|Volume 17, Number 4 • April 2000|
Database Companies Can Live Long and Prosper
An interview with CSA president Jim McGinty
by Tom Hogan
CSA was one of the first information companies to develop an Internet-based service for abstracting-and-indexing databases. Your Internet Database Service (IDS) was a bold initiative at a time when most people were still hanging on to other technologies. What made you decide to go in that direction?
It was simple, really. We saw replication and distribution costs trending towards zero, and we realized, as far back as 1993, that client/server architecture, which is the model of the Internet, was going to be unbelievably beneficial to companies with large databases. One of my favorite stories is that when we shut down our old IBM 360s, which we used primarily for production of our databases, the annual savings in our air-conditioning bills alone were enough to fund the purchase of our new computers. The move to the Internet was an absolute no-brainer.
Were you worried about migration from any of your other distribution media?
There is no question that the move to the Internet cannibalized some of our other products. For example, in the early 1990s we had about 8,000 subscriptions to our various printed abstracts journals. Now we have about 3,000 subscriptions, and next year it will probably be 2,000. But the Internet yields us such a cost advantage, compared with other distribution media, that moving to the Internet was inescapable.
Doesn’t that cost advantage also lower the barriers of entry for new competitors and thereby make you more vulnerable?
Sure, and of course that’s been proven. In a way, today everyone’s in the publishing business. You can say, “Well, they don’t index, or they don’t do abstracts, or they don’t do all the other value-added things that we do.” But the point is the Internet enabled lots of people to get into the publishing business. So, when you look around, how do you differentiate yourself? Now, you still can’t beat proprietary content—I don’t care what anybody says. They can talk about “community” or “e-commerce,” but I believe that delivering content is still the prime function of a publishing business. If you have unique content and can distribute it for a low price, and if you can add value to it, then you’re in a better position than someone who doesn’t have that content.
A number of years ago you turned your CD-ROM business over to SilverPlatter, even while CD-ROM was hot. What makes Internet delivery different? Why not look to a third party when it comes to offering your databases via the Internet?
That’s a very viable option for many information companies, no question about it. But we had a lot of resident expertise in the technology because of our CD experience. The underlying software for an Internet platform is not much different from the software for a CD-ROM information product. In addition, we had a sales and marketing network in place, although it was very small at the time. So we felt that we had both key components in place to move forward on our own with an Internet product.
But how is that different from the situation you had with CD-ROM? You had in-house technology expertise, and you had a sales and marketing network. But you found a third-party distributor for your CD-ROM business.
But if you look at what an information partner brings to the table, it’s primarily distribution and customer service. And for many companies that’s still very important. But distribution, with the Internet, suddenly became very, very cheap, and it was very easy for us to reach people through the Net. The Internet empowers publishers to do things that we couldn’t do very cost-effectively on our own when the business was CD-based.
And users have gotten much more educated, so customer service isn’t the major hurdle it used to be. For example, when we were in the CD-ROM business, we might get 150 customer service questions a day, ranging from legitimate content questions to things like “Why doesn’t my CD-ROM disk fit in my A drive?” Now, we don’t get anywhere near the number of customer service calls per day, even though we have far more users than we did in those days. The Internet, with its common standards and familiar interfaces, has made the user much more self-sufficient.
You’ve done a lot with linking your abstracts to full-text sources. Do you look at this as an additional source of revenue for your company, or is it more a matter of trying to make your abstracts databases more useful?
I think it’s the latter. I think that any A&I service has to recognize its position in the world. And the function of an A&I service is to make people more effective at doing their research. That’s CSA’s mission statement, by the way. We’re in the business of helping researchers, and we want to make them more efficient in doing their jobs through the use of our service. And if you think that through, then obviously researchers have a real need, once they have identified the articles they’d like to see, to get to those articles as quickly as possible. Obviously there is added value in our assisting in that process, and maybe someday we might consider charging for that value, but we did it primarily to enhance the value of IDS. We now link to 10 major publishers, and we think that this will escalate as time goes by. We see A&I services as the front end of the research process. We’re the portal, if you will, for researchers in our field. But if you’re going to be in that position, then you really have to make sure that you complete the cycle by making available as much of the full-text material your users need as possible.
You’ve also done some interesting things with linking to Web sites related to the subject areas of your various databases. How is this done editorially—how do you choose the Web sites to be included?
It’s called Web Resources database, which now contains about 60,000 sites, and we hope to have 100,000 by the end of this year. We realized a few years back that there was a lot of information on the Web, but, as we like to say, it’s like a library with all the books on the floor. So, once again, what’s the role of an A&I service? Our role is to structure information for retrieval. Since records on the Web aren’t structured and aren’t indexed, we felt there was a role we could play in helping researchers find good material related to subject areas that we cover. We started in areas in which we are particularly strong editorially, such as environmental sciences and aquatic sciences. We started by having our editors spend time on the Web identifying sites and actually looking into those sites to find interesting pages. We then index those pages and build a little record for each of them.
That must be very time-consuming for your editors.
It was, which is why we now have freelance editors doing a lot of that work. Also, we’re in a unique position to be able to identify what areas are worth looking into because we know what terms and subjects are being searched for most often on our IDS service. If we see that lots of people are looking for information on rain forests, for example, then that tells us we should spend some time looking for credible pages on that subject on the Web.
It wasn’t that long ago that CSA was regarded as a sleepy little company, and it was reported that the company was up for sale. The “For Sale” sign is no longer in the window, and the company has grown by leaps and bounds. What is the reason for this sort of resurrection?
I think just after the sale of the CD-ROM portion of the business to SilverPlatter, the company contracted a little bit, and selling the company was definitely an option being looked at—basically because we were very tiny, and we weren’t exactly sure how to grow the business. But then along came the Internet. We were faced with the decision to either sell the business or take a chance—essentially betting the ranch—that this new phenomenon was going to launch us in a new direction. Bob Snyder, the owner of the company, chose the latter. Our disposition as a company to do things quickly, along with the promise of the Internet, led him to the conclusion that it was worth the gamble.
Has the gamble paid off?
Since that decision was made, we’ve tripled our revenues, and our profits have probably increased by five to eight times.
There’s an amazing irony in what you’ve just said, isn’t there? The pundits are saying that the Internet is going to put the traditional information companies out of business, and here you are crediting the Internet with your resurrection.
I guess we’ve proven that you can cannibalize your own business and still survive. As I mentioned earlier, we had 8,000 print subscriptions, and we now have 3,000, but our business has grown overall, thanks to the Internet. Remember, however, that when we started providing Internet access to our databases it was as a value add for our print customers. It was intended to provide a benefit for them so that they would want to maintain their print subscriptions. But as time went by it became obvious that the Internet had a life of its own. In essence, we provided a transition path for our customers—first to get used to the Internet and then later to rely on it.
CSA is obviously an abstracting-and-indexing company. What do you say to those who say the A&I services are dead or dying?
It’s actually too bad, in a way, that we have this A&I label. Yes, we abstract, and yes we index, but we do so many other things as well—we link, we process, we aggregate. Maybe we should invent another name for the kind of service we offer. As I said before, we’re a front-end service in the research process. I think that as long as bibliographic companies aggressively pursue opportunities to add value to the databases and services they offer, they will have long and fruitful lives.
A related question: When there is so much free information out there, why do the people you serve feel inclined to spend good money on your information services?
To borrow the motto of a clothing retailer, “An educated consumer is our best customer.” Our customers, who are predominately librarians and information managers, are very educated consumers, and they know the value of our information. Sometimes other people may not know the value of a highly structured, comprehensive, indexed, and organized information service, but fortunately librarians do. And thank heavens for librarians.
Believe me, I say that every day.
Seriously, though, every time I visit a library, whether they’re a customer of ours or not, I learn something from the librarians—every time. They’re sharp, they understand our business, and they have constructive things to offer us.
Speaking of libraries, what has been the impact of library consortia on your business?
Mostly positive I would say. We’re dealing with a couple dozen consortia, particularly overseas. In the U.S., I’m a big fan of the consortium of consortia [the International Coalition of Library Consortia], because they’ve brought some order to the marketplace, and they’ve identified the right issues to consider in the purchasing process. In a way, they’ve actually made it easier for us to present our wares, especially as a company that’s not as well known as some of the bigger companies in our industry. It’s true that sometimes they get a little unrealistic, but the legitimate consortia realize you can’t go below a certain level of prices without ruining the game for everybody.
You don’t find that you can get shut out of the loop once a consortium has chosen a particular vendor?
Yes, that can happen. A consortium might decide on this vendor or that vendor, and your company may not surface on the first round. But when you’re marketing to a consortium you have to remember that you’re really marketing to its members. If you have something that the members want, then sooner or later you’re going to get your foot in the door. We don’t offer an all-or-nothing solution, in other words. I believe the key to working with consortia is to offer simple, understandable pricing but flexibility in your product offerings. And it helps to have data that nobody else has. In our case, for example, we have Sociological Abstracts in our portfolio, and we’re the only game in town in that field.
Jim, you’ve been outspoken on the subject of government competition with the private sector. Could you give us a sense of where you feel this particular issue is headed at the moment?
Government agencies, acting in what they believe are their best interests and the best interests of their constituencies, may decide that part of their mission is the dissemination of information. They may feel compelled to develop an information service, at taxpayer expense, and offer it free of charge on the Internet. Now if this happens to be in an area in which your company is offering services, you can get clobbered, especially if you’re a small company. All of this may be done completely innocently.
Of course, there is a set of procedures that government agencies are supposed to follow to mitigate against this happening—i.e., competing with the private sector. But this hasn’t happened in all cases. And I believe this is a critical issue for the information industry.
Don’t you believe that the government has some obligation or right to disseminate the information it collects in the course of doing its business?
Yes, information dissemination is a perfectly legitimate function of the government. Information developed by the government in the course of fulfilling its mission should be available to the public in one form or another. We all agree on that. Where the rubber hits the road, however, is when a government agency then turns around and develops a whole system of distribution, does all the value-added things that the private sector has always done, and then offers the resulting service free of charge on the Internet, competing with existing commercial services. And the situation becomes even murkier when the government starts collecting data that is outside its day-to-day activities, just so it can offer a well-rounded information service.
But even more disturbing to me is the fact that this information, because it’s on the Internet, is then available to people outside the U.S. We then see government-sponsored information services, developed at taxpayer expense, competing with legitimate U.S. companies and being consumed abroad. So exporters of information services, like our company, can find themselves in the peculiar circumstance of competing with the same federal government that is trying desperately to encourage exports. I know one agency, and you can pick the name, that claims to have this phenomenal data in science and technology, paid for with billions of taxpayers’ dollars, and that information is now being provided to everybody in the world, totally free of charge.
So just to summarize, there are things that are clearly appropriate for government agencies to do and that make good common sense. Then there are gray areas, like value-added services, that require review on a case-by-case basis. But then there are areas that are no-brainers. To me, there is no way, shape, or form that the U.S. government should be subsidizing the delivery of information, particularly science and technology information, to the rest of the world. I’m not saying that you should shut the rest of the world off. What I’m saying is that a fair price should be placed on the usage of this information. People outside the U.S. should pay for it.
To quote Yogi Berra, this is déjà vu all over again. We thought we slew this dragon 20 years ago.
Yes, but the Internet has exacerbated a situation that was always there. The Internet makes it so easy to disseminate information that now agencies feel compelled to do so, and they’ve thrown out or ignored the safeguards that were set up to protect the private sector from unfair government competition.
Are you aware of any organized efforts to correct this situation?
Yes, as a matter of fact NFAIS [the National Federation of Abstracting
and Information Services] is setting up a working group to review government
information policy and to make recommendations for changes, if necessary.
NFAIS is in a touchy situation because some of its members are government
agencies. But Dick Kaser, the NFAIS executive director, is doing a good
job of getting the issues out on the table. I happen currently to be on
the NFAIS board of directors, and I hope some good comes of it all. I think,
as I said before, this is a critical issue for the information industry.
That’s my soapbox speech for the day.
[Author’s Note: In the interest of full disclosure, it should be
said that Information Today, Inc. produces two databases, Information
Science Abstracts and Internet & Personal Computing Abstracts
Abstracts), that are available on the IDS service from CSA.]
Tom Hogan is president of Information Today, Inc. and publisher of
Today. His e-mail address is email@example.com.
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