[ Editor’s note: Carl Grant presents his views on how the economic downturn may affect federated search vendors and customers this year. Carl’s forward-looking article is a nice complement to Abe’s looking-back review of 2008.
Carl Grant is President of Ex Libris North America. With more than a quarter century of experience in the library-automation industry, I’m grateful for his periodic and very popular contributions to this blog. ]
Searching for answers about metasearch in 2009
As Yogi Berra once said “The future ain’t what it used to be” and there is hardly a more apt description of what the metasearch business and many others are facing in 2009.
Obviously, much of the world has been turned on its ear over the past few months. Future plans, once elaborately developed, budgeted for and in place, have now been shelved. In their place new plans being developed, include words like “contingency,” “possible scenarios” and “emergency.” The reality is that these new plans bear only a faint resemblance to those they replaced.
This new reality is compounded by the fact that there are a host of unknown variables at the moment, including the ultimate fates of the automobile industry, investment companies, real estate markets and many others; any one of which, depending on the outcome, could send us in into entirely new (and not necessarily good) directions. But let’s assume, just for the moment, that the trajectory doesn’t change markedly from what we’ve already seen; what then will the metasearch business look like in 2009?
There are some things that we can rather safely count on in economically distressed times and these include:
a. Leading organizations will see and seize opportunity. Times like these are when very strategic investments and moves can put organizations in a position to catapult past their competitors when the economy begins reversing. Investment in R&D while possibly trimmed, will be continued in leading firms. One benefit for suppliers is that market research conducted during this time is by far more productive because end-users are more highly focused, re-evaluating every aspect of their operations, and are eliminating those that don’t clear critical baseline criteria. As a result new approaches to problems find more receptive audiences. Of course, this is what leaders are doing and they are by definition a minority. So what about the majority?
b. Most organizations will retrench on all fronts. Many will argue that retrenching is to be done out of sheer necessity. To be sure, all organizations will need to cut back in some areas of their operations to deal with these economic realities. Unfortunately, many organizations approach this by simply doing “across-the-board-cuts” until their budgets realign expenses with revenues. This is a very shortsighted approach. It may be easily implemented but it is one with severe long-term consequences for the organizations and the suppliers that rely on them for sales. Selective and focused cuts, accompanied by strategic investments that support the differentiating values of the organization, such as metasearch, will ultimately strengthen the organization. It’s not as easy an approach and obviously increases the risk but the results could be markedly better.
c. Libraries, (one large market for federated search products), will see increased utilization during economically depressed times. Public libraries will see this because people will once again, come to value the free services and resources that are at their disposal. Academic libraries will benefit from increased enrollments as people take the opportunity to retrain and update their skill sets. Parade Magazine reported on December 21, 2008 that public libraries are seeing increases in usage of 20% already. This is a time when libraries have and should act on the opportunity to re-establish and re-engage with their users, who for some time now have been slowly and steadily pulled away by other, newer and more interactive information suppliers like Google. As I’ve argued before, libraries/librarianship have a substantial value to offer in assisting, obtaining and delivering information, but they’ve failed to deliver that value in the new web-based information environment that users prefer.
d. There will be a shakeout of the federated search suppliers in the field. It is inevitable that in an economic downturn of this size and dimension, we will face the loss of some suppliers either through reduced product offerings, via merger/acquisition, or total cessation of operations. Young firms doing a delicate balance of debt vs. revenue, a common state while in the startup phase, may succumb to the lack of credit and or sales. Larger, more established software firms have recurring revenue streams and while their new sales may suffer, they’ll likely be able to better endure the storm until the situation starts turning around. The basics of good business management don’t really change in this environment and those that have taken a conservative, but steady approach to the growth of their businesses, will have done risk management planning and will be in a position to draw on the funds set aside for these kinds of business cycles. Those that have operated closer to the edge of high-risk may well now lose that bet.
e. Open source business models will continue to have a multi-faceted impact on proprietary software suppliers. Depending on your preferences, you can easily find pundits that will tell you this economic environment will result in the explosive growth of open source, or alternatively, that this will be the final death-blow to this nascent movement. As I have long maintained about open source, the extremes of this movement will be proven wrong once more. Yes, it is true that many organizations will refocus their investments to more strongly support their primary mission statements and, as such, may well trim back on supporting the investment in IT and people required to be a full supporter of open source. At the same time, those who’ve invested heavily in open source already, while possibly reducing that investment, will most certainly not abandon it. As with everything else, what we will see is realignment of markets and players within those markets.
Large organizations, particularly those that tend to be vision and leadership focused and where the financial impact has been more minimal, will continue their investment. They will see open source as enabling them to move in mission-focused directions at a higher rate of speed than that of other solutions. Other portions of the market will view the stability, rich functionality and enterprise-level software of proprietary firms as a way to allow them to focus on other, more visible and higher-value aspects of their operations. In all cases, both the economy and open source software firms will cause proprietary suppliers to focus on enhancing, promoting and tailoring their service offerings to better meet customer needs.
Open source software firms, by definition, live on the service satisfaction of their customers being extremely high. In order to retain their existing customers and attract new customers, proprietary firms will have to step up the depth and quality of their service. The other major impact I expect to see open source have is to increase the adoption and supply of SaaS based solutions. While this most certainly would have happened without open source, I see open source driving it more rapidly because it helps to level the competitive difference for the proprietary software supplier, it helps to make costs more affordable for end-users and it also helps to ensure that should something better come along in the future, the end-user is in a better position to more quickly adopt the new solution.
Open source software is here to stay for a long time to come and so is proprietary software. The way these two continue to interact and change the business models of the other will be an interesting part of the year ahead. I still maintain, as I have for a long time, that the real impact of these two forces/markets will be realized when end-users can select software components from multiple suppliers, easily hook them together and develop the applications they need, with the functionality they want. When we move from focusing on open source vs. proprietary to the interoperability of fine-grained components through simple administrative interfaces, we will know we’ve taken the next major step in software development and utilization. I believe one consequence of the current economic crisis is that it will speed us down that pathway.
Now, as a reader of this blog, you most likely want to know what does this brief and general analysis mean for you and metasearch?
As a purchaser/user of products, you should be looking for firms that are talking about more than their next set of enhancements; rather they should be talking about their next generation of products. Very few organizations will come out of this economic crisis unchanged. Most will be substantially changed in that many marginal activities will have been eliminated, fewer people will be supporting those activities that are left and end-users will be more in number. That combination means new work-flows, new efficiencies and new approaches will be required. Do the metasearch tools you’re examining deal with these realities? In these situations, buying products that are more of the same would be a strategic mistake.
At the same time, deciding where to invest your limited resources will require more thought and analysis. Looking carefully at the financial situation of the metasearch firms you’re considering becomes far more important. This step consists of more than just asking for and reviewing financial statements. Have someone who understands financial analysis do this step and provide you with a report (universities are filled with professors and students who can and will do this and public libraries can seek qualified volunteers from their community). While the financial statements are being reviewed, you should be running a return-on-investment analysis that supports the true mission statement and objectives of the organization. Only those investments that pass the test should be made.
This is a time for library administrators to seriously look at, and possibly realign, the major goals of their organizations. No longer does the economy afford the choice of “our organization is different, our needs are unique” or “we’ve always done it this way” to dictate actions. The result of those previous choices placed demands on metasearch suppliers for complex configurations of software to support local needs at the cost of major, coordinated and national initiatives that would have leveraged greater good. It also resulted in investments that were marginal and peripheral. It is time now to align libraries on a national level, behind a national agenda and to invest in initiatives that move that agenda forward. Technology and certainly within that, metasearching, are definitely part of that agenda, because libraries need to provide a uniform central interface that reaches into all of their organizations and resources. Perhaps this means it must be done in a more coordinated, more purposeful way than has been the case in the past with existing national organizations. It may mean the creation of new approaches, new national organizations and/or new leadership that would be capable of taking these steps.
As a developer and supplier of metasearch products, it is obvious from what I’ve said above, that carefully examining and maintaining strategic initiatives is critical, while of course you work hard to provide your existing customer base with every reason to retain your product and services. New product plans being developed must deal with this very real economic situation of customers and must offer substantive advances in providing solutions to their needs.
I started this post with a quote and a caveat, so let me close with a quote and repeat an earlier caveat. Herb Brody once said it would be wise to remember that “Telling the future by looking at the past assumes that conditions remain constant. This is like driving a car by looking in the rearview mirror.” Much remains to be seen in 2009. While the above is my analysis today based on the events we’ve seen thus far, events of tomorrow can certainly and dramatically change the situation. Dynamic leadership, analysis and flexibility will be just as critical as anything I’ve mentioned in determining where metasearch is headed in 2009.