Prompted by a $10 million annual operating loss, the University of Washington (UW) recently announced its intention to lay off 66 employees from its centralised IT department.
Structured as an internal services group that charges University departments for IT services, the department cited the growing uptake, by its internal clients, of free and low-cost email and document sharing applications, from vendors such as Google and Microsoft, as contributing to its decline in revenue.
While regrettable, Datamonitor believes that these lay-offs are the unfortunate outcome of the positive trend of higher education increasingly outsourcing its IT functions and/or accessing solutions through hosted or software as a service (SaaS) models.
Over the next decade, higher education will sail into turbulent waters. Demographic shifts will drive institutions to compete more aggressively with one another to recruit and retain a shrinking pool of qualified students. Although globalisation offers students a new world of higher education opportunities, it will require colleges and universities to provide more and more personalised services to students in order to differentiate themselves in the market. All of this will occur in a context where economic recession is limiting the ability to raise tuition rates, depend on allocations from state or local governments and fill budget shortfalls with financial returns from institutional investments.
‘Doing a whole lot more with a whole lot less' is the millennial edition of ‘doing more with the same or less'. As a result, conducting a rigorous cost-benefit analysis for each spending allocation will become de rigueur for any institution's budgeting process.
Here is where the story gets interesting for technology and relates to the staff reductions at UW. Using hosted or SaaS applications and/or outsourcing specific IT functions offer a slew of potential benefits, including reduced costs, so it is not surprising that many UW departments switched to Google Apps. The problem is not simply licensing costs but also those associated with the ongoing maintenance of an increasingly complex institutional IT infrastructure.
Simply providing the same level of service pushes IT budgets to brink, and when factoring in the need to provide more services to more people, such as document collaboration for students, the desire to take drastic actions with regard to IT is understandable.
Drastic action is often unnecessary in order to garner the benefits of outsourcing and hosted or SaaS delivery models. While many associate SunGard Higher Education's manager services business unit - formerly known as Collegis - with fully outsourcing the IT department, the majority of its business comes from supporting specific IT functions or out-tasking. Institutions are able to offload functions that have an unattractive value for money ratio, such as university email, and focus their resources on ones that do, such as CRM in admissions. On the hosted end of the spectrum, it is also insightful to consider the Google apps phenomenon.
Uptake of these free solutions has been enormous, particularly in Gmail. Yet, it should not be surprising; email is a considerable drain on IT resources and most students forward their university email to Gmail anyway. Reallocating its email budget in order to hire a new faculty member or extend the library's hours offers far more value to an institution. Again, it comes down finding ways to use limited resources more efficiently.
However, there is more to the story than simply saving money - it is also about differentiating on what you do best. How many colleges and universities include providing IT services as part of their institutional mission? The answer is appropriately zero - teaching, learning and research is the core mission of higher education. Nevertheless, too many institutions are distracted from their strategic objectives in order to support basic demands for IT, something they are ill prepared and poorly positioned to do. Whereas providing IT services and solutions is the core mission of technology vendors, and consequently, they are able, for the most part, to do it more effectively and efficiently than most institutions.
In the end, outsourcing specific IT tasks and/or using hosted or SaaS delivery models enables institutions to get back to basics and do what they do best - educating students and conducting research.
