The UK HE market for Library Management Systems

A mature and consolidating market

In terms of core functionality, basic components and workflows, today’s systems are the recognisable descendants from the systems of the 1980s and most have a legacy that goes back to that time. It is not surprising therefore to find a UK HE LMS market that is well developed and mature. The study established that libraries spend approximately £13,100,000 annually with the four main vendors who have nearly 90% of the market. This makes the total market worth just over £14,000,000. Of course this excludes library spending on systems from other vendors, such as RFID based self-service.

Vendors typically derive most of their revenue from annual maintenance (especially in the current market with few new sales). This is a stable and attractive business model: customers pay in advance helping vendor cash-flow and giving highly predictable revenue. The (primarily US) global market in all sectors (not just HE) was estimated to be worth around £285 million in 2006 . By comparison Google (defined in its own mission statement as a ‘library’ company ) had revenues of over USD $16 billion for 2007.

In HEIs the churn in LMS replacement is very slow, as most institutions have already replaced their end-of-life systems. Many customers retain long-term loyalty to their LMS vendors, despite changes in ownership and confusion over product direction after mergers.

Opportunities for dramatic growth are therefore quite limited. Vendors with a global reach and a large international customer base still see opportunity for organic growth. Neil Block, for example, described Innovative’s strategy in the following terms:

[It] is all about organic growth— [we] don’t want a bunch of customers, acquired through a merger for example, who didn’t select us. We still see strong new name account growth. Of course the market is mature but we dispute the characterisation that all LMSs are the same.

Vendors naturally seek to grow by ‘up-selling’ add-on products to their own LMS customers. Innovative is particularly successful here with a large portfolio of ‘add-ons’ and this no doubt accounts for its high revenues relative to its market share (see the table in 5.2.3 below). Vendors also seek to ‘cross-sell’ their add-on products to libraries with competing systems. ExLibris started this trend with products such as SFX (Open URL resolver/knowledge base) and MetaLib (federated search).

Private equity investment now plays an important part of the ownership picture with two (ExLibris and SirsiDynix) of the four main vendors now owned by private equity companies. This represents nearly half the UK market. The priority of the new owners is to get a good return on their investment before selling or refinancing. Their business horizon is between three and seven years. Inevitably, therefore, we will see further changes in ownership, which may be attended by further product rationalisation if the ownership change embraces a merger of LMS vendors.

2007 also saw Open Source LMS win some significant HE institutions in North America but this trend is still far from mainstream.

Development trends - Electronic Resources

The main driver in terms of library system developments over the last few years has been the need to manage and provide access to an increasing range of electronic resources (primarily electronic journals). This has focused attention on enhanced search and delivery mechanisms and new Electronic Resource Management (ERM) systems and features. The ERM market is clearly not as mature as the LMS market and remains fragmented.

The LMS survey confirmed this picture of fragmentation. Only a small number of institutions has invested in integrated off-the-shelf ERM systems. Most have a patchwork of solutions to solve specific aspects of the overall problem.

In terms of e-content the rise of Open Access (OA) means that HE libraries are playing a growing role in managing (via some kind of institutional repository) the scholarly output of their institution. Institutional repositories however are not part of the scope of this study.