Strategic Positioning Options for Scientific Libraries in Markets of Scientific and Technical Information - the Economic Impact of Digitization
AbstractAs a key resource of the 21st century, information goods might displace industrial goods as key drivers of markets. The foundation of the economic prosperity of developed countries is not only based on the efficient conversion of information to knowledge, but also in imparting this knowledge in the educational system. In this context, scientific libraries play a decisive role as a provider of scientific and technical information (STI). After introducing the 2-3-6-concept, an analysis concept based on a special value chain, the paper examines the roles of the different players - author, scientific library, publisher, bookstore and scientific association - involved in the production of STI. A structural model for the value chain of the STI market is developed to analyse in detail the opportunities for scientific libraries offered by technological progress within the current economic, legal and regulatory framework. The analysis reveals that none of the players can be expected to stay within their historical core competencies. Due to technical developments and associated changes in the structure of transaction costs, each player can cover more fields of value-adding activities. The roles of the different players are merging more and more. Further, analysis of current direct and indirect monetary flows reveals considerable potential for conflict. As a consequence, players such as university libraries need to reconsider their strategic position in order to persist in the STI market. The paper proposes paths for possible strategic repositioning of university libraries.
Information and communication are highly influential elements of our society. Libraries have a long tradition in collecting documents and delivering information. Extensive collections, especially of scientific and technical information (STI), together with education, are essential for modern information societies to assure economic wealth. Educational systems have changed dramatically in the last decades, and more people are working in the scientific community than ever before. This leads both to a growing demand for STI, and to an increase in the production of STI [DBI]. These developments affect all parts of our society and will also have an influence on the libraries of the future.
Librarianship plays an important role in the world today, due to the dependency of students, professionals and researchers on information. As an illustration of these trends consider the success of document delivery services. There are general and issue-related [SUB] document delivery services. Apart from the market in the academic sector, there is also a market for digital information in the private sector, which is covered by a multitude of commercial service providers [FID]. Most of these services are pure databases, that can be accessed from all over the world via the Internet. For example, subito, the document delivery service of international libraries [sD], started with 101,756 orders in 1998, and will reach more than one million orders in 2002. Looking at the dispersal of orders according to different user groups, three-quarters of customers are non-commercial users, whereas one-quarter of customers use the services in a commercial manner [sD].
Throughout the world various academic institutions are challenged by the task of teaching an expanding number of students with a constant number of staff. Student numbers are growing because there is increasing demand for highly qualified employees. In addition, lifelong learning must be supported more and more, because rapid technological change is affecting more and more industries, requiring more support for professional study. Although this would appear to require additional qualified staff at academic institutions, typically, few extra staff have been hired due to problems of financing the public sector. Many e-learning courses have been set up to support those who are not able to attend classes on location at all times due to other work commitments [Dea97]. As providers of STI, scientific libraries hold a central position within the e-learning environment of virtual universities. They support e-learning students with both hard copies and digital documents of readings.
Most of today's scientific libraries are equipped with electronic library management systems, including Online Public Access Catalogs (OPACs), which can be accessed via the Web. When setting up e-learning offers, electronic search for literature via an OPAC has to be coupled with delivering services for these electronic documents [KGKF01]. Setting up new purely digital libraries is rare. More typically, traditional paper-oriented scientific libraries are extended with digital documents, forming so-called 'hybrid libraries'. Delivery of digital documents raises many questions, although most of the technical problems have already been solved and the solutions integrated in many academic libraries. The focus of this paper is not on technical details. The paper refers to projects such as the Stanford Digital Library Project [Sta] within the US Digital Library Initiative Phase 2 [Dig] or the Chablis-Project [BKEJ+98] within the "Distributed Processing and Delivery of Digital Documents" (V3D2) [Deua] programme of the Deutsche Forschungsgemeinschaft.
The economic problems of university libraries have been approached more or less in an ad hoc manner. To illustrate this, consider that academic libraries are usually financed from public funds of a university's budget. In addition, a small income stream is derived from revenues such as, for example, reminder charges. Under German laws for public financing, libraries cannot usually claim these charges fully; occasionally they are allowed to keep them in part. A classic example of this is the traditional interlibrary loan. Under pressure of budget cuts, libraries recently started to charge, especially for the use of digital document order, or delivery, services, despite the incentive problems with such a payment distribution.
The universities' budget problems cannot be solved by charging for document delivery services. To participate in subito, for example, a library needs to purchase several book scanners. A new book scanner normally costs about EUR 12,000. These scanners work continuously and need to be exchanged every 5-6 years. In addition to the costs of purchasing equipment, staff costs for scanning pages and for the administrative overhead must be financed. The current legal situation makes the prospect of complete cost recovery at reasonable prices illusory: digital storage of articles with repeat demand is not allowed - articles need to be rescanned, if required. As a consequence, the higher service quality of a modern German university library directly increases the incurred economic loss.
Following the document delivery process in a German university to its end, we arrive at the point of payment. Most of the time, users are bound to a user account as far as ordering and charging for a document is concerned. Recharging this account in due course, however, often only works on site. The virtual user is at a disadvantage, needing access to a user account that has to be opened in person and can only be recharged the same way. Often, commercial STI providers have external payment possibilities embedded into their services, which is not given to university libraries due to legal restricions. In the commercial sector it is not only possible to pay on account, via cheque or credit card, the user also has the chance to employ some of the newer electronic payment systems: annual subscriptions, as well as monthly billing models. Commercial STI providers enable the virtual user to buy a document from wherever they want. In contrast to the universities, mostly serving regional markets, commercial document delivery services are international players.
A digital document can be delivered by sending it through the post or via fax or email. Putting the file on a ftp-server is another way of getting the document to the user. The handling time (ordinary or express delivery), as well as the user group, can be decisive factors in the amount the user has to pay for the delivery. Normally, different groups of users can be distinguished: one group consists of students and employees of scientific or research facilities, etc.; another group is made up of commercial users such as firms or company libraries; a third group is composed of private users. Such distinctions between user groups requires further technical effort at the infrastructure level, resulting in additional transaction costs.
What remains unsolved is the future role of scientific libraries in competitive STI markets. This paper develops a structural model based on [NHS02] the value chain of the STI market, which allows for a detailed analysis of the options for scientific libraries given the impact of technological progress combined with economic, legal and regulatory obstacles. Systematic analysis of development options for all market participants made possible by technological progress, and analysis of current direct and indirect monetary flows, reveal considerable potential for conflict.
The paper is structured into three parts:
- Section 2 presents the 2-3-6-concept, an analysis concept based on a special value-chain presentation, and then determines the overall activities involved in STI markets by means of this concept.
- Section 3 analyses the position of authors, libraries, publishers, bookstores, collecting societies and scientific associations within STI markets based on these activities.
- Section 4 discusses strategic development options for the different players in section 3.
With the growth of the Internet, the digitization of entire
markets continues. Much research is trying to answer the
question of what kind of future there might be for STI in
Germany [Lit01, Deub, Kie01].
Scientific libraries play a prominent role in markets for
technical literature. This role can be better be understood
with the help of the so-called '2-3-6-concept' [EA96] in digital interactive services (DIS),
an industry that has evolved around electronic commerce for
digital information goods. Schlueter and Shaw [SS97] analyse the whole area of electronic
publishing by means of the 2-3-6-concept. Electronic
publishing is defined as the distribution of all sorts of
information goods via the Internet. A recent application of
this concept to the analysis of emergent industry integration
trends in electronic markets for publishing, consumer
products, financial services and travel services is presented
by Schlueter-Langdon and Shaw [SLS02].
Figure 1. 2-3-6-concept in digital interactive services: two chains, three steps and six core processes of value-adding activities. Based on [SS97], p. 21
The 2-3-6 concept shown in Figure 1 is an extension of the concept of value chains [ZPS+00]. A company's value chain consists of its value activities together with the profit margin. Value activities are defined as processes that create value for the customer. In a market, the value chain of a company is linked with the value chain of its suppliers and its customers. From a management view, the analysis of a value chain serves to develop competitive business strategies. Schlueter and Shaw's 2-3-6 concept is a simplified description of two vertically integrated value chains, namely content and infrastructure, which are essential for electronic markets [SS97]. These value chains are reduced to a set of three value-added stages. Each of the six resulting core processes represents the core processes of existing industry sectors, and each core process consists of different sub-activities.
At the infrastructure level these are the transport process, the delivery support and services process, and the interface and systems process. Players in the transport process are from the telecommunication sector (e.g. AT&T, BellSouth). The delivery support and services process admits players from the financial services industry (e.g. Visa), the network services industry (e.g. Uunet), and the systems integrator industry (e.g. EDS). The interface and systems process is the domain of software and hardware manufacturers (e.g. IBM, Microsoft). In the infrastructure chain, technical progress, the main driver for change at the content-creating level, becomes clearly visible.
For the content value chain, the core processes are "content creation", "content packaging" and "market making". Players in the content creation process are e.g. music and TV studios (e.g. Metro Goldwyn Mayer); players in "content packaging" are TV-channels and publishers (e.g. NBC, Washington Post); players in "market making" are online services (e.g. AOL).
The main motivation for structuring the value chain as discussed above is that this structure reflects the current industry structure (the status quo). It also reflects the potential for competition by extending core competencies either horizontally or vertically along/across the value chain.
With the help of this concept the structure and behavior of industries can be analysed and visualized in a qualitative way, e.g. the effects of concentration on competition, and the effects of competition on pricing, investment and innovation. For this purpose, combinations of value activities identify the strategic role of each player. Analysing the dynamic development of these combinations reveals the opportunities and threats each player faces from other market participants. Opportunities and threats are largely influenced by technology changes and, in the case of STI markets, by the legal framework, by cost structures and by earnings schemes. In the following we concentrate on STI markets. Taking the classic library as an example, a shift in the role of open access libraries towards hybrid libraries can be observed. This shift is the result of technical progress in the digitization of information goods.
This paper uses the 2-3-6 concept as a framework to position hybrid scientific libraries and identify possible developments. Starting with the assignment of identified core processes and their activities to the relevant players, such as authors, libraries or publishing houses, a qualitative analysis of the strategic position of scientific libraries emerges.
The development of digital interactive services has had a great influence on the role of libraries as distributors of STI. The following paragraphs show this with the help of the 2-3-6-concept. Besides authors, the relevant players in the content chain are publishing houses, libraries, the book trade, collecting societies, and scientific associations.
Activities within the core processes of the value-added chain in the STI market can be identified in Figure 2. For example, in the core process "content direction" activities are "content creation", e.g. writing a professional article; also the "process of peer-reviewing" for professional journals, and "initiation of content creation", such as the work of publishers looking for new manuals. The activities within one core process can be carried out by different players, defining their role within the STI market.
This article focuses on the market for STI. Within the 2-3-6 concept four core processes are relevant: "content direction", "content packaging" and "market making" on the content chain; at the infrastructure level we concentrate on "delivery support and services". Two other processes, "transport" and "interface and systems", are relevant factors for DIS but are mainly of importance in other areas like the telecommunication industry and the hardware industry, since in these areas standard systems like Web browsers are used instead of specific STI products. Our study takes the industrial structure of these industries, especially their earnings and cost structures, as a given fact.
The following assigns the relevant activities for some of the players mentioned above to define their role within the 2-3-6-concept.
Figure 3 displays authors' traditional activities in the STI process, as well as the activities authors might be able to do in the future with the help of digitization. The creation of content by an author is the central activity within the value-added chain. Nevertheless the digitization of information markets makes other activities available for the author. Beginning with the possibility of the electronic preparation, authors can also distribute their own work easily with the help of the Internet, e.g. a pdf document on their Web site. This does not solve the question of who gets the money, however. Detailed research in the field of copyright law would be necessary but goes beyond the scope of this article.
Which activities and core processes do scientific libraries cover? Figure 4 reveals that hybrid libraries are involved in at least three core processes: in "content package and content refinement", in "market making" and in "delivery services". The change from conventional libraries towards hybrid libraries is a consequence of the ongoing process of digitization. Meanwhile, it still is not obvious what the position of university libraries might be and should be within the STI market.
Categorization of the book inventory can be seen as a classical domain of libraries. Of greater interest within the value-added chain, is search - and delivery - of books and articles in a library or via a library cooperative. To get books and/or articles from conventional open access libraries, the user has to be present physically. This not only applies to the process of lending a book, but also for search and other value-adding services like recommender systems [GSHJ01]. With OPACs and digital distribution, libraries can reach additional groups of users and can also intensify their relationship with regular customers.
The process of digitization within hybrid libraries necessarily means an ongoing extension of services at the infrastructure level of the 2-3-6-concept. Several service providers offer payment services which can be easily integrated in digital processes [KS02].
Publishing houses can also extend their activities beyond their traditional core processes (Figure 5). The development of an electronic distribution channel seems to be the biggest challenge confronting the publishing industry. A number of technical innovations are still required, including acceptable digital rights management tools.
Organization of the reviewing process is still the main activity for publishing houses, especially for peer-reviewed professional journals. Publishers organize the quality management process that is characteristic of scientific publications, and gradually acquired a high reputation for their peer-reviewed academic journals. With the switch to electronic publishing the reviewing process may change, and it is not clear that publishers will continue to be the main player if another player succeeds in building high academic reputation.
Another industry undergoing structural change is the bookselling trade. It is not digitization that is causing problems, but new distribution channels. The Internet has allowed new business models, e.g. Amazon.com, to emerge (see in detail [ROW01,GGSHST02]). Figure 6 shows the potential for the bookselling trade, assuming it can manage the transition to hybrid selling of physical and digital content.
The role of scientific associations in STI markets and publishing houses is changing with the adevnt of digitization (Figures 7 and 5). Until now only the bigger associations with many members, e.g. IEEE or ACM, could successfully merge the activities of publishing and printing in their field of academic interest. With the help of digitization, smaller scientific associations are able to publish their products electronically. Several business models are possible. Members can be given access to information for free, while non-members are charged on a pay-per-view basis. There seems to be great overlap of the potential future roles of scientific associations and publishing houses. Nevertheless, the academic institutions - especially in their role as peer reviewers - still work for both parties. Whether both players will find sustainable positions within the market of STI or not may be a question of legal, political and economic power.
Collecting societies provide an indirect payment service and cannot be seen as normal players within the value-added chain. They are unfortunately not included in several recent studies [Lit01,Kie01], although they influence the structure of STI markets with the transaction costs they impose on market participants. For example, the single article royalty imposes a strict lower price limit on document delivery services. If this is set too high, it may lead to market failure and degrade the efficiency of scientific research.
The role of collecting societies can be seen in Figure 8. The players involved in the value-added chain exchange physical goods and/or information. The possible reproduction of information via copying - physically or digitally - adds a special feature to the STI market (in fact to the whole publishing industry). Collecting societies are one way of solving the problem of fair distribution. Figure 8 shows their role as an agent taking money from different players and redistributing it towards those players not able to get fair remuneration otherwise.
The implementation of this distribution process turns out to be rather complex. The collecting society responsible for literature in Germany, Verwertungsgesellschaft Wort, is a highly complex institution trying to resolve the problem of fair redistribution with the help of, more or less reliable, statistics. The payment scheme itself is the result of a political process that is discussed regularly.
Forthcoming technologies might help in finding new ways of implementing fair processes, both in gathering the statistics on multiple users of the same product and in routing payments towards the right owners. The problem of knowing how much money copyright owners should get from copy machine manufacturers can be solved this way, too. Collecting societies may profit from technological progress and evolve as impartial market operators for intellectual property rights.
Looking at the roles of the different players, it becomes obvious that all of them are embracing activities towards the right-hand side of the STI figures, i.e. towards the market side. The main reason for this development is the process of digitizing products - articles, books, film-documents, etc. What is relevant in this discussion is the fact that there is a horizontal move on the value-added chain towards the market. This makes it more difficult for players in the STI market to define their strategic position in order to gain profit. All players, and also new entrants to the market, can try to take over activities in other core processes; they are driven by market forces to do so.
It is worth remarking that digitization of STI no longer allows single players in that market simply to defend their conventional position. That same activity might be taken over by different players, sometimes resulting in better, sometimes in inferior, quality. For example, within the core process "content packaging" the activity "digital print" might easily be completed by different players: by the author, but also by the publishing house or the bookselling trade. Looking at the core process "market making", the same is true for the activity "research tools". All players, with different emphasis and therefore different benefits for the consumer, can integrate this activity into their portfolio. In an ongoing competition an optimised research function might be the central requirement of consumers in their decision to choose one or other provider. Combining the research function with the option to buy or loan will be crucial in the decision-making process of the consumer using electronic means.
Comparison of Figures 4, 5 and 6 profiling the current and future business processes of university libraries, publishing companies and bookshops shows a large potential for conflict resulting from development options for all market participants made feasible by current Internet technologies. Without discussing the strategic options of all market participants in detail, such as e.g. authors cooperating closely with a specialized peer-to-peer search and payment provider (e.g. on Napster or Gnutella-like peer-to-peer platforms), the following concentrates on potentially successful strategies for university libraries.
A strategic repositioning of libraries should essentially use and focus on the specific core competencies of university libraries. Currently these core competencies are:
- Large inventories of books, which is neither matched by bookshops nor by publishers (e.g. the South-West German Library Network, with 23 member libraries hosted by the university library of the Universitat Karlsruhe (TH) contains about 15 million documents).
- Long experience in cataloging and indexing (and, in the German tradition, of building special collections) [SUB].
- The still excellent network and operating infrastructure of large universities.
- Large numbers of users already using the Internet and digital services of university libraries (e.g. the document delivery service subito, is ranked number 5 worldwide, forecasts a million document orders for 2002 [BG02]).
In the short term university libraries should:
- be combined with computing centers into information service centers with a chief information officer (CIO) who is responsible for and represents information services and infrastructure at the university's top executive level. Synergy effects expected from this reorganization are to be found in operating and maintenance, better standardization in hardware and software, and joint user administration.
- develop (automated) personalized services, e.g. recommender systems. The expected benefits are an improvement in the service quality and improved accessibility of literature by students and researchers. The development of such services benefits from the established network infrastructure and the large number of current users. The critical mass of users necessary to justify the development of automated recommendations using statistical methods is already met by university libraries. Such services can be offered with relatively small investments in additional infrastructure, hardware, software, and with small incremental operating costs.
- develop improved document inventory management systems similar to the retail and wholesale industries to improve the availability and timely delivery of documents according to the preferences of library users. Such services are usually developed as a by-product ofpersonalized services and are based on the same infrastructure.
Over a period of several years university libraries should strive to establish themselves as the university's electronic publisher of choice. This goal requires:
- Creating a consciousness for a tighter binding of authors to the university's own publishing channels. A start here would be thinking about stricter publicity requirements, e.g. of diploma theses which can be offered electronically by university libraries. A good example is the option of choosing between a book publication of a dissertation paid by the student and (free) electronic publication within the university library. Such changes require the introduction of digital rights management systems, e-payment systems and fair pricing to further the interests of all parties involved.
- Overcoming the problem of scientific authors seeking to build reputation based on publication. Today, only publication in peer reviewed academic journals helps authors improve their career chances and their scientific standing in their communities. This implies establishing editorial boards with a high academic reputation and supporting an electronic version of the peer review process as the method of choice for quality management. This in turn requires incentives for experienced professors to publish in such electronic channels and to participate in the review and in the quality management of such university library-based electronic publication outlets.
Self-financing of such services, which is typically demanded by politicians, first requires a change in the legal framework in which university libraries operate today in Germany (e.g. intellectual property rights, competition and antitrust laws, labor legislation, budget laws). These changes most probably require considerable time and can be expected only in the long run. They are necessary to increase the international competitiveness of the German university sector, however.
We gratefully acknowledge the funding of the project "Scientific Libraries in Information Markets" ("Wissenschaftliche Bibliotheken in Informationsmärkten") by the Deutsche Forschungsgemeinschaft (DFG) within the scope of the research initiative "Distributed Processing and Delivery of Digital Documents" (DFG-SPP 1041 "V3D2: Verteilte Vermittlung und Verarbeitung Digitaler Dokumente").
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