The ongoing consolidation of the vendors that provide products and services has brought incredible change to the business landscape. Large-scale businesses involved in multiple business sectors are now a dominant force in the library technology industry. While these large businesses have resources to develop sophisticated products and services, concerns arise relative to possible product alignment or bundling strategies and price increases. The lack of FTC intervention in the recent mergers suggests that these events have not crossed the regulatory threshold of anti-competitiveness. From the library perspective, however, the consolidated companies wield massive economic clout and the choices within any given product category have narrowed. Libraries have never been passive in their relations with the vendor community. The current environment, however, means that libraries must be even more strategic in their technology investments.
Competition Remains, Despite Consolidation
In the library technology sector, the good news is that core technology products tend to survive, and even prosper, as their creators undergo business transitions. It makes good business sense for a company to continue to support and develop acquired products, even if the companies that created them are absorbed. The cost of continuing products pays off in terms of maintenance fees it can collect in the short term and in the potential to attract these libraries to newer strategic products in the long term. A study of the products implemented in ARL member libraries reveal a more competitive environment now than there was a decade ago
(see Systems and Vendors in Association of Research Libraries members
)
. The recent acquisition of ProQuest into Clarivate does not threaten any of its core technology products.
Systems and Vendors in Association of Research Libraries members
Collaboration in a Competitive Climate
A more strategic approach with commercial technology providers does not mean an adversarial relationship. Even when dealing with large-scale vendors, libraries should seek opportunities for collaboration. Engaging with a vendor for a core technology product is both a partnership and a business transaction. Libraries depend on their vendors to deliver the product at a fair price that meets the requirements as specified when it was selected and to provide competent technical support and contracted services. Beyond these minimal requirements, libraries also expect the vendor to take their interests into consideration as it develops and enhances the product. A collaborative relationship between a library and a vendor can yield mutual benefits.
Some libraries will contribute resources, including serving as a development partner for new products, helping to test new versions, and by serving on advisory groups to inform product development. These partnerships often help libraries by gaining early access to technologies and helping ensure that the product will meet its own requitements and those of its peers. Vendors benefit through products that will have increased market value gained through real-world customer input. Libraries should expect these contributed resources to yield tangible benefits through discounted pricing or waiving of license fees for a defined period. Development or beta testing relationships give libraries more of a direct voice in product development, but financial incentives can help the library justify the resources contributed to their administration. Libraries should expect reasonable in-kind or financial compensation when they contribute their valuable expertise and resources to vendors.
Avoid Non-Disclosure clauses for Contract Terms
The ever growing economic power of vendors provides libraries an opportunity to consider measures they can take to gain more leverage to ensure fair pricing and meaningful product options.
Libraries need as much information as possible as they consider selection of technology products. The capabilities of a technology product can be evaluated objectively. The fairness of pricing can be more difficult to assess. It seems reasonable for a library to know that the price offered for a product is similar to that paid by other libraries of similar size and complexity. Libraries often negotiate prices with vendors from a weak position in the absence of comparative data. A library may not be able to consult with peer institutions for price comparisons due to the non-disclosure clauses for financial details typically stated in contracts for major technology and content products.
It is reasonable for libraries to pay different amounts for the same product based on their size and complexity, which generally correlates to budget capacity. Most vendors use some set of factors, such as collection size, the population of the user community, circulation transaction trends, or other measures to inform price proposals. This model of pricing is well established and usually results in more affordability for technology products and services compared to the alternative where all libraries pay the same price. Other competitive issues may also impact pricing in addition to the usual factors, resulting in libraries or consortia with similar characteristics paying dramatically different amounts for the same product.
Large-scale Leverage
Libraries also gain more leverage within the consolidated vendor environment through collective procurement. This strategy can take the form of large-scale implementation projects or through consortial buying agreements. A very large consortium, a state-wide system, or other projects involving dozens, or hundreds of libraries will usually involve better pricing for each participant than each would have received independently. Even if libraries will implement a product independently, consortia can negotiate preferred pricing for their members. In this environment of large-scale vendors, libraries gain price leverage through procurement processes involving ever larger representation of library organizations. This business strategy is consistent with the recent trends for ever larger groups of libraries to join in shared technical infrastructure in support of improved resource sharing, collaborative collection development, and other operational efficiencies.
Alternative vendor and Product Scenarios
Some libraries may explore other alternatives in reaction to the consolidated business environment. Some may look to open source technologies as an alternative to proprietary technologies from large-scale vendors.
Open source technologies are often seen as a way for libraries to gain independence from vendors. Some libraries implement open source products through their own efforts without commercial services. These projects may not or may not result in savings when considering all related costs and may divert technology personnel from contributing to progress in other areas. In the US and Canada, almost all implementations of integrated library systems based on open source software rely on commercial services from a vendor. Some of the large companies in the industry also have deep involvement with open source technologies. Many libraries implement open source systems quite successfully, though this style of software development does not necessarily mean less involvement with vendors. Firms providing hosting and support services for open source library products tend to be small or mid-sized companies and have a focus on customer service.
Giving preference to smaller or mid-sized vendors may also be seen as a hedge relative to the consolidated business landscape. Given the relentless cycles of mergers and acquisitions, today's smaller independent company may eventually be part of a consolidated business. Selecting a product of more modest capabilities from a smaller company may or may not be a good trade-off compared to acquiring a more sophisticated product from a large business. In other cases, smaller companies often can offer specialized products and personalized services well appreciated by libraries.
Despite the major impact of consolidation, the library technology industry continues to be comprised of diverse types of businesses, including many small and mid-sized companies. Open source technologies provide viable solutions for many libraries. These alternatives represent important competition in a deeply consolidated industry. While large companies hold a dominant positions in the overall industry, at least some alternatives should be available in any given procurement scenario.
An Established Reality
The library technology industry has reached an unprecedented level of consolidation. It would not be at all surprising to see additional business events in the near future that take this trend even further. Large vendors are a longstanding part of the library economy, especially in the publishing sector. As this reality also makes its way into the technology front, libraries must work together strategically to gain economic leverage and to take available measures to facilitate a more competitive environment with meaningful choices from a diverse set of businesses.
