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Open Source isn’t for everyone, and that’s OK. Proprietary Systems aren’t for everyone, and that’s OK too.

Monday, November 2nd, 2009

Last week, there was a small dust up in the community about a “leaked” document from one of the systems suppliers in the community about issues regarding Open Source (OS) software.  The merits of the document itself aren’t nearly as interesting as the issues surrounding it and the reactions from the community.  The paper outlined from the company’s perspective the many issues that face organizations that choose an open source solution as well as the benefits to proprietary software.  Almost immediately after the paper was released on Wikileaks, the OS community pounced on its release as “spreading FUD {i.e., Fear Uncertainty and Doubt}” about OS solutions.  This is a description OS supporters use for corporate communications that support the use and benefits of proprietary solutions.

From my mind the first interesting issue is that there is a presumption that any one solution is the “right” one, and the sales techniques from both communities understandably presume that each community’s approach is best for everyone.  This is almost never the case in a marketplace as large, broad and diverse as the US library market.  Each approach has it’s own strengths AND weaknesses and the community should work to understand what those strengths and weaknesses are, from both sides.  A clearer understanding and discussion of those qualities should do much to improve both options for the consumers.  There are potential issues with OS software, such as support, bug fixing, long-term sustainability, and staffing costs that implementers of OS options need to consider.  Similarly, proprietary options could have problems with data lock-in, interoperability challenges with other systems, and customization limitations.   However, each too has their strengths.  With OS these include and openness and an opportunity to collaboratively problem solve with other users and an infinite customizability.  Proprietary solutions provide a greater level of support and accountability, a mature support and development environment, and generally known fixed costs.

During the NISO Library Resources Management Systems educational forum in Boston last month, part of the program was devoted to a discussion of whether an organization should build or buy LRMS system.  There were certainly positives and downsides described from each approach.  The point that was driven home for me is that each organization’s situation is different and each team brings distinct skills that could push an organization in one direction or another.  Each organization needs to weigh the known and potential costs against their needs and resources.  A small public library might not have the technical skills to tweak OS systems in a way that is often needed.  A mid-sized institution might have staff that are technically expert enough to engage in an OS project.  A large library might be able to reallocate resources, but want the support commitments that come with a proprietary solution.  One positive thing about the marketplace for library systems is the variety of options and choices available to management.

Last year, during the Charleston Conference during a discussion of Open Source, I made the comment that, yes, everyone could build their own car, but why would they.  I personally don’t have the skills or time to build my own, I rely on large car manufacturers to do so for me.  When it breaks, I bring it to a specialized mechanic who knows how to fix it.  On the other hand, I have friends who do have the skills to build and repair cars. They save lots of money doing their own maintenance and have even built sports cars and made a decent amount of money doing so.  That doesn’t make one approach right or wrong, better or worse.  Unfortunately, people frequently let these value judgments color the debate about costs and benefits. As with everything where people have a vested interest in a project’s success, there are strong passions in the OS solutions debate.

What make these systems better for everyone is that there are common data structures and a common language for interacting.  Standards such as MARC, Z39.50, and OpenURL, among others make the storage, discovery and delivery of library content more functional and more interoperable.  As with all standards, they may not be perfect, but they have served the community well and provide an example of how we can as a community move forward in a collaborative way.

For all of the complaints hurled at the proprietary systems vendors (rightly or wrongly), they do a tremendous amount to support the development of voluntary consensus standards, which all systems are using.  Interoperability among library systems couldn’t take place without them.  Unfortunately, the same can’t be said for the OS community.  As Carl Grant, President of Ex Libris, made the point during the vendor roundtable in Boston, “How many of the OS support vendors and suppliers are members of and participants in NISO?”  Unfortunately, the answer to that question is “None” as yet.  Given how critical open standards are to the smooth functioning of these systems, it is surprising that they haven’t engaged in standards development.  We certainly would welcome their engagement and support.

The other issue that is raised about the release of this document is its provenance.  I’ll discuss that in my next post.

Problems with a “Kindle in Every Backpack”

Wednesday, July 15th, 2009

Interestingly, on the heels of last week’s ALA conference in Chicago, the Democratic Leadership Council (DLC) has released a proposal: “A Kindle in Every Backpack: A Proposal for eTextbooks in American Schools”.  This influential DC-based think tank promotes center-left-leaning policies related to education, trade, pro-business tax and economic reform and health care according to their website.  The report was issued by Tom Freedman, a policy analyst and lobbyist, who had worked as a policy adviser to the President in the Clinton administration as and former Press Secretary and Policy Director for Senator Schumer (D-NY).  Unfortunately, this is the kind of DC policy report that approaches these issues from a 30,000-foot level from an expert who, by the looks of his client list, has no experience with the media or publishing industries and therefore comes to the wrong conclusion.  This perspective leads to a report is light on understanding the business impacts, the pitfalls of the technology at this stage, and the significant problems that would be caused by leaping at once behind still maturing technology.

The report does make several good points about the value of e-texts. The functionality, the reduction in manufacturing costs, the up-date-ability of digital versions, the environmental impact and savings of digital distribution, all make the move to ebooks very compelling. I do agree that this is the general direction that textbooks are headed.  However, before we jump headfirst into handing out ebook readers (especially the Kindle) to every child, there’s much more to this topic than Freedman’s report details.
While a good idea from some perspectives, Freedman misses the trees through the forest.  First of all, while I am incredibly fond of my Kindle, it is not perfectly suited for textbooks.  Here are several concerns I have at this stage, in no particular order.  Many of these topics were themes we covered in the NISO / BISG Forum last Friday on the Changing Standards Landscape for Ebooks.  We’ll be posting video clips of the presentations later this summer.  NISO is also hosting a webinar on ebooks next month.
The business models for ebook sales are very early in their development.  Many critical questions, such as license terms, digital rights management, file formats and identification still need to be explored, tested and tweaked.  It took more than a decade for the business model for electronic journals to begin to mature and ebooks are only at the outset of these changes.  Even a year later, the market of e-journals is still a tenuous one, still tied in many ways to print.  It will be at least a decade before these same models mature for ebooks, which is a larger and in many ways a more complex market.

While a print book might be inefficient from the perspective of distribution, storage and up-to-date content, print has the distinct advantage in that it also lasts a long time.  Freedman’s report notes that many school texts are outdated.  A 2008 report from the New York Library Association that Freedman cites highlights that “the average age of books in school libraries ranges from 21 to 25 years old across the six regions of the state surveyed, with the average book year being 1986.”  That NYLA report also found that “the average price of an elementary school book is $20.82 and $23.38 for secondary school books.” So if one text were purchased once and used for 20+ years, the cost per year, per student is less than $1.00.  I seriously doubt that publishers would be willing to license the texts for so little on an annual ongoing subscription basis.  That would reduce the textbook market from $6 billion per year less than $1 billion (presuming if the 56 million k-12 students were each given an e-book reader with 6 books at $2 per book, which is more than twice the current cost/year/book detailed in the NYLA report.) The problem is that the textbook publishes can’t survive on this reduced revenue stream and they know it.
I don’t want to quibble, but the data source that Freedman uses for his cost estimates is simply not accurate for manufacturing as a percentage of overall costs of goods sold.  Therefore his estimate of the potential costs savings is way off the mark.  Freedman claims that the savings by moving to digital distribution would be in the range of 45% and is simply wrong.  Anyone who has dealt with the transition from print to electronic distribution of published information knows this.  To paraphrase NBC Universal’s Jeff Zucker, the publishing world cannot sustain itself moving from “analog dollars to digital pennies.”  The vast majority of costs of a product are not associated with the creation and distribution of the physical item.  Much like most product development, most people are shocked to realize that it costs less than a fraction of a penny to “manufacture” the $3.00 soda that they purchase at a restaurant, or only $3 to manufacture the $40 HDMI cable.
Physical production of books (the actual paper, print and binding) represents only about 10-15% of the retail price.  Had Freedman actually understood the business (or Tim Conneally, who wrote the cited article) he would have understood the flaw in the following statement “32.7% of a textbook’s cost comes from paper, printing, and editorial costs.”  The vast majority of the 32.7% are not manufacturing costs, they are editorial and first copy costs, which do not go away in a digital environment.  Unless people are willing to read straight ASCII-text, a book still needs to be edited, formatted, laid out, tagged for production, images included, etc.  This is especially true in textbooks.  These costs do not go away in a digital environment and will continue to need support.  If the industry is functioning on $6 billion in annual revenues, reducing marginal costs by even 20% wouldn’t allow it to survive on less than half of present revenues.  This is a problem that many publishers are finding with current Kindle sales and has been the subject of a number of posts, conjecture and controversy.
A much better analysis of the actual costs of manufacturing a book than what Freedman uses in his paper is available on the Kindle Review Blog. Even though this analysis is focused on trade publication, the cost splits are roughly equivalent in other publishing specialties.
Costs are another issue inhibiting the wide adoption of ebook reader technology.  Once the cost-per-reading device decreases to a point where they cost less than $100 per device they will likely begin to become as ubiquitous as the iPod is today. However, they will have to drop well below $100 before most school districts will begin handing them to students. I doubt that it will take place in the next 3-5 years.  The reasons for this are myriad.
At the moment, the display technology of e-book readers is still developing and improving.  This is one of the main reasons that manufacturing of the Kindle was slow to meet the demand even into its first year of sales.  Although increased demand from a program such as proposed would significantly boost manufacturing capabilities, it is still an open question as to whether e-ink is the best possible technology, although it is very promising – and one that I’m fond of.  Would it make sense for the government through a “Kindle for every child” program to determine that Kindle and its technology are most appropriate, simply because it was first to market with a successful product (BTW, I’m sure Sony wouldn’t agree with this point.) Even recently with several hundred thousand devices produced, the manufacturing costs for the Kindle are reported to be about $185 per device.  It would take a 75% reduction in direct costs to make a sub-$100 price feasible.  That won’t happen quickly, even if the government through millions of dollars Amazon’s way.
Other issues that I have about this idea are more specific to the Kindle itself and its functionality.  The note-taking feature is clumsy and when compared to writing in the margins or highlighting on paper falls short – although it is better than other devices (particularly the 1st gen Kindle).  Other devices, with touch-screen technology appear to handle this better, although these too are several years from mass-market production.   Even still, they would likely be more costly than the current e-ink technology.
At the moment, Kindle is also only a black and white reading device.  Some color display technologies are being developed, but the power drain is too significant for any but small, iPhone-sized devices to support long-term use (such as the week or more between Kindle charges).  The fact that the display on the Kindle is only in black and white would pose significant problems for textbooks where color pictures are critical, especially in the sciences.  This goes back to the underlying costs of the systems noted above.
Also, the Kindle is a closed proprietary system completely controlled by Amazon.  While fine for the moment in its current, trade book market space, it would be unlikely for a whole new class of publishers (K-12 textbook publishers) to hand their entire business model over to a single company, who many publishers already consider to be too powerful.
The rendering of graphics, charts and forms is clumsy on the Kindle, in part because of the Kindle format, but more because the file format standards are still improving in this area.  Also, the reflowable file format, EPUB, is still maturing and how it handles complex format issues, as would be the case in textbooks, are still being improved.  EPUB, an open standard for publishing ebooks, isn’t even naively supported by the Kindle, which relies on its own proprietary file format.
While a great grand vision, I’m sorry to say that even the pilot described in Freedman’s paper isn’t a good idea at this stage.  The ebook market needs time to work through the technical and business model questions.  The DLC report he wrote presumes that dumping millions of dollars in a program of this type will push the industry forward more rapidly. My sense of the energy in the ebooks market is already palpable and would progress regardless of any government intervention.   The unintended consequences of this suggestion would radically and irrevocably alter the publishing community in a way that would likely lead to diminished service, even if it were to be successful.  Eventually, educational textbook publishers will move in the direction of ebooks, as will most other publishers.  Digital versions will not replace print entirely, but they will supplant it in many cases and textbooks are likely one segment where it will.  However, it will take a lot more time than most people think.

Kodak takes the Kodachrome away

Thursday, June 25th, 2009

I grew up in Rochester, NY, which is home to Kodak, the iconic film company founded by George Eastman.  Much like Detroit is a car town renowned for FordGM and Chrysler, Rochester was known for its film industry.  Nearly everyone I knew had some tie to Kodak and most of my friends fathers were engineers of some sort at the many plants around town.  At its peak, Kodak employed more than 145,000 people in 1988.  It is now down to less than 30,000.  The last time I was home, I was shocked by parking lots, which the sites of were massive manufacturing plants when I was growing up.  Many of buildings of one industrial park were actually imploded in 2007. It was a stark indication of just how much Kodak had changed and how far they had fallen.   

Kodak announced earlier this week that it would be ceasing production of Kodachrome film.  Kodachrome had long been recognized for its true-tone color quality and preservation quality.  It was great slide film and among the first mass-market color films available.  It was even memorialized in a famous Paul Simon song.  Unfortunately, like all great film products, its days have been numbered for over a decade.  Now, if you’re one of the few who still shoot with Kodachrome, there’s only one facility, based in Kansas that processes the film.  Unfortunately, despite its quality and history, that won’t save it from the dustbin of chemistry and manufacturing. 

Kodak was a company built on 19th century technology–chemicals on plastic that captured images. It was old-world manufacturing on a massive scale.  It was also a company that clung onto its cash-cow core business well past the time when it was tenable, focused on its rivalry with other, mainly Japanese filmmakers.  It did not see–or probably more likely didn’t choose to focus on–the seismic shift in its core business to digital media.  This is despite the fact that it was a Kodak Engineer, Steven Sasson, who created the first digital camera in 1975 AT Kodak.  Although Kodak released a digital SLR camera in 1991 (in partnership with Nikon and as a Nikon branded product), at $13,000 it was hardly for the average consumer.  It would take more than a quarter century after Sasson’s original prototype before Kodak released its first mass-market digital camera in 2001.  Just after Kodak peaked in the late 80s and early 90s and begin dueling with Fuji for control of the film market, the rest of the consumer electronic market had begun to move on.   

Today, Kodak receives some 70% of its revenue from digital activities.  It holds the top share of the digital camera market, with nearly a quarter of the market.  Had it moved more quickly, in all liklihood it could have held a much larger share.  After all, “Kodak moments” used to be a common phrase for one that should be captured on film.  While the company spoke of capturing the moment, it was really focused on what they thought to be their business, chemicals. The real problem was people didn’t care about chemicals, they cared about the moment.  How best to capture the moment and how do so quickly and cheaply was what consumers cared about.  Very quickly, as processors sped up, as storage costs dropped, image sensors improved and all of this technology became a great deal cheaper, the old model of chemicals on plastic was displaced.  

The lessons of Kodak and its slow reaction to the changes in its industry should be a warning sign to those whose businesses is being impacted by the switch to digital media.  Focusing only on preservation of your cash-cow business could be detrimental to your long-term success and survival.  The academic journals publishing industry moved quickly to embrace online distribution.  However, in many respects there are still ties to print and many publishers still rely on the 19th-20th century revenue streams of the print-based economy.  The e-book world is much more tied to print models and distribution.  For example, the Kindle is in so many ways a technological derivative of print.  Much of the experience of reading an e-book on the Kindle is based on the experience of reading print. Even more than the technical experience of reading, the business models and approaches to distributing content is completely tied to the print sales streams.    There are so many new approaches that have not even been considered or tried.  Don’t be surprised if you are not paying attention, the entire market could shift under your business’s feet.