Last Thursday, news of Elsevier’s acquisition of Aries Systems broke, and the reactions were varied. Some boasted that they’d predicted moves along these lines. Others speculated about a possible boycott of Elsevier and Aries journals. And some decried the lack of “independent” options in the space Aries helped to create — online manuscript submission and management systems.
There also seemed to be echoes, one of which related to last December’s announcement by PLOS that they were abandoning the effort to create their own manuscript submission system (Aperta) after years of development. PLOS uses Aries Systems, so this was tantamount to an endorsement of Aries in practical and symbolic terms. Now, we have Elsevier, which developed its own manuscript submission and tracking system called Evise — and used it in a limited way after lackluster reception by editors and authors — acquiring Aries Systems, ostensibly to improve their ability to handle important elements of the publishing workflow.
There was also an echo of Wiley’s acquisition of Atypon in 2016, where a publisher acquires a privately held family-owned company delivering business critical services to other publishers, which brings to light all the data protection and business continuity concerns you’d imagine. By emphasizing oversight and firewalls, Elsevier and Aries seem to be following the Wiley-Atypon lead to assuage customer concerns.
Manuscript submission and tracking systems are extremely complex to build and maintain, especially in multi-tenant deployments. With the increasingly common practice of journal cascades, these systems have only become more complex (Elsevier filed what they claim is a defensive patent in this area years ago to prevent another company from patenting a narrow set of cases around manuscript cascading). Key parts of Elsevier have been using Aries Systems’ Editorial Manager® for many years, when the company adopted it by default when it acquired Cell Press in 1999.
Manuscript submission and tracking systems are also among the most-hated types of systems for academics, for a few key reasons — they are usually the only publishing systems that academics have to deal with (they’d probably also hate publishers’ other systems); submission requirements are complex and demanding; it’s psychologically demeaning to submit papers to an uncaring system (mailing a packet of manuscripts was simpler and had more positive feedback mechanisms, from the photocopy station to the post office staff); and system interfaces aren’t as smooth and sophisticated as most of the rest of their online experiences. Manuscript systems are perceived as uncaring, unforgiving, and ungainly by most users.
It’s easy to forget that even distinguished researchers spend much of their time using the superbly designed interfaces of Amazon, Netflix, and Google. The consumer Internet has raised the bar for all software and user interface development, even the relatively obscure software used in highly specialized areas of research and publishing.
The business fundamentals of the deal are interesting to contemplate. Publishers have benefited tremendously over the past 50-75 years from a robust subscription model, which provides recurring revenues, which I’ve argued are the best kind of revenues for a variety of reasons. Open access pressures have threatened these stable revenue sources, replacing recurring revenues with the much less attractive non-recurring revenues of article processing charges (APCs). This may have been a factor in the poor market response to the attempted Springer-Nature IPO earlier this year.
Elsevier’s acquisitions have been paving a path into data and analytics for a while now (Mendeley, Plum), with some strong content-source positioning (bePress and SSRN) adding even more to their growing portfolio of interesting strategic products. None has had the combination of strong recurring revenues and high switching costs of Aries Systems, however, which sets this acquisition apart in my mind.
Changing manuscript systems can be among the more jarring transitions a publisher can make. Platform migrations pale by comparison, because editorial functions have much touchier stakeholders, most of whom are more than willing to call and complain if there is even the slightest problem. High switching costs make it highly likely that any immediate negative reactions to this news will amount to grumbling but little movement, giving Elsevier and Aries time to prove that they can pull it off. For instance, based on the rumor mill, many of Atypon’s larger customers were upset to learn of Wiley’s acquisition of their platform provider and threatened a rebellion, but they are now renewing their contracts after the new entity proved it could execute and maintain the proper arm’s length arrangement. A manuscript system provider probably has a longer time horizon during which it can prove itself.
In speaking with various people in the days following the announcement, a number mentioned that there seems to be a rhythm to these kinds of acquisitions — a period immediately post-acquisition of quiescence and status quo, where the business is run carefully and with its priorities intact; a period 2-5 years after the acquisition where the strategic imperatives that informed the acquisition begin to impose themselves on the operation, often in a disruptive way that can make customers feel sidelined; and then after 5 years, a new status quo emerges that is a hybrid of the original product, the acquiring firm’s priorities, and new imperatives coming up from customer angst, emerging needs, and a reaction to market performance.
Even given the benefits of recurring revenues, Aries Systems seems to be relatively small acquisition for Elsevier, with online sources estimating its annual revenues as $5-6 million. For a multi-billion-dollar company, assuming they paid a decent multiple via a competitive process (terms were not disclosed), the expenditure was probably quite tolerable given the strategic positioning of the entity. This likely means there’s also a decent amount of money and resources available for improving and enhancing the underlying technology.
Even if Elsevier doesn’t grow significantly in revenues with this acquisition, it grows significantly in gravitational pull and centrality.
Even if Elsevier doesn’t grow significantly in revenues with this acquisition, it grows significantly in gravitational pull and centrality. Thousands of papers flow through Editorial Manager every day. The only other comparably positioned manuscript system is ScholarOne, owned by Clarivate. There seems to be an arms race between Clarivate and Elsevier when it comes to data and centrality. This move puts Elsevier on a better footing for the market confrontations that may lie ahead.
Interface and analytics development is also key to the next generation of manuscript systems. Reporting is a key weakness of these systems, with editorial staff often tasked with downloading, parsing, and assembling reports for editors, boards, and management, wasting hours every month or quarter when computers could do it more easily. While the data flows from Aries Systems into Elsevier may be firewalled, the data flows from Elsevier’s other offerings into Aries Systems may be robust, allowing for a next-generation of editorial reporting. Aries Systems will also benefit from a wave of development resources to support this potentiality.
There is almost certainly a timing aspect to this news. Aries Systems was started by Lyndon and Sandra Holmes in 1986. Manuscript systems were at first modest PC-based systems, but as bandwidth and computing power improved, online submissions made these types of systems truly indispensable for most publishers, and Aries was well-positioned to take advantage. It provides services to PLOS, Springer Nature, Elsevier itself, and dozens of other commercial and non-profit publishers. But after 32 years building the company, its longevity beyond the founders certainly had to be a question at hand. By selling to a company adept at acquisitions and integrations, Aries’ leadership has likely ensured that their work will endure.
Holmes will stay on as an advisor to the company, which will remain based just north of Boston, having recently moved to new quarters in the area. A Customer Advisory Board will be created to help guide the organization, which will firewall its data from Elsevier in a manner akin to how Atypon had to firewall its data from Wiley when it was acquired.
In the grander scheme, this acquisition feels like more of the same when it comes to bigger fish gobbling up smaller fish. We are in a business environment where organic growth is difficult and content devalued, so the natural business response is to seek recurring revenues from service offerings while leveraging and replenishing strategic data storehouses. Independent entities are going to continue to be gobbled up as larger firms seek growth and diversified revenue streams. Consolidation is the tenor of the times. The difference with this is two-fold in my mind — first, it clarifies that Elsevier and Clarivate are squaring off; and, second, it adds to the likelihood that Elsevier’s services will be central to publishers of all sorts for a long time to come.
(HT to JE, AM, LH, DC, PM, and multiple others who helped shape and inform this post.)