the limits of outsourcing

In my last post, about approaching outsourcing in higher education from a strategic view that goes beyond simple cost savings or privacy concerns, I talked about how outsourcing should either lower costs, increase value, or do both in order to help an organization develop and maintain a competitive advantage.

Defining competitive advantage in higher education or specifically IT therein is not easy.  It’s more than simply how a university or college does in rankings or how well it attracts students.  It might be measurable in terms of how it does compared to its direct competitors – how many times a student that applies to both schools chooses a particular one is somewhat indicative of a competitive advantage.

But let’s just presume that there are a great many factors that lead to something akin to an advantage that is useful when in competition for the best and brightest students with other schools.  The quantity of factors makes it all the harder to quantify the benefit of specific strategic planning decisions, but overall there is at least room for reasonable conjecture.

So the question remains – what should be outsourced?  What activities do technology departments in higher education engage in that are not directly beneficial in terms of competitive advantage?  What activities could be best outsourced such that cost goes down, value goes up, or both, leading to more students choosing one school over another?

E-mail systems are an easy one.  E-mail itself is a commodity communication medium, yet it is a high-overhead hardware and software combination.  Maintaining an in-house e-mail system means tons of storage, dealing with lots of database transactions, and integration with a number of other systems (directories that indicate all valid users, etc).  If one seeks e-mail and calendering, which is offered by products such as Lotus, Exchange/Outlook and Groupwise (which we use at SCU), then it becomes idiosyncratic and specific to that product, as well.

If the service is a commodity, and the users treat it as one (expecting it to just work all the time, little to no understanding of outages, etc), then an IT organization gains no competitive advantage by hosting its own e-mail system.  Maintaining such a system offers nothing to the university.  This is an easy one.  And the options are quite varied – one can even outsource a full Exchange service – as compared to just going to Google Apps for Education – so that one can have full Outlook capabilities.

Learning Management Systems like Angel or Blackboard and Content Management Systems based on Joomla or Moodle can easily be outsourced as well.  Since these are services that are offered by many universities, a school does not gain an advantage by running these internally.  There is also a significant advantage to letting others run these systems.  Whereas e-mail systems are fairly common and well-known, developing a full Joomla installation or customizing Moodle with all of its modules can be costly in terms of staff time for maintenance.

A key tool for strategic planning analysis is VRIO – determining whether a resource is Valuable, Rare, Inimitable (not easily imitated in a reasonable timeframe, usually 3-5 years), and whether the organization is able to take advantage of the resource.  So if the LMS, CMS, and e-mail systems are all easily imitated and are not rare (but are valuable – we all have to have efficient communication methods), then what can schools offer that meet all of the requirements of VRIO?

Personnel.

The people cannot be imitated, the quality of how they have been trained, and their knowledge of the school, its staff and faculty.  These are the resources that match up with VRIO.  We push out all of the resources and systems that we do not need to be running, but we maintain the quality of the people that interface between those services and the university itself.  And by freeing up resources by having fewer system administrators and/or having them work on more different projects, we offer more to the university as a whole.  We potentially decrease costs or head count (which can be a form of cost-savings, even if payroll stays the same) and we add a ton of value.

The next question is about how far this can go.  Can we outsource systems such as Peoplesoft or Banner?  Can we outsource even ourselves?  Can we go that far?  And are the answers based on emotional connection or strategic analysis?