The big news this month concerns Innovative Interfaces, Inc. receiving a major investment from a pair of private equity firms. Until now, this company had often touted its independence from the influence of outside investors as one of its positive qualities. Innovative will need to demonstrate that its new ownership arrangement actually does mean “business as usual” or that any upcoming changes will result in substantive benefits to current and potential library customers.
With this change, private equity investors own in whole or part the top three companies in the industry, SirsiDynix, Ex Libris, and Innovative. As we explore the details of this transition at Innovative, it's also interesting to think about the broader issues regarding the interest of private equity investors for the library automation industry.
The sustained interest by private equity firms to invest in the library automation industry can be taken as a positive vote of confidence in its financial health and in its potential for growth. Investors at this level are looking for strong companies poised for additional growth. It seems to me that these investors would become involved with companies only if they see opportunities to shape strategies in ways that will increase their overall revenue and profitability. Does that mean that costs will go up for libraries? While I wouldn't rule out that outcome, I would think that it's unlikely that new strategies will alter the prices that any given library will agree to pay for its technology products. It seems more likely to me that new investors would first seek opportunities to exploit new markets, expand product offerings, and to streamline operations in ways that will reduce costs.
In this issue we also cover the launch of a Soutron Global as a new competitor in the industry wholly owned by its founder. It enters the scene with an explicit position that without dependence on external investors it has more flexibility to be responsive to its library customers. Time will tell whether this flexibility will translate into a strong position in the industry.
Whether owned by the individual that founded the company or by external investors, almost all the companies in the library automation industry exist to generate a profit. The obvious exception, OCLC, is a non-profit membership organization with business strategies not that different from its for-profit competitors.
But whether the organization is forprofit or non-profit or if it works with open source or proprietary software, their longterm success depends on whether libraries will find value in their products and services. With all the pressures that libraries face today, they need more than ever strong technology products at reasonable costs. These new investors must understand the forces of change that impact libraries and the limitations of their budgets.
Libraries have an interest in the success of the organizations upon which they depend for its technology just as those organizations have an interest in the success of libraries. While libraries do not want to be taken advantage of in the marketplace of automation software and services, they also need to build partnerships with organizations to create technologies to meet their needs today and into the future. A huge portion of libraries depend on products provided by companies under the control of private equity investors, and a lot is at stake for finding mutual benefits.
It's also a time when organizations under other ownership models can step up to demonstrate whether they can deliver better values and stronger products. In the end, the business model or ownership of the company is only one of many factors that come into play as libraries make technology decisions. The strength of products, quality of support, and a solid understanding of library futures are factors, I think, are more important differentiators.