To outsource, or not to outsource … that is the IT question so many schools are asking right now - Technology

University Business, Jan, 2003 by John Savarese

It may be trickier to have a reasoned discussion about outsourcing than about other IT issues. From the psychological point of view, there are two species of outsourcing: The first kind (reasonably easy to talk about) involves getting outside people to do routine jobs that nobody inside realty wants to do anyway (like PC maintenance). Or, going through an outside company to bring in skirts that the institution hasn't been able to hire. Or, adding on new services that nobody inside the institution has been supporting up to now (like e-Learning).

Then there's the second kind of outsourcing, even the mention of which sends shivers up a lot of spines: bringing in new management to reform the operation that currently provides a wide range of IT services--perhaps also turning over all those positions (and the people who work in them) to the outside firm.

The first kind, selective outsourcing, is often a tactical move, initiated by the IT department itself. The second, more extensive kind of outsourcing is usually a strategic shift, and is generally initiated by higher executive levels of the institution.

SELECTIVE OUTSOURCING

Selective outsourcing is no longer controversial, and is even taken for granted. Campuses no longer see it as an admission of their inability to do something, just as a canny move that lets them put their attention somewhere else, as tong as the price is right. Outsourcing has become more common for network operations, PC maintenance, Web site development, and telecommunications. Kenneth C. Green's Campus Computing Survey 2001 reported that over 10 percent of all institutions were outsourcing at least some portion of their computing services.

The test case. Outsourcing of distance education delivery systems provides an interesting test case for examining the factors that make outsourcing sensible or not. Outsourcing of e-Learning covers a substantial range, including hardware, software, operations, and even help desk and customer support. Because many distance education programs are set up as new endeavors fairly distinct from the rest of the institution, it is relatively easy to define what IT services are needed, and to compare the costs of those services with the revenues generated. IT outsourcing is more likely to be accepted for distance learning programs because it represents a new activity, not one that is already staffed by people who must be transferred or displaced. What's more, the students are working remotely, so it is not as obvious to them whether the services are being supplied by the institution or a third party.

Oakleigh Thorne, chairman and chief executive officer of eCollege (www.ecollege.com), makes his case for outsourcing distance learning on two fronts. The first argument is financial. "We have invested tens of millions of dollars developing software and setting up data centers, and we continue to invest in ongoing advancements and upkeep," says Thorne. "A school that tried to do that on its own would be at an economic disadvantage." Besides, he points out, support loads are cyclical, and an institution would have to continually staff up to provide adequate support during busy times such as exam weeks.

Then there's the risk argument. Says Thorne, "People think that outsourcing is a risky decision. But ironically, many of our clients insourced originally, and then moved to us because it is a less risky way to run their operation." Think of online students, says Thorne: "They're more demanding. They have jobs and busy lives. They behave more like customers than like students. If the system is down for 10 minutes when they need to use it, they won't just get mad, they'll eventually drop out."

Just how attractive the outsourcing solution is for a particular distance education program will ultimately depend on whether it works into that program's business model. It costs $80 to $125 per course-taker to deliver a course through eCollege, with the price per seat going down as the enrollments increase. The institution doesn't have to pay for facilities it's not using if enrollments fall short, nor does it have to worry about variable factors such as bandwidth, or the number of calls to the help desk, etc.

STRATEGIC-SHIFT OUTSOURCING

By contrast, the decision to outsource a campus's entire IT operation, or a substantial part of it, is considerably less tidy. There's a lot to consider. It's not hard to zero in on the vendors with substantial market share and higher education credentials. A major portion of the comprehensive outsourcing market in higher education belongs to Collegis (www.collegis.com) and SCT (www.sct.com). Now for the hard parts ...

The contract. For one thing, it is quite a task to describe all of the services and facilities that the outsourcer is expected to provide. Yet, an exhaustively explicit contract is a contributing factor to success with an outsourcing partner.

Measuring performance. Next, it's vital to come up with good ways to measure performance. You can do it by inputs (specifying the number of staff that the outsourcing company is expected to supply), or by technical metrics (the number of minutes per month the Sun server is down, for instance). But a more effective way is to establish performance measures that reflect the business realities of the institution.