Operations Costs in Libraries

Library operations costs associated with printed scholarly journals include the costs to acquire, process, preserve, and circulate journals. Each library's costs differ based on the organizational structure, degree of centralization or decentralization of processes, differentials in salary and benefit scales, effectiveness of automated systems, success at reengineering internal operations, and other factors.

University Libraries and Scholarly Communication reports that "salaries as a percentage of total library expenditures have declined over the past two decades, while other operating expenditures (heavily reflecting computerization) have risen

markedly" (p. xxii). The report infers that the increases in other operating expenditures reflect automation of technical service operations such as acquisition, cataloging, serials control, and circulation. It also notes that despite the decline in salaries as a percentage of total library expenses and the increase in other expenditures, "the number of volumes added per staff member has declined" (p. xxii), implying that there has not been a measurable staff efficiency gain from the investments in automation. In fact, on average, library staff increased by a total of 7% from 1970 to 1985 and by 6% from 1985 to 1991. Thus the rise in the nonsalary operations portion of the total operating expenses did not occur through staff reductions but rather as a result of budget augmentation for nonsalary items.

Presumably, greater efficiency in processing and circulation coupled with declining acquisitions should have resulted either in staff reductions or in substantial shifts of personnel away from the back room of technical processing to and into service to faculty and students, but it is not possible to discern from ARL statistics whether this is so. The ARL did not report service transactions until 1991, so one cannot discern changes in user demand for the earlier periods. Between 1991 and 1996, the ARL reports steady increases in interlibrary borrowing, library instruction, reference transactions, and total circulation. During the same period, total staff has declined by 2%.^[8]

The inability to learn from the ARL reports or other reliable studies how libraries might be changing their staff allocation among operations and services reflects a serious flaw common to almost all analyses of library costs relating to both collections and operations. It is not obvious to what extent nonsalary investments, for example in automated systems, have actually improved processing productivity or the quality of services rendered by staff; nor is it clear whether or to what degree these investments have moderated the rate of rise of operations costs.

Library rankings typically reflect inputs such as budget, volumes acquired, number of serial subscriptions maintained, size of staff; or operational statistics such as the number of circulation transactions, titles cataloged, hours of opening, or items borrowed through interlibrary services. Ironically, the ARL Index ranks research libraries in part on the number of staff they employ; improving productivity and reducing staff accordingly would have the paradoxical effect of reducing a library's ranking vis-à-vis its peers. Developing measurements of service outcomes related to the mission of the institution would be more helpful as comparative data. For example, how do a library's collections and services contribute to research quality, faculty productivity, or student learning? The problem of defining productivity of knowledge workers was mentioned 30 years ago by Peter Drucker^[9] and is further examined by Manuel Castells in his recent book The Rise of the Network Society.^[10] Library operations represent a clear example of this productivity paradox.

William Massy and Robert Zemsky, discussing the use of information technology to enhance academic productivity in general, remark on its transformational potential, calling it a "modern industrial revolution for the university" that can

create economies of scale, deliver broad information access at low marginal cost, and allow for mass customization.^[11] The analysis they provide for the academy at large would appear to be even more pertinent to libraries, many of whose functions are of a processing nature similar to those in industry and whose services can also be generalized to a greater degree than is possible for teaching and research.

Massy and Zemsky suggest that although capital investments in technology to enhance productivity will increase the ratio of capital cost to labor cost, they may not actually reduce overall costs. But the writers argue that those investments will save money in the long term because over time labor costs rise with productivity gains and technology costs decline.

The primary purposes of automating processing operations in libraries have been to reduce the rate of rise of labor costs and to improve timeliness and accuracy of information. From the point of view of faculty and students, the service improvements are the most important result of automation. For example, on-line catalogs and automated circulation services provide users with more rapid access to information about the library's collections, reduce errors in borrowing records, and support more timely inventory control. Use of on-line indexing and abstracting services rather than the print versions preserves the scarce time of scholars and effectively extends the library's walls throughout the network.

Despite the efficiencies that automation has brought, labor costs to perform library processing operations such as ordering and receiving, cataloging, maintenance of the physical inventory, and certain user services including interlibrary lending and borrowing remain substantial. A transition to electronic publishing of journals (accompanied by the elimination of print subscriptions) could enable libraries to reduce or eliminate many of the costs of these labor-intensive operations. The freed-up resources might then be moved into higher priority services, necessary capital investments in technology, or provision of technology-based information resources. The benefits to end users could also be significant: less time spent in finding and retrieving physical issues of journals.

In the very long term, restructuring of library operations in response to electronic scholarly publishing could, in theory, result in major improvements to the quality of library services and also reduce operations costs. However, to maximize operations costs reductions, libraries will need to define better the desired outcomes of their operations investments, measure those outcomes effectively, and engage in rigorous reengineering of processes.

Several studies have attempted to quantify typical costs of acquiring journals. In a study funded by CLR (The Council on Library Resources), Bruce Kingma found the average fixed cost of purchasing a journal subscription to be $62.96.^[12] In discussing the economics of JSTOR, Bowen estimates the costs of processing, check-in, and binding to be approximately $40.00.^[13] In 1996, the library of the University of California, Berkeley estimated the physical processing costs, including check-in of individual issues, bindery preparation, and binding, for print serial subscriptions received and housed in the main library to be as low as $17.47 for

a quarterly journal and up to $113.08 for a weekly journal. Berkeley's figures exclude the costs of ordering and order maintenance under the assumption that those costs will not differ significantly for electronic journals. The figures also exclude staff benefit costs and overhead and therefore understate the true cost to the university of receiving print subscriptions. Assuming an average annual processing cost of $50.00 per print serial subscription, a research library subscribing to 50,000 titles may incur an operations cost of $2.5 million per year simply to acquire journals.

Once the library acquires these journals, it begins to incur the costs of making them available to students, faculty, and other users. In the late 1980s, Michael Cooper reviewed the costs of alternative book storage strategies.^[14] He found that circulation costs ranged from a low of $.53 per transaction in a medium-sized, open-stack research library to a high of $9.36 per transaction from a remote storage facility. Adjusted for inflation of 3% per year, these costs would range from approximately $.67 to $11.86 per transaction today. Berkeley calculates that an average circulation transaction costs approximately $1.07, and Bowen's estimate is $1.00. According to ARL Statistics, 1995-96, the mean number of initial circulations per library was 452,428. Using a circulation transaction cost of $1.00, the average ARL library spent almost $500,000 to circulate materials during the fiscal year 1995/96.

A review of the costs of acquiring and circulating print journals indicates that a transition from print to electronic journals would eventually reduce annual library operations costs related to providing the university community with the fruits of recent scholarship, but it is not clear how much of these savings might be offset by costs of technology infrastructure and equipment replacement. Large recurring expenses in support of historical print collections would continue but gradually diminish over time as the aging of the collection reduced the rate of usage. The long-term cost reductions could be substantial in the sciences where currency of information is of utmost importance. Costs associated with traditional operations and physical facilities might be more rapidly reduced were high-use print collections converted to digital form. Ultimately, the shift from labor-intensive processing operations to capital investments in electronic content (current journals and retrospective conversion of high-use print collections) might bring about the kinds of effects envisioned by Massy and Zemsky.

However, caution must be exercised in forecasting these types of savings. Despite the potential for long-range cost reductions, savings are unlikely to occur to any significant degree in the short term. The pace of transition from print to digital journals is moving slowly, and only those publishers with a strong financial base will be likely to succeed in quickly providing on-line access. As noted above and in the section of this paper relating to publishers' cost structures, there is no clearly viable economic path to move from print to digital publishing. Moreover, because user acceptance of digital journals may not occur rapidly and because of the many uncertainties about archiving digital information, libraries will need to

maintain print collections-historical and prospective-into the foreseeable future, requiring that investments in operations and facilities be maintained.

Interlibrary borrowing and lending is a growing cost within research libraries,^[15] and its rate of increase promises to escalate as the inflation-generated rate of serials cancellations escalates. According to the ARL, faculty and students borrowed more than twice as many items through interlibrary loan in 1996 as they did in 1986. The University of California Libraries recently reported an annual increase approaching 10% per year. Interlibrary services are labor-intensive operations; in 1993, the ARL conducted a cost study that determined the average cost of a borrowing transaction to be $18.62 and that of a lending transaction to be $10.93. The average ARL university library processed 17,804 interlibrary borrowing transactions and 33,397 interlibrary lending transactions during 1995-96, incurring an average annual cost of approximately $700,000. Given the rate of rise of interlibrary resource sharing transactions as well as the rate of rise of labor costs, research libraries are likely to experience increasing interlibrary borrowing and lending costs of about 10% per year. The rate of rise of interlibrary lending costs could be reduced through use of on-line journals rather than print journals; but if traditional print-based fair use practices are abrogated in the on-line environment, publishers might create pay-per-view contracts that would actually increase costs beyond the costs of manual interlibrary loans. Thus there are unknown cost implications in interlibrary resource sharing of digital information.