensely competitive environment, all the major systems offer very high levels of functionality in every standard library module. Systems lacking deep functionality will not survive. All the systems offer the standard suite of functionality specified in common RFPs.

This year, the focus of competition was expanding the web OPAC to employ more content components and to expand the library services and options it offers. The OPAC has effectively been transformed into an information portal, or a content-enhanced web OPAC. When we asked, 19 companies responded that they offer an enhanced, web-based OPAC.

One widely offered feature is the ability to display book jacket images, tables of contents, abstracts, and reviews. Many library automation companies?Sirsi, BiblioMondo, Endeavor, VTLS, Brodart, Geac, Innovative, Gaylord, The Library Corporation, and epixtech?artner with Syndetic Solutions to deliver such content. Many of these extended OPACs, e.g., Sirsi's LibraryHQ, Brodart's DartClix, and Sagebrush's WebMARC, provide access to collections of selected and cataloged web sites.

Another extension of the online catalog involves providing users with the ability to search multiple information sources simultaneously. Generally termed metasearching, this process takes a single query entered by the user, broadcasts it to multiple, selected information searches, gathers the results from each, and creates a unified results set, sorted with duplicates removed. Behind the scenes, these systems generally employ Z39.50, SQL, HTML parsing, and other techniques to process the query.

Some companies rely on third-party technology: Innovative and The Library Corporation integrate MuseGlobal, and epixtech partners with Webfeat. Others, including Ex Libris (MetaLib), Endeavor, Gaylord, Fretwell-Downing, and Auto-Graphics, have developed their own metasearch capabilities.

Reference linking is the genre of software that provides intelligent navigation from citations to full text and other related information. As library web catalogs extend their scope to include citation and full-text information, the need arises to provide more sophisticated ways for users to navigate from links in the catalog to external information resources. If publishers offer an item of digital content, linking mechanisms must lead the user to the source of that content to which the library subscribes. Some 14 companies indicated that they offer a product that performs some type of reference linking.

Unicode, now well supported in both desktop and server operating systems, provides for support, display, and input of text for all languages and scripts. In an apparent response to the globalization of the market, 26 of the 57 automation systems mentioned in this year's survey support Unicode.

This year we saw more involvement in wireless and hand-held technologies for library automation. Book Systems' Concourse Commuter and Sagebrush's In-Hand are Palm Pilot applications for remote circulation and inventory. Innovative released AirPAC, a version of its OPAC for cell phones and PDAs with Internet access. The Library Corporation and Gaylord have both enabled their systems for wireless access.

More and more companies now offer their systems in an ASP (Application Service Provider) model. With ASP, the vendor provides and houses all server equipment; access to the system for both library staff and library users takes place through the Internet, often using VPN (Virtual Private Network) technology.

Examples of library systems specifically promoted as ASP include the E-Library Service from EOS International (Q Series or GLAS) and CASPR's LibraryCom.com (offered only through ASP). Auto-Graphics' Impact/VERSO, epixtech's Horizon Sunrise, Ex Libris's ALEPH 500, and CyberTools for Libraries are all offered either locally installed or ASP. Overall, however, ASP represents a very small portion of market activity. Libraries far and away prefer the self-reliance of locally housed servers.

An important development in scholarly publishing and electronic publishing involves a new way of establishing search capability among multiple related resources. This model, known as the Open Archives Initiative (OAI), relies on an infrastructure of metadata harvesting from one or more information providers to create a service that can be searched with added value by end users. OAI-based services offer users in a given field of research the ability to search a single resource rather than having to discover and search individual information repositories. This architecture of federated searching based on metadata harvesting performed in advance stands in contrast to Z39.50 and other metasearch technologies based on live interactive connections between the searcher and multiple remote information sources. Library automation companies have begun to take an interest, with a few offering products based on OAI.