newsletter No. 54,, Spring 1987

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ASSOCIATION O f INFORMATION A N 0 OISSEMINATION CENTERS

Spring Meeting Discusses Profitability and $$$ The Spring, 1987 ASIDIC meeting was held in delightful surroundings at the Royal Sonata Hotel, New Orleans, LA, on April 5-7, 1987. The Technical Program, under the able direction of Moms Goldstein (IAC) and Walter Bevendge (IBM), featured presentations on profitability iri the information industry from the viewpoints of producers, who have to have a reason to be in business, and users, whose businesses are often driven by the information they can access and the price of that information. Twice in the program, attendees broke up into small groups for in-depth examination of the issues; following the technical presentations, a panel session reported on these discussions.

Local arrangements were directed by Taissa Kusma (American Mathematicad Society), who spared no effort to ensure that attendees were comfortable and enjoying themselves. A variety of activities were available. Before the conference, tours of local. plantations or a bayou were offered. Those touring the plantations enjoyed a glimpse of life in bygone days and a delicious luncheon. The bayou. visitors saw a variety of wildlife on the boat tour (but unfortunately no alligators!). Thanlcs to the photographic skills of Bill Bartenbach (€I. W. Wilson Co.), two pictures from the bayou tour are featured here. On Monday evening, a paddlewheeler riverboat cruise on the Mississippi was enjoyed b y all. The meeting closed with a rousing vote of thanks to Taissa for her efforts and the smooth trouble-free arrangements.

Committee Reports

Finance: ASIDIC has just over $21,000 in assets, with over $15.O00 invested in a Certificate of Deposit. Other investment options were examined, but with the recent declline in interest rates, it was decided to rerain the certificate. Members who have not paid their dues for 1987 were exhorted to do so as soon as possible. Membership: Gloria Moline (Engineering Information) reported that two new members have joined ASIDIC since the last meeting; they are listed elsewhere in this Newsletter. Nominations: Elections will be held at the Fall meeting. Ballots will be sent to members during the summer. Executive: A guide to conducting meetings is in preparation; a working draft will be used in planning the Fall meeting. Text for the ASIDIC brochure has been adopted. Joint regismtion for ASIDIC and MAIS meetings was approved. The Executive Committee would like input from anyone who has suggestions meeting formats, and key issues or topics to be discussed in future meetings, or the direction of the organization.

Fall, 1987 Meeting

The Fall meeting will be held at the Viking Hotel in Newport, RI on Septcmber 20-22, 1987. Local host will again be Taissa Kusma; program chair will be Walter Beveridge., assisted by Anne Fernald (Thomson & Thomson). The theme will be "Prophets and Profits-The New Technologies." To nominate speakers, please contact Walter at (914)-742-5965 or Anne at (617)-786-8273. Tours of the Newport mansions, the harbor, and other sites of interest will be offered depending on the interests of attendees. The Fall meeting will be the first ASIDIC meeting held in Newport; plan now to attend!

The ASIDIC Newsletter is published by the Assoc~ation of Information and Dissemination Centers, P. 0. Box 8105. Athens CIA 30603. phone (404)-542-6820, and edited by Donald T. Hawkins, AT&T Bell Laboratories. Murray Hill, NJ 07974. phone (201)-582-65l7 The opinions

herein are not to be. construed as those of ASIDIC nor of AT&T Bell Laboratories.

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Future Meetings

The Spring, 1988 meeting will be held in $an Antonio, TX. Local host will be Harry Allcock (IFI/Plenum Data); program chair will be David Grooms (Patent and Trademark Office). Suggestions for a suitable site for the Fall, 1988 meeting are solicited by the Executive Committee.

ALA Directory of Information Professionals

The American Library Association (ALA) is compiling a Directory of Library and Information Professionals, to be published as a three-volume set and also in CD-ROM format in early 1988. Questionnaires have been dismbuted to over 70,000 people in the information field; anyone who did not receive one is urged to contact Joel Lee, ALA Information Technology Publishing, (800)-545-2433 or (312)-944-6780. Those who have receive questionnaires are asked to complete and return them as soon as possible. All ASIDIC member organizations' representatives, CEO's, and other key staff are essential persons for inclusion in the database.

President's Column by Marjorie Hlava

The ASIDIC Spring Meeting was a wonderful success due to the efforts of Morry Goldstein and Walter Beveridge in the program and Taissa Kusma's local arrangements. It's always refreshing to get together and talk about profit for any of us who need to pay attention to the bottom line-which I think is all of

The topic "What Makes a Database Successful: The Need for Profitability in the Industry is Dramatic" was certainly timely. We heard what makes a database successful from several points of view. Probably the most interesting perspectives were those of the database producers who have stones to tell about both their successes and their failures. We learn as much from the failures as from the successes. And even those who have, by most measures, great successes currently had a few misteaks to share with

The talks provided good discussion fodder for all of us while we were enjoying other parts of New Orleans. Social events were once again tailored so that people could share industry gossip in convivial surroundings. The Sunday night reception was held in the patio of the Royal Sonesta Hotel, and although it was a little nippy, the heat lamps gave us all the warmth that we needed to share information with friends. The Monday night paddlewheeler cruise was refreshing and fun for everyone attending. We have to give our hearty thanks to Taissa Kusma for putting together a very nice program and particularly iq handling the tours which, I know from experience, can take as much or more time than the actual meeting arrangements themselves. If we follow ASIDIC's normal procedure, we'll be back in New Orleans in about three years.

The Fall meeting will be held at the Viking Hotel in Newport, RI. Information and brochures on that meeting will be sent to you soon, but the topic is again one of interest to all of us who are wrestling with keeping current: "The New Technologies: Who Pays?"

us.

US.

New Members

ASIDIC welcomes the following new Members:

DOD/NSA 9800 Savage Road Ft. George G. Meade, MD 20755 Ms. Beth A. Williams

Mead Data Central Personal Computer Systems Group 2730 Sand Hill Road Menlo Park, CA 94025 Ms. Reva Basch

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STG National Lucht en Ruimtevaart Laboratories Anthony Fokkerweg 2 1059 CM Amsterdam, Netherlands

Trinet, Inc. 9 Campus Drive Barsippany, NJ 07054 Ms. Christine A. Monahan

University Microfilms International 300 N. 2keb Road AnnArbor,MI 48106 Mr. Richard T. Wood

B i l l Bar tenbach (H.W. Wilson C o . ) a t Oak A l l e y P l a n t a t i o n .

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SPRING MEETING SUMMARY

Richard Wood, University M i c r o f i l m s o .

Bell & Howell, owners of UMI, are investing in the information industry because of its growth potential. They view databases as valuable services containing information that people need. Characteristics of successful databases are:

* They fill a niche (such as Business Dateline).

- They complement large successful files and add "bells and whistles."

* They are not "me tot)" products which do not have enough volume to be successful.

- They present unique information.

They meet acceptable quality standards-essential to capturing market share.

Database producers must capture "shelf space" and get people to use them by tapping the information stream in a fresh way. Profitably is hard to achieve because there is strong competition for source dollars, the market is fragmented and confused, and the required technology is widely available to nearly anyone. Going online dcxs not equate to earning a profit!

Some issues to consider in today's information marketplace are:

0 Online growth rates are leveling off from 14% per year; how can we continue to induce usage of

0 How high can prices be raised before users turn away and decide they cannot afford the infomation?

What features are stiU needed in databases? Market surveys should be taken before new features are

0 Individual support is important for infrequent users.

online products?

arbitrarily installed.

Are there any good databases left to produce?

basis be changed? Will 2400 baud access mean reduced revenues for database producers? 0 Discounts should be judiciously applied. Large users deserve a price break. Should the pricing

0 How will locally stored or distributed databases affect vendors?

What is the relationship between vendors and producers? Is it as a partnership, client, or an adversary?

How can customers differentiate among files?

When will new online users come into the market?

The market is slow to respond to new entrants. It used to take three years for a database to become successful; now it takes at least five, with lots of money invested along the way.

Randy Marsinko, Dynamic Information.

Information brokers such as Dynamic Information are the missing links in the information delivery chain. They do worldwide document delivery and information consulting; about 60% of their business involves online searching. Brokers face significant odds in enhancing their profitability and are strategically positioned in the marketplace; they add value as well as simply gathering data.

Information brokers know the databases; larger ones do a volume business, accessing files available from many producers and vendors. They spend much money to attract clients and have become unpaid advertisers for database producers and online search services. Experienced as online users and making full use of the files, they have all the search aids at their fingertips. They occupy a unique place in the market because they have educated their clients about online databases, sparing the producers this effort and expense. Brokers are redly wholesalers of information and should be recognized as such by

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information producers.

Dynamic Information does a large amount of searching on about five files. They have found ways of cutting their costs even below the standard discount rates offered by the vendors. Some of their techniques are:

. Using the highest baud rates available.

Refining search logic during the day but running the searches at night and diownloading the output when response is faster.

downloading output from the desired databases.

as one hour per month)

Using inexpensive systems and databases to develop search logic and to browse, then rapidly

Using leased 9600 baud lines where available. (QL Systems provides such a line for usage as low

Techniques such as these can save up to 20% on search costs. Brokers’ margins are low, so they must take advantage of every possible saving; Dynamic Information aims to save $500 to $750 per month per database, and they do it with little or no producer or vendor help. Brokers, producers, and vendors should work together in a spirit of cooperation to mutually enhance profits.

Carol Galvin, Invesfext.

Business Research started in 1983 and was backed by venture capitalists who expected a quick return on their investment. They had seven employees compiling information from brokerage house research reports to create the Investext database. Brokerage reports were a new source of business information, so many customers were expected. Investext’s start was slower than expected because most people were unaware of brokerage research; there was no market recognition and no perceived need. The company reached the breakeven point in 2% years and now has the database up on both Dialog and their own system. The number of brokerage houses providing input has been increased from 12 to 45.

Revenues were increased by emphasizing customer support, training, and product demonstrations. Marketing was done by hands-on demonstrations; there was no direct mail. The market was segmented by having the database available on two systems: Dialog for the library market, and an in-house system for end users. The main consideration is that the product gets used, not on which system it is accessed. At first there was no print equivalent to Investext, but one had to be developed to make users aware of the database. About 80% of the marketing budget was used to develop a catalog, New Research Reports that is given away to stimulate online usage.

Market research is important in introducing a new database. Initial marketing efforts concentrated on surveys, focus groups, etc. telling people how to use the database. Even the President of the company made some calls. When usage was not up to expectations, efforts were redirected to emphasize database content because it was discovered that people did not know what type of infoimation was in brokerage reports. As users became educated and understood the value of the information available to them, usage grew. Seminars were held; telemarketing was used to increase attendance at them.

Revenues were enhanced by conducting a sales promotion modeled after the airlines’ frequent flyer plans. Direct discounts could not be given because of contractual provisions, so points redeemable for gifts were issued to frequent searchers. Using this technique, 1400 users wen: added in one month. Costs were strictly controlled, and empbyees were motivated with a “Bottom Line Incentive Progran” in which everyone had a stake in the success of the company. Quality was carefully monitored; a cottage industry was established to do the data entry. An internal database is used to support and upgrade the marketing and sales effort; it contains customer profiles and logs all calls for information, sales, search questions, etc.

Business Research has recently been purchased by International Thompson Co. As a division of a large company, the challenge will be how to sustain growth.

Dick Kollin, Telebase Systems.

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The online industry was born under the shadow of print products. Its profit attitude came slowly: some of these thoughts continue today. When migration from print to online occurred, the online products had to cover resulting print product losses and pay their own way. If online revenues are to contribute to the bottom line, overhead must be allocated to them. Many people don’t think about the costs of obtaining data, indexing it, and absmcting it. Market research on potential products must be done; can the market support the product? EasyNet med offering free access to Magazine ASAP on Compuserve. They gave out about 350,000 passwords and only got $50,000 in usage from 6,000 users. The world clearly is not ready for online information; only about 600,OOO modems have been purchased for personal use. The best way to maximize profit is to look for the largest possible database audience with the least possible production costs. EasyNet’s biggest problem is obtaining enough hardware to accommodate usage. Their goal is to put more revenues from new markets into the bottom line by increasing the number of users fiom new sources.

Geof’f Sharp, Dialog Information Services.

Dialog’s core business has matured: growth is now coming from product development and marketing. Greater collaboration between producers and information services is needed. Dialog has become a matrix organization:

Administration handles customer relations @asswords, etc.), licensing, and royalty arrangements.

Marketing directs customer service, field offices, and publications. A new Vice President of

System handles operations. mounting new databases, updates, etc. and strives for a 99% uptime

- Finunce controls revenue, costs, and budgetary flow.

Marketing has just been hired.

record.

Dialog’s product lines have been divided into four departments: business information, chemical information, general information, and advanced technology. From 1972 through 1980, costs were modest, lead times were short, and the user base was small. Marketing and training were therefore simple, prices were moderate, and the growth rate was high. In today’s environment, these conditions no longer hold; costs are high, lead times have lengthened, and the user base has grown substantially. Prices are therefore higher, marketing and ?raining have become more complex, and growth has matured.

Today’s markets are sophisticated and demanding. Consumers are becoming more and more aware and astute. The following will doom a product to failure:

Products not matched to the market

Narrow or shallow subject coverages (customers will not come back).

EXTOIS or omissions in the data. Lack of substantive information.

Old data, or infrequent updating.

Poor design and technical coordination.

Lack of marketing and training.

Several measures can be taken to increase revenues and growth rates. Prices can be raised, but there is a limit before increased prices slow growth. Product enhancements are a good way to stimulate growth. One must start with market feedback, then adjust to shifts in customer demand (the introduction of regional news databases is an example), add value while eliminating low use data, and improve currency, indexing, and design. The marketing function can contribute substantially to a company’s profits in several areas, such as market segmentation, cross-segment marketing, focused advertising and direct mail, applications training and promotion, and key account development. There are many new business opportunities in today’s markets,

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Ran Spigai, Database Services.

According to Laird's book, Innovations in Information, the information industry today has the following characteristics:

Demand is virtually open ended.

Revenues are based on recurring needs for new data (such as subscriptions).

Repackaging and reformatting offers opportunities to customize output for end users.

There is high fragmentation, but within niches some organizations dominate.

. Relative value to end users is high; costs of making decisions to obtain information are low.

Natural monopolies have been formed from exclusive arrangements.

These observations mean that new technologies will lower costs and will allow new users into the market. "Nice to know" will become "must know." Proprietary data collections will lock in a market position. The number of end users has grown 10-fold, but they still account for only 30% of the revenue stream. These numbers should increase with the growth of PC's and information integration. Technology impacts profitability, especially in the price-performance curve; there has been a large growth after 1975.

These are some steps in making a database successful:

Information will be delivered to personal computers; producers must plan for new market segmentation and new products. For example, the end user market may move from floppy disks to CD-ROM, and downloaded segments of databases may become profitable.

Microcomputers offer ease of use and the advantage of major dismbution channels already in place. 0 Producers should work with developers of software for microcomputers instead of for mainframes.

Pricing should be based on the quantity of information distributed, its value:, and quality.

0 New technologies should be investigated for potential cost reductions and competitive advantages in

Products must be differentiated from one another to eliminate confusion in the marketplace and 1.0

collection and entry of data as well as information distribution.

gain "shelf space."

Helen Wdtse, Georgia Institute of Technology.

Georgia Tech has 11,OOO students, of which 9,500 are undergraduates and over 75% are engineering majors. There is a high computing activity among the students: over 3,500 microcomputers and 200 terminals can access the school's computing network. Each student is given an account on the computer; there are four databases available for searching locally using the BR.S search software. The library's catalog is online; users are given an 8-page booklet with searching instructions. Usage is high; students and faculty do over 4,800 searches a week, using more than 160 conniect hours a day.

Considerations in operating the Georgia Tech system are:

Disk space for expansion is scarce because the mainframe must be shared with the university business office.

Budgets are tight Costs are paid out of operating funds; the budget will increase 3% next year, but the literature to be searched will increase 25%. Consideration was given to charging for database use, but many problems were foreseen. Would users pay for hits on a local system? Who would certrfy reports of usage to producers? New predictive pricing algorithms from database producers to mesh with budgets are needed.

Contractual arrangements are slanted towards the producers and do little to consider users' righrs. Suppliers want to place all the liabilities on the user and take none themse.lves. A user would therefore do well to begin negotiations before mounting any test databases. At Georgia Tech, no test

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databases are loaded if contract negotiations become difficult; the students expect a database to stay once it is up. Many contracts state that the laws of the producer’s state apply and fail to recognize that the university is a state agency and cannot agree to such clauses.

The best pricing strategy is an annual subscription charge that is cancelable at any time, with no tie to the number of items printed. The fee should be based on the number of potential users. Rates should be in blocks; there should be a different rate for one department than for an entire network. Producers must realize that the library must provide services to the students, whose numbers continue to grow. (Georgia Tech had 25% more applicants this year than last.) The connect hour is not an acceptable method of pricing; they cannot afford to mount a database locally if they must pay on that basis.

considerations in choosing databases, but the major driving force is “can the library afford to fund it?”.

- Electronic document delivery, gateway service, CD-ROM, and retrospective data are all

Anne Fernald, Thomon & Thornson.

Trademarkscan is an example of a success story in launching a new database. Thomson and Thomson (T&T) is the oldest trademark research firm in the U.S.; they deal only with trademarks-no copyrights or patents. They began to search trademarks in the 1920’s and did it manually using 3x5 cards until the 1960’s. By the mid-l960’s, a batch system was installed, it still operates. In 1983, the Trademarkscan database was mounted on Dialog with 650,000 active records; it now has 850,000. In 1986, the product line was broadened with the addition of a state trademark file. Both files have proven to be very successful.

Major factors in the success of Trademarkscan are:

0 Thedata.

- The Trademarkscan database is a collection of data that is unique and difficult to replicate.

- The historical data have continuing value, encouraging repeat uses of the file.

- The data are frequently updated-1,400 records a week are added, and 3,000 to 4,000 are

- The information is of high value to customers because it is used in making decisions. It is also

Changed.

used in the creation of other services, so the costs of obtaining it are spread over several product lines.

- The data existed in print form before the online database was created and was well known to its USerS.

0 The database producer.

- T&T has a strong presence and a high share of the trademark data market.

- It has a reputation for quality products and premium priced services.

- It sells new products beside others and maintains frequent contact with its customers.

- It was the first to offer a database with trademark information.

0 The customer.

- Users of trademark data are mainly attorneys who tend to be wealthy. They do not worry about

- They are loyal to a product.

- Increased automation of legal departments and law offices provided a receptive climate for the introduction of the database.

the costs of obtaining information because of chargebacks to their clients.

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- Rapid response to information needs is becoming more important.

- Corporate attorneys, who do not charge fees to external clients are bringing work in-house to cut costs instead of contracting it out.

Dialog was chosen as the vendor for Trademarkscan because it had a large custctmer base in existing markets. It also had a gateway arrangement with Mead’s LEXIS system, used by many attorneys. Dialog also had other files of interest to trademark users and were willing to modify their system to accommodate special features of the Trademarkscan database. And they offered a high level of support, which T&T’s customers were used to. For their lint entry into the online database market, T&T felt that an exclusive contract would work well because alI their energy would be chlanneled towards making that relationship successful. The vendor would have a higher loyalty to them, and the costs of training and customer support would be lower.

T&T made a few mistakes in introducing Trademarkscan. They ignored their own market research and set the introductory price too low ($85/hour), not realizing that their database shlould be priced differently from a bibliographic database. They were overly concerned about migration from their manual services to the online file and as a result, delayed mounting the state trademark file. And they did not promote the non-trademark uses of the database.

T&T has three competitors in the tradernark field, but it was the !irst to put a trademark database online and so gained a valuable advantage. Their competition ma& several mistakes. The first competitor wanted to be its own vendor and designed a product accessible only by IBM PC’s and having only three searchable fields. They conducted no market research and limited what customers could do with the file. When they were unable to sell the file, they gave it away. The second competitor contracted with a vendor not committed to the online market. They began building a trademark database from scratch and have nothing to offer yet. (Because of the nature of trademark information, the. entire database must be available online to be useful.) The third competitor is putting trademarks on CD-ROM which will not be viable for attorneys because they lack the necessary equipment. The database will require seven disks and will therefore be awkward and cumbersome to use. Updates will be difficult and infrequent.

T&T therefore has a commanding lead in the trademark information market. Their future plans include correcting their mistakes, staying in touch with their users and improving the basic product, adding complementary new files, exploiting new technologies as appropriate, and watching the competition.

Group and Panel Discussions

Users want the best, most accurate, and most complete data. A successful database answers the user’s question. The bottom line to database success is repeat users, not more single users. Producers must be sensitive when setting prices and consider who is using the data and what they will get out of it. Initial prices for databases were set artificially low because many of the early databases were produced by non-profit organizations: large royalty increases in the 1970’s may have hurt die online industry. Biases were originally towards producers and vendors, not users.

A good database is part of a package of products that fills a need. Success is achieved by professional marketing and by staying in touch with users. Users measure the success of a database by whether they found the information they were searching for; producers measure it by revenues and profits. These success criteria may change as new technology (such as CD-ROM) impacts u j m the marketplace. Technology advances will drive pricing decisions in the future.

ASIDIC PHOTO SECTION

( T W to Bill Bartenbach)

Start of the bayou tow. Left to right: Tow guide, Don Hawkins (AT&T Bell Laboratories), Fran Spigai (Database Services), Randy Marcinko (Dynamic Information), Dennis Auld (UMIDara Courier), Barbara Auld.

Marjorie Hlava (Access Innovations), ASIDIC President, and her husband, Paul, look for wildlife in the bayou.