1 - 5/13/02 Proprietary & Confidential - ECAR The Outlook for ASP and IT Outsourcing in Higher Education in the U.S. and Canada Emillia Kancheva, Senior
1 - 5/13/02 Proprietary & Confidential - ECAR The Outlook
for ASP and IT Outsourcing in Higher Education in the U.S. and
Canada Emillia Kancheva, Senior Analyst Tel. (703) 814-8023
[email protected] Copyright 2002 by ECAR. This work is the
intellectual property of ECAR. Permission is granted for this
material to be shared for non-commercial, educational purposes,
provided that this copyright statement appears on the reproduced
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ECAR. To disseminate otherwise or to republish requires written
permission from ECAR.
Slide 2
2 - 5/13/02 Proprietary & Confidential - ECAR Presentation
Agenda l Survey and research background, scope, and methodology l
Market size l Survey results IT outsourcing in higher education Use
of Application Service Providers (ASPs) in higher education l IT
outsourcing trends, drivers, and inhibitors in the higher education
market l Conclusions
Slide 3
3 - 5/13/02 Proprietary & Confidential - ECAR Research
Timeline l October 2001 ECAR authorizes INPUT to undertake a study
of ASP and IT outsourcing in higher education l November 2001 ECAR
conducts Web survey of EDUCAUSE membership l December 2001 INPUT
performs data analysis, conducts secondary research, and interviews
active IT vendors and experienced university representatives l
January 2002 INPUT executes on-site case-study research l
Publication of final report by ECAR is coming soon
Slide 4
4 - 5/13/02 Proprietary & Confidential - ECAR Key Survey
Questions l Who is outsourcing IT in higher education and to what
extent? l Why outsource IT in higher education? What are the
benefits? What are the problems? What has the experience been? l
What IT functions are being outsourced in higher education? l On
what level are institutions outsourcing? What do their IT
organizations look like? l Who are the IT outsourcing vendors
active in higher education? How are they selected? l What direction
is IT outsourcing taking in higher education?
Slide 5
5 - 5/13/02 Proprietary & Confidential - ECAR Respondent
and Survey Parameters l Institutions: Proprietary, for-profit and
professional institutions excluded l Geography: Only organizations
in the U.S. and Canada included l Services: IT outsourcing services
only addressed; IT projects for software or hardware undertaken on
an in-house basis with vendor implementation assistance
excluded
Slide 6
6 - 5/13/02 Proprietary & Confidential - ECAR Survey
Participation TypeTotalPercent Total Responses286100.0%
Public16758.4% Private11941.6% DR (Research)5519.2% MA
(Masters)7827.3% BA (Baccalaureate)5719.9% AA (Community
Colleges)5218.2% Specialized3211.2% Canadian124.2%
Slide 7
7 - 5/13/02 Proprietary & Confidential - ECAR Survey
Distribution 19.6% 29.0% 21.2% 21.1% 12.8% 9.4% 3.1% 3.5% 42.7%
15.5% 15.6% 6.7% 8.2% 22.5% 20.8% 30.2% 18.4% 10.0% 20.4% 19.3%
0.0% 5.0% 10.0% 15.0% 20.0% 25.0% 30.0% 35.0% 40.0% 45.0%
ResearchMABAAASpecialized Percentage of Respondents Distribution by
Carnegie Classification Distribution by EDUCAUSE Membership
Distribution by Survey Sample Sample as proportion of Carnegie
Classification
Slide 8
8 - 5/13/02 Proprietary & Confidential - ECAR Related
Issues l The terms outsourcing, IT outsourcing and Application
Service Provider (ASP) are used quite loosely by IT buyers and
vendors alike l Clarity of definition is important in order to
assign client/vendor IT outsourcing responsibilities l Depending on
definition, IT outsourcing market size and growth forecasts
vary
Slide 9
9 - 5/13/02 Proprietary & Confidential - ECAR INPUT
Definitions l IT Outsourcing: a long-term (greater than one year)
contract between a customer and a vendor in which the customer
delegates all, or a major portion, of an organizational IT
operation or function to the vendor l ASPs: value-added resellers
of various types that make the software applications provided to
them available to their clients on a pay- as-you-go basis, whether
on a fixed-price or pay-by-the-sip basis; from the customers point
of view, the key is to be able to pay only for the amount and level
of services that are actually used and to have the flexibility to
scale up or down rapidly as business conditions change
Slide 10
10 - 5/13/02 Proprietary & Confidential - ECAR Market Size
l Based on its definitions, INPUT estimates that the size of the
operational services market in U.S. higher education in 2001 was at
$782 million, compared to: $57 billion for the U.S. commercial
market $6.4 billion for the U.S. federal market
Slide 11
11 - 5/13/02 Proprietary & Confidential - ECAR Who Is
Outsourcing? l According to the ECAR survey of Educause membership,
42% of all respondents report that they outsource l Among
outsourcers: 57% are public institutions 43% are private
institutions
Slide 12
12 - 5/13/02 Proprietary & Confidential - ECAR Outsourcers
by Type of Institution
Slide 13
13 - 5/13/02 Proprietary & Confidential - ECAR Reasons to
Outsource 0%5%10%15%20%25%30%35%40%45% Other Access to innovative
services Cost-savings Operating efficiencies Lack of in-house
skills Percent of Respondents ResearchMABAAA
Slide 14
14 - 5/13/02 Proprietary & Confidential - ECAR What is
Outsourced? IT infrastructure 17% Application management 15%
Application services 17% Processing services 13% Business process
outsourcing 10% Distributed services 11% E-learning/distance
learning 17%
Slide 15
15 - 5/13/02 Proprietary & Confidential - ECAR Outsourced
Functions by Type of Institution
Slide 16
16 - 5/13/02 Proprietary & Confidential - ECAR How are
Vendors Selected?
18 - 5/13/02 Proprietary & Confidential - ECAR Probability
of In-Sourcing Currently Outsourced IT Functions
Slide 19
19 - 5/13/02 Proprietary & Confidential - ECAR Probability
of Outsourcing Additional Functions to New Vendors
Slide 20
20 - 5/13/02 Proprietary & Confidential - ECAR Familiarity
with the ASP Model
Slide 21
21 - 5/13/02 Proprietary & Confidential - ECAR Use of the
ASP Model
Slide 22
22 - 5/13/02 Proprietary & Confidential - ECAR ASP
Experience AllPublicPrivateResearchMABAAA As
expected50%54%31%50%52%20%62% Better than expected8%12%0%7%10%0%
Worse than expected10%0%17%7%10%20%0% Liked ASP, wrong
vendor4%0%2%0% 15% Needed more customization than expected
14%5%14%7%10%13%8% Regretted Using ASP6%5% 7%5%7%0% ASP too
ill-defined3%0%5%0% 13%0% ASP too limited6%0%2%7%0% 8%
Other0%14%21%14% 27%8%
24 - 5/13/02 Proprietary & Confidential - ECAR General
Trends Promoting IT Outsourcing l The continuing transition from
traditional business to e-business l The pace of change of
technology and the proliferation of pervasive (mobile and/or
wireless) computing l The continuing high cost of recruiting and
maintaining critical in-house IT capabilities
Slide 25
25 - 5/13/02 Proprietary & Confidential - ECAR Trends
Affecting IT Outsourcing in Higher Education l Substantial growth
in IT requirements l Mandate to wire all classrooms for Internet
access l The transition to Enterprise Resource Planning (ERP)
software in order to electronically link administrative, financial
and student-related records l Internet-enabled, interactive,
distance-learning l Demand for postsecondary education by
individuals, corporations and the government l The accelerated pace
of change in technology
Slide 26
26 - 5/13/02 Proprietary & Confidential - ECAR Drivers of
IT Outsourcing in Higher Education l Effective use of assets l
Maximization of staff effectiveness l Competition for funding and
demand for financial accountability l Access to external resources
l Changing student demographics l Effective instruction delivery l
Potential to reach a wider market l Instructor support l
Globalization of the economy
Slide 27
27 - 5/13/02 Proprietary & Confidential - ECAR Barriers to
IT Outsourcing in Higher Education l Slower adoption than other
areas of the economy l Fear of losing control over a vital
resource, especially when IT is an integral part of delivering a
mission-critical product or service l Tradition of resolving
intellectual problems from within l Institutional emphasis on job
security l Smaller market size l Complex decision-making
structures, requirements and implementation planning, vendor
selection l Vendors lacking industry expertise
Slide 28
28 - 5/13/02 Proprietary & Confidential - ECAR Conclusions
l IT outsourcing in higher education requires different
considerations l The unique organizational structures of colleges
and universities, along with special sense of purpose, create
employee concerns and reasons for caution that have few
counterparts in the commercial market, and are less important in
the government market
Slide 29
29 - 5/13/02 Proprietary & Confidential - ECAR l Higher
education will find itself increasingly caught between: the rising
cost and risk of attempting to operate complex IT infrastructures
internally, and opposition from faculty and staff due to
ideological differences regarding an institutions responsibility to
its employees and non-commercial identity l Few institutions
believe they have the resources and skills to meet all IT needs
internally in an efficient and cost-effective way l As a result,
over time, higher education institutions will become increasingly
comfortable using external service vendors Conclusions
Slide 30
30 - 5/13/02 Proprietary & Confidential - ECAR l Survey
respondents have made it clear that the outsourcing process is not
without pain l The challenge to educational institutions will be to
better prepare and better contract l The challenge to IT vendors
will be to learn how to meet the needs of this exacting customer in
the same way they have learned to meet the special needs of other
vertical industries l The ASP model, while likely to become
increasingly attractive to higher education, will not fulfill its
overall potential until the market matures Conclusions
