Swamped by Switching Costs

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Most of the publishers in scientific and academic publishing can be considered small — making less than $25 million in revenues annually. Because many of these are also non-profits, they have complex organizational forms that impose significant overheads in both direct costs and extended decision times.

When organizations were switching or adopting technology vendors every few years, it was possible to support these organizational overheads — board members’ travel plans, meetings and minutes, editorial retreats, and so forth. Every year, with new board members joining, new editors being trained, and new leadership rotating in at some level, a certain level of switching costs had to be maintained for the organization to function.

The move into the Digital Age has created another major overhead for these small organizations as vendor adoption and transitions now occur frequently. This introduces another set of switching costs that can be more difficult to support because they are often unknown at the outset, which usually translates into them being larger than expected.

The traditional switching costs aren’t going away. In fact, they are increasing slightly and dovetailing with the newer switching costs, as boards and editors and leadership become more virtual and want to use technology more and more, and as some take on a more international aspect. Boards now want agendas for their tablets, Skype connections, and so forth. The administrative staffs have become small-scale technology contractors themselves.

At the organizational level, the demands for technology upgrades, adoption, and migration seem endless. New standards, customer expectations, buyer expectations, intriguing offerings, and new vendor practices are everywhere. A new DTD standard can mean a year of work and thousands of dollars in new expenses, only to see the new standard supplanted just as the dust is settling.

For larger organizations, the challenges are daunting enough, but for smaller organizations, mostly non-profits, the constant switching costs — requiring consultants, staff time, IT resources, and management of multiple vendors — are not being met with much in the way of new revenues. As a result, these organizations are treading waters that are becoming more turbulent with each passing year.

Such organizations are increasingly faced with some hard choices — either pull back from the forefront of technology and truly bet on content; make some aggressive bets on technology in hopes that one hard push might tame the problem; or partner with a larger entity to take on the harder work of managing the technology, sales, and operational challenges of the Digital Age.

More non-profits are choosing this latter path, which may be wise. There is no winding back the clock. Also, the risks of this path are slight. It may feel shameful to give up some operational tasks, but the reality is that these operational tasks are usually not part of the mission. They are embedded now, but that is a recent trend. Printers used to provide editing, printing, and mailing services under one roof, leaving the editing as the source of independence. Is the digital equivalent really that difficult to contemplate? 

Playing current trends forward, it seems inevitable that there will be more small and non-profit publishers seeking shelter from the endless switching costs involved with the digital publishing. This is pragmatic, especially as technologies do tend to find more equilibrium over time. The pendulum may swing back to some new balance in the future, as technology becomes more of a commodity and online commerce becomes more normalized. Until then, heavy switching costs are not going away soon.

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