The Local Government Group and the Museums, Libraries and Archives Council (MLA) report comes as up to 800 libraries could be earmarked for closure by cash-strapped councils. The report also calls for voluntary groups to run library services, with private sector funding.
According to the report - Future Libraries: Change, options and how to get there - back-office mergers between libraries could save up to 10%.
Libraries must also engage with users by using digital technology such as SMS, e-mail and social media. They should also use e-books, digital access, fundraising online, APIs and mash-ups. But the report did not specify how these measures should be used.
Some digital initiatives may require investment up front to realise savings. Others may generate savings or constitute additional services which open opportunities for users without necessarily reducing costs, said the report.
Public sector workers' union Unison - which represents library staff - said it was concerned as to where the funding would come from for the digital initiatives outlined in the report. Unison also slammed the plans for failing to protect the quality of the service.
"Libraries have moved hugely with the times to embrace things like computer clubs, homework groups for young people without online facilities at home and those looking for jobs," said a Unison spokeswoman.
"The government must act to stop local authorities rushing through changes to services with no consultation. An investment in libraries is an investment in the future generation," she added.
Culture Minister Ed Vaizey praised the plans: "There is a huge amount of expertise and ambition throughout England's local authorities to run brilliant, modern library services. Across England, councillors and managers are working to develop plans that will meet their community's changing needs while balancing budget pressures," Ed Vaizey said.