The Return on Investment of Collaborative Virtual Reference Service

1. The Return on Investment of Collaborative Virtual Reference Service Jeffrey Pomerantz Lorraine Eakin School of Information & Library Science UNC Chapel Hill <pomerantz, eak>@unc.edu

2. Recent library ROI studies Florida: $6.54 returned for every $1.00 invested (Griffiths et al., 2004) South Carolina: $4.48 returned for every $1.00 invested (Barron et al., 2005) Southwestern Ohio: $3.81 returned for every $1.00 invested (Levin, Driscoll & Fleeter, 2006) Florida & Pennsylvania: numerous economic and social benefits (McClure et al., 1998, 2000)

3. Older reference ROI studies • Murfin (1993) reviews several from late 1960s – early 1980s • Cost-per-transaction range from $2.20 – $10.80 • Some issues in identifying costs: • Length of a transaction, “idle” time → % librarian’s salary • Librarians’ task analysis, reference collection usage • Portion of a reference collection to charge to the reference desk

4. Rationale for Model These ROI studies focus on benefits (the return) Cost provides essential determinant of ROI (the investment) Few libraries know the true costs of their virtual reference service: Accounting practices make accurate costing of individual services difficult to achieve Focus tends to be on costing library’s structure rather than services provided to patron Staff resistance (Marsteller, 2003)

5. Trajectory: from vertical integration …

6. … to collaborative and third party sourcing around shared processes and data Collaboratively sourced Sourced Third party

7. Operating Budget Equipment Budget Materials Budget • Supplies • Leased Copier Charges • Supply Room/Computer Supplies • Departmental Supplies • Current Services • Travel • Postage • Phone/Infrastructure • Printing • Computer Services • Bibliographic Charges • Facilitiy/Equip/Furniture • Transit/Parking Fees • Fixed Charges • Annual Recurring Charges • Memberships • Equip/Facility Contingency • Equip/Facility Requests • EDP Equipment • Special Purchases/Projects • ContentDM • Credit Card Equipment Serials Standing Orders New Subscriptions Monographs General (Special Orders) Binding Processing Electronic Manuscripts Preservation Research Accounting Practices “Typical” Reference Expenditure Categories:

8. Books and Serials Publications • Academic Affairs Library • Health Sciences Library • Law Library • Binding • Academic Affairs Library • Health Sciences Library • Law Library • Salaries • Academic Affairs Library • Health Sciences Library • Law Library • Fringe Benefits • Academic Affairs Library • Health Sciences Library • Law Library • Wages • Academic Affairs Library • Health Sciences Library • Law Library Structure vs Service Costing “Typical” System Level Expenditure Reporting:

9. Accounting Approach • To provide the most value to the patrons requires being able to tie the costs of service provision to the benefits received • Approaches that have been taken: • Traditional Functional Costing: • Focuses upon the internal administrative structures of operations • Difficult to tie activities to the value provided • Activity-Based Costing • Focuses on cost “drivers,” those goods or services that provide value to the patron and are costly to produce • More detailed attempt to tie value provided to cost of providing that value

10. Activity-Based Costing • Steps to engage in ABC Costing: • Identify operational activities • Assign Resource costs to activities • Identify service/good/output • Assign activity costs to output

11. Breakdown of costs Individual libraries / Entire collaborative Capital / Operational Start-up / Ongoing

12. Individual/Collaborative “Micro” approach: how an individual library can begin to cost the virtual reference services provided Line item approach: detailed line item activities that lead to overall costs Costs of collaboration to be determined in future studies

13. Capital/Operational • Capital: expenditures on resources like equipment, buildings and land • Typically long-term costs that can be depreciated • Associated with resources that have a long-term (e.g., >1 year) useful life • Operational: expenditures on resources that have a shorter-term lifespan • Will not be depreciated • Associated with the relatively short-term resources used to engage in creating the organization’s goods or services

14. Start-up/Ongoing • Start-up: The upfront costs associated with implementation of the service • May be fully or partially funded from a “project budget,” external agency or grant that will not be continued after the implementation is complete • Ongoing: The ongoing operational costs associated with the service after it “goes live” • Usually comes directly from the library’s operational, materials, and equipment budgets

15. Costs Over Time - NPV • Net Present Value • The value in terms of today’s dollar of cash flows that extend over a period of time, such as months or years • Uses the idea that getting a dollar today is more valuable than receiving that same dollar next year • Inflation would reduce the dollar’s value over time so next year’s dollar is worth less than this year’s • Interest rates would allow you to take that dollar and invest it, making today’s dollar worth more than next year’s • Evaluating costs over time require you to take into account that future dollars spent “cost less” in terms of today’s dollar

16. Cost Categories Licensing costs Outsourcing costs Staff salaries & benefits New hardware purchases Telecommunication costs Print materials costs Electronic materials costs Training Facilities costs Program planning & management

17. Example: large urban library Excel file of model

18. Use of this model Cost-Benefit Analysis Cost Effectiveness Analysis Budgeting and Budget Planning Controlling Operations

19. Additional information Project report: oclc.org/research/grants/awarded.htm Cost model Excel file: www.ils.unc.edu/~jpom/costmodel/