Growth of Lyrasis, Revamp of Regional Networks Tied to Changing OCLC Relationship

Norman Oder -- Library Journal, 04/21/2009

• Regional networks face lowered OCLC revenues
• Individual libraries see OCLC costs tightened
• New models for networks, as Amigos and BCR evolve

(updated April 21)
As with some other consolidations in the library world (and beyond), the formation of Lyrasis—out of PALINET and SOLINET—and the planned absorption of the New England-based regional network NELINET—comes down to issues of money and changing technology.

Changing relationship with OCLC
One significant driver is a changing relationship between the networks and OCLC, which provides services like cataloging and interlibrary loan that have historically generated a significant slice of network revenue. While the networks retain the role of middleman between OCLC and libraries, they have much less latitude on operating fees. Lyrasis CEO Kate Nevins told LJ that OCLC had hired a consultant who concluded it was problematic that libraries pay different amounts for services depending on network surcharges.

On July 1, OCLC will move to a new model, with a national price, and OCLC will reimburse the networks to cover the cost of supporting service. “I’m pleased that as a result of our new infrastructure changes, that OCLC’s going to be able to hold our service prices constant, and in many cases reduce them for next year,” OCLC’s Cathy De Rosa, VP for the Americas and Global VP of Marketing, told LJ.

OCLC last September also announced expanded options for service and support, including additional product training materials and access to an OCLC national training calendar; enhanced online ordering; improved and simplified billing and administrative services; more online product information; simplified product pricing options; and an expanded network of training and education partners.

The laggards in the equation, unmentioned in OCLC’s news releases, are the regional networks; indeed, before the creation of Lyrasis, SOLINET projected “a decrease in our operating budget of one third. In some ways, this move by OCLC does not recognize that cost varies, depending on number of members and geographic area,” Nevins said. “The other thing it doesn’t recognize is that surcharges were set by the members themselves.”

The future of the networks
So, what does this mean to the future of regional networks? “It’s clearly the purview of governing boards,” De Rosa said, careful not to prognosticate. “They’re working hard to bring new values and new efficiencies.”

Indeed they are. “I think there’s a really strong future for regional networks and regional cooperation, but I do think it requires a rethinking of the model,” Nevins observed. “In our case, the board decided our future depended on increasing the scale and reach of our organization, while, at same time, continuing a focus on regional services. We did not pursue a merger from a point of weakness. We saw changes were coming.”

Given that more than half the training offered by Lyrasis goes via the web, the idea of regionalism is less important. Still, Nevins noted, Lyrasis works locally with state libraries, consortia, and individual libraries, maintaining offices in Atlanta and Philadelphia. Should the NELINET absorption go through, she said, “We would maintain a presence in New England, looking to consolidate where we can to reduce costs and overlap in activities.”

Staff cuts and growth
By combining systems and processes, and moving to a single financial management system and membership system, Lyrasis has eliminated four positions, out of 65, and may cut another two or three. NELINET’s 19-member staff similarly may be trimmed upon consolidation.

“We are a fee-based nonprofit, by and large,” Nevins said. “Our role is to be good stewards of our members’ resources. That’s why we initially pursued the merger.”

Can Lyrasis, which would dominate the eastern half of the United States upon absorption of NELINET, grow further? “We are not talking with anyone about that now,” Nevins said. “It is possible that in the future there might be some opportunities. If we do, it would be based on the idea of strong regional and local programming, and the benefits of consolidation.”

“We’re really seeing the potential to be a national organization, with a series of regional hubs and regional programming,” she said, emphasizing that she meant national reach rather than blanket coverage.

Participation, revenue, savings
LJ asked Nevins to rank the activities in which Lyrasis members most participate. After OCLC services, she cited database licensing, educational services (e.g., staff development), consulting (e.g., digital services strategic planning), and preservation (e.g.., disaster preparedness).

As for revenues, the greatest source of revenue for Lyrasis now is database licensing. Then comes OCLC services, including cataloging, ILL, databases, and digitization services. After that comes continuing education and staff development.

The increased size of Lyrasis, Nevins said, allows more leverage with vendor partners, and the capacity to offer an efficient single contract has led to increased discounts.

The increased scale has also led Lyrasis to focus on new products. Former PALINET CEO Cathy Wilt is president of Lyrasis for innovation and new program development. So Lyrasis is looking into open source support and implementation, leadership development and support for emerging leaders, and digital creation and stewardship. An announcement regarding the latter is upcoming, Nevins noted.

Recent economic pressure, Nevins added, has driven a look at shared collections across libraries, including shared storage and cooperative collection development. “The more we diversify, the less we’re dependent on any single source” of revenue, she said.

At Amigos
Bonnie Juergens, executive director of Amigos, an OCLC-affiliated network based in Dallas, told LJ that trustees “have consistently determined the best strategy for Amigos members is for Amigos to remain a multi-type regional consortium focused on meeting the needs of libraries in the southwestern United States.”

In May, however, members will vote on proposed changes in membership structure and fees. For example, while there’s now a membership category of “OCLC Full User Member,” the aim is to move to a single membership category, without fees based on each member’s use of OCLC’s services.

“Like other OCLC-affiliated networks, we will experience a revenue reduction in our OCLC program,” Juergens said. “The mix of Amigos services, which has long been diversified, will continue to grow proportionally stronger in non-OCLC programs.” And future partnerships will be explored to strengthen the network.

BCR’s take
LJ also queried Brenda Bailey-Hainer, president and CEO of BCR, which is based in Aurora, CO, and has more than 8000 voting members, primarily concentrated in the Midwest and West, but also scattered throughout most of the country.

While it’s not necessary to have an office in each state, she said, “I do believe that there are significant differences between broad regions that make it sensible, practical and desirable to have more than one organization serving libraries."

Moreover, she said, the history library service, the way service is funded, the number of higher education institutions available, and the role of the state library agency often differ. Thus, there’s a need—and room—for several regional organizations. “At the same time, I don’t know what the magic number of organizations should be,” she said, recognizing the business sense of mergers.

“BCR takes the long term view on the current situation,” Bailey-Hainer said, noting that, since the organization’s founding in 1935, it has faced at least two critical financial junctures causing it to change its business focus and became stronger.
 
“The upcoming change initiated by OCLC gives BCR the opportunity to shift its resources to focus on other member needs and create new lines of business,” she said. Iin April 2007 the Collaborative Digitization Program merged into BCR and served as the foundation for its Digital and Preservation Services Unit. 

“This Unit has expanded our reach and presence not only within libraries but also within the cultural heritage institution community,” Bailey-Hainer said. The Unit also houses the new Shelf2Life Program for digitization. BCR also has expanded consulting and training into areas such as managing RFP processes for other agencies, event management, marketing and brand identity work, and workflow analysis.