The Competition Heats Up

In 2002, the move away from outdated systems fueled sales in the library automation market. Companies with legacy systems pulled out all the stops to retain customers and entice them to migrate to their replacement systems. This year we'll take a look at which companies gained and lost ground in the competition for market share and study the issues likely to impact the industry over the next few years.

Companies today are seeking to increase revenue through products and services beyond the basic library automation system. Digital library systems, reference linking products, federated search environments, and enhanced-content web-based OPACS are but a few of the products that increasingly influence the marketplace.

Even with this shift, maintenance costs on integrated library systems (ILS) supply the most constant fuel for the automation economy. Companies reap an average of 39% of their overall revenue from system maintenance, and the size of the installed customer base has an enormous impact on the financial health of a company. Thirty-two percent of revenue came from the sale of systems, 13% from non-ILS products, and 6% from hardware. Miscellaneous revenue accounted for the remaining 10%.

The slate of companies remains the same as last year, although epixtech, inc., is once again Dynix and Sanderson Computing is Civica. Following a period of consolidation of companies, this year was uncharacteristically quiet. The activity playing out in the industry today, which has even greater impact on libraries, is the consolidation of library automation systems within companies.

Many firms oversee multiple library automation systems—either because they have developed a new system to replace a legacy product or have gained systems through acquisition. These companies are channeling their customer base toward a single system. An example is the libraries that run systems of the former DRA, now under Sirsi. With Unicorn firmly established as Sirsi's strategic product, sites running DRA Classic, Taos, INLEX/3000, and MultiLIS are being encouraged to migrate to Unicorn. Other companies have explicitly defined strategies that support two systems where the systems don't serve the same customer base of libraries. The Library Corporation with Library.Solution and Carl.Solution and BiblioMondo with PortFolio and Concerto fit this bill.

In 2002, the overall market remained basically flat relative to the previous year, which in these economic times can be taken as a positive indicator. We estimate gross revenues of the overall automation marketplace at $530 million (+/- $20 million). This estimate represents the gross revenues of all the automation companies that sell to libraries in the United States and Canada. We count each company's worldwide sales of ILS and non-ILS library software, hardware sales, maintenance, and other products and services, provided they relate in some way to library automation.

Included are the number of new contracts for each company. However, contracts to consortia, large urban systems, and school systems include multiple libraries. For those companies that are able to provide revenue, the breakdown is as follows: Innovative Interfaces led at $70–80 million; Sirsi follows at $55 million; and both Endeavor and The Library Corporation were in the $25–30 million range. Ex Libris's revenue was $20–$25 million. Both Gaylord and BiblioMondo were between $15–$20 million. Auto-Graphics, Book Systems, Inmagic, and VTLS were all in the $5–10 million range.

Several companies made changes in top-level management, and, in an interesting trend, all the recently appointed top executives come from outside the library automation industry.

Jack Blount replaced Lana Porter as president and CEO at Dynix. Blount has executive experience in the high-tech industry, and we expect to see advancements in Dynix's development, building on the strengths of what is already the industry's largest army of programmers.

Pat Sommers finished his second full year as CEO of Sirsi Corporation. Consistent with his background in the information industry, Sommers has led Sirsi toward a product suite that emphasizes integrating content. Ex Libris Group in June named Sami Kamhi as its new president, replacing Ehud Arad, company cofounder and longtime president. Kamhi also has many years in the software industry. Endeavor's president, Jane Burke, stepped down in early 2003, and Roland Dietz, formerly managing director of global sales and marketing for the Science and Technology Division of Elsevier, was named her successor. Dietz has a long history with libraries from the publishing side and an academic background in systems software development.

Most of the companies in the library automation industry are privately owned. A few of the firms, especially Dynix, Sirsi, and BiblioMondo, have acquired capital from outside investors. The public companies in the industry include Endeavor (subsidiary of Elsevier Science), Auto-Graphics, Geac, and Open Text. Most of the publicly held library companies are small divisions within larger organizations, and the financial performances of each division are not usually detailed.

No one company can be considered the leader overall. However, several companies take the top rank in specific areas:

• Dynix supports the most multiuser systems, with 3,338 installations of Dynix, Horizon, and NOTIS combined;
• Sirsi sells the most multiuser systems with 207 contracts for Unicorn;
• Innovative Interfaces maintains the highest retention rate of libraries migrating from its legacy system Innopac to the newer Millennium;
• Follett's Circulation Plus and Catalog Plus outsold all other single products for school libraries with 4,088 units sold;
• Sagebrush led the school libraries market with 4,396 sales from Winnebago Spectrum, Sagebrush Athena, and Accent;
• Gaylord employs the highest number of staff in proportion to installed libraries, a ratio of one support person per every six sites;
• Dynix, with 454 reported FTE staff, has the largest overall personnel count.

The migrations that will play out in the next three years will shape the future of the library automation marketplace. The ability to retain customers will determine which companies will dominate the market five years from now.

Almost all the libraries were replacing obsolete systems. Although few would characterize their current automation system as perfect, libraries rarely leave current systems out of dissatisfaction with support or functionality. Migrations are just too costly.

Many of the same companies that support legacy systems offer new generation systems. While we don't have comprehensive numbers, some trends have emerged:

• Sirsi attracted a majority of libraries from the DRA Classic system to its Unicorn system. A large number of DRA libraries also went to Innovative Interface's Millennium and Endeavor's Voyager, with a few large sites going to Ex Libris's ALEPH 500. The vast majority of INLEX/3000 libraries that migrated this year selected Sirsi's Unicorn. Taos libraries that migrated in 2002 almost universally selected Unicorn—offered to them as a lateral migration without significant cost.
• Gaylord saw mixed success in attracting its Galaxy libraries to Polaris, retaining fewer than half. Others went to TLC/ CARL's Library.Solution, Innovative Interface's Millennium, and Sirsi's Unicorn.
• VTLS saw larger numbers of its VTLS classic sites move to Virtua. Its retention rate scored higher internationally. Many of its competitors picked up one or two VTLS Classic sites in North America.
• Geac watched many of its ADVANCE and PLUS customers migrate to other systems in 2002.

Stronger sales can be expected in the next few years. In early 2002, 4,272 libraries were operating legacy systems. Sales that year lowered this number to 3,767, or about 12%. In a time when the tax revenues that support public libraries are low and when academic libraries face cutbacks, many institutions delay capital investments in library automation. But the time frame for operating these legacy systems is finite—probably limited to another three to five years. While each vendor assures its customers that it will support these systems indefinitely, rapidly aging hardware platforms and operating systems will drive migrations.

Librarians seek not only increased functionality in the ILS itself but tools to both help manage the electronic content they purchase and create content from digital projects. In the academic library sector, we expect strong demand for digital library systems, reference linking products, federated search tools, and other products that support multifunctional web-based library portals (see Table 6). For more on the public library market, see "The Public Library: Size and Sizzle," below.

A subset of the automation industry has long specialized in school libraries. Follett Software and Sagebrush Technologies are the two powerhouses in this market. Book Systems is a rising firm, and many other smaller companies sell automation systems to school libraries.

The traditional approach for school libraries involves standalone systems within each facility, with an optional product for searching all the libraries in the district. In the last two years, we have seen a trend toward marketing multiuser systems as centralized library automation solutions for school districts. Several vendors of multiuser systems are entering the school market. In 2001 Sirsi licensed a version of its Unicorn system to Sagebrush Technologies, which is marketed under the name Accent. This year Innovative Interfaces created a new executive position, director of school library sales, and a new product, Via, which is specifically for school districts. The Library Corporation also announced the creation of a schools division and SchoolLibrary.Solution, its new product.

Consortial sales are important. While new consortia are not being formed, consortia sales are growing. Acquiring an ILS through a consortium saves libraries money, compared with the alternative of each library supporting an individual installation. There are also savings through shared systems support, cooperative cataloging opportunities, and other areas.

A key issue for librarians in selecting an ILS vendor is the quality and quantity of the support they can expect. This year, we attempt to quantify the resources available within a company for the delivery of support (see Table 5). We report only the companies that support multiuser systems for public and academic libraries. While we have similar information for those vendors that support school libraries, discrepancies in how companies count sites has resulted in statistics that do not reasonably predict service quality.

While the current systems are mature and rich in features, librarians exert strong pressure for improvements. In turn, all companies focus on how to meet their customers' enhancement requests and develop increased functionality for potential customers.

This year, one of the focal points of new development is increased interoperability—the ability for an ILS to interact with external systems. Interest lies in establishing interoperability with circulation-oriented functions through the NISO Circulation Interchange Protocol (NCIP). The adoption of NCIP as a standard will help drive a variety of functions (such as resource sharing, patron enablement, and self-checkout) that require system-to-system interactions through circulation modules.

These days a viable system must include a web-based OPAC with basic patron enablement features such as reviewing checkouts and online item renewal. Beginning in 2000, products such as Sirsi's iBistro and TLC's YouSeeMore introduced the enhanced web OPAC, where book jacket images, tables of contents, abstracts, and reviews complement the basic bibliographic and holdings information. Library vendors have run in droves to Syndetic Solutions, the company best able to provide enriched content. Every firm reported that they offer a content-enriched web OPAC.

Digital library products—tools that allow libraries to create and manage local digital content—are also in demand, especially by large academic libraries. One of the first companies to offer such a product was Sirsi; its Hyperion Digital Media Archive debuted in 1997. Endeavor offers the ENCompass digital collection management system, Ex Libris offers DigiTool, and most recently Dynix announced its DigitaLink.

Metasearching, or federated searching, where a user keys a search term and receives results from multiple information resources, is also pushing the development of the ILS. While Z39.50 makes federated searching for bibliographic information fairly easy, today's library environment includes a complex mix of information resources. In an ideal world, the patron should be able to find information from all the library's leased information resources and the catalog through a single search, presented in a relevant and understandable fashion.

This ideal will not be easily fulfilled, but a variety of products are emerging that go a long way toward that goal. Some non-ILS companies that specialize in metasearching include MuseGlobal and WebFeat; several ILS vendors license their technologies. Metasearch companies also license their products directly to libraries, while some ILS vendors, such as Gaylord, have crafted their own metasearching capabilities.

Reference linking continues to spark interest, especially among academic and research libraries. These libraries need to provide ways to move users from citations to full text to document delivery services and online catalog searches. The OpenURL specification provides an important piece of this functionality. A NISO committee is developing an OpenURL standard, but in the meantime, a number of systems support the prestandard OpenURL specification. Ten companies indicated that they offer a product that supports OpenURL.

For academic libraries, a natural area of convergence lies between the ILS and courseware systems. Libraries struggle to attract students to their electronic resources, while students are daily using courseware packages. Early efforts in this arena include Endeavor's recent integration with the two major courseware packages, WebCT Visa course management system and Blackboard Learning System. Expect others to follow soon.

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