Electronic resource management: a multi-period capital budgeting approach

Engineering Economist, Winter, 2006 by Timothy M. McGeary, Joseph C. Hartman

INTRODUCTION

As the costs for acquisitions have been rising consistently faster than the increases in budgets, academic libraries are struggling to financially manage their subscriptions of electronic resources, including electronic journals, databases, and books (Leonard, 1994; Prabha and Ogden, 1994). More specifically, the increasing costs of journals, considered crucial for scholarly research, have created "professional anxiety" within libraries (Meyer, 1997). Nonetheless, academic libraries are tasked to supply and manage ever increasing electronic resources in order to sustain and grow the academic enterprise. As budgets are not expected to keep pace with subscription prices, it is clear that resource allocation decisions will only get more difficult.

At Lehigh University, the library budget cannot fiscally maintain all current journal subscriptions as well as support new academic and research programs, which require new subscriptions. Over the last three fiscal years (2002-2005), the total library budget has increased 4, 6, and 4%, respectively, while journal price increases over the same time frames averaged 8.67, 8.93, and 8.44%. In preparation of a budget shortfall, the Collection Management team at Lehigh "pre-cut" the subscription budget of journals they perceived to be low use or less significant to supporting the academic and research needs of the university. The act of "pre-cutting" spending is the method of canceling unwanted or unneeded journals before balancing the budget with the remaining subscriptions. Despite this effort, the overall increases to the journal subscription portion of the budget (including these aforementioned cuts) were 7, 8, and 6% in the same time periods. Compounding with these price increases are also increases in book prices of 3.5, 8.7, and 3.5% during the same periods. These figures are from Lehigh's primary book vendor, Yankee Book Peddlers. Thus, despite efforts to pre-cut spending, deficits are occurring and are significant.

The main problem of electronic resource management is determining the most valuable subscriptions to renew and the least valuable to cancel in order to maintain a balanced budget in addition to adding new subscriptions to support new academic programs. Defining the value of a subscription represents a major challenge for library administrators and collection managers. The return on these investments is non-financial, and in most cases cannot even be measured in financial units. This presents a tremendous obstacle when approaching this problem as a capital budgeting problem.

Currently, library collections are managed by committees of "subject reference" librarians. The librarians are charged with evaluating the requests of faculty and departments and present the worth of these requests to a larger committee or library director, who makes the final decision about purchasing a subscription or not. Oftentimes it is obligatory to cut a current subscription to make room in the budget for a request. This process can be quite subjective and political in nature, especially when new academic or research programs have been introduced within the university. The library, of course, needs to support fledgling programs that are just getting started, as well as the rest of the university, all within a budget that is not increasing fast enough. Therefore, maximizing the subscriptions used in research is vital to the library's survival in supporting the research of its institution. The question remains as to what value can be used to maximize electronic subscriptions.

We present two models to solve this problem, characterized as classical capital budgeting or knapsack models. However, unlike traditional capital budgeting models, the objective is not to maximize return, such as the cumulative net present value of the chosen investments. Rather, our objective is to maximize usage, as this is utilized as a measure of value of the journal subscriptions. We investigate two models: the first, which maximizes usage, and the second, which also considers the change in usage over time. We realize that there are other objectives possible (and other data can be included). These issues are discussed later.

We analyze the models with data acquired from Lehigh University on 52 electronic journal subscriptions. This research is part of a larger process to design a new decision support information system to support the processes that the Lehigh University Library requires in managing electronic resources, while following the forthcoming standards of the Digital Library Federation for use by other academic libraries. The efforts of the Digital Library Federation through the Electronic Resource Management Initiative (ERMI website) describe the systematic requirements for managing the vast amount of electronic resources in academic libraries. The electronic resource management system is required to manage the licensing, requirements, and provisions of these subscriptions and the Digital Library Federation aims to assist library vendors in the design of these systems. The decision management support system will enhance the electronic resource management system and its design is as crucial to this problem as the electronic resource management system. The capital budgeting model, however, will be the focus of this article. While this article examines the problem with 52 journals, Lehigh University subscribes to over 4,000 electronic journals. Thus, the size of the problem provides further motivation for this work.