University outsourcing ‘may not save money and may push up fees’

Claims that outsourcing in higher education improves efficiency are not proven, says analysis

August 1, 2017
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Outsourcing university services does not guarantee cheaper or more effective delivery of student services and might actually act to push up tuition fees, a study has found.

While outsourcing is now “ubiquitous” in US higher education and is increasingly common worldwide, the evidence for its effectiveness is very limited, according to an analysis of 30 journal papers focused on the practice in higher education.

In fact, existing research suggests that outsourcing might often have deleterious effects for higher education. Articles published between 2000 and 2015 reveal that while universities had “outsourced to reduce costs and eliminate budgetary constraints, improve the quality of services and ease management oversight duties, there is no guarantee that outsourcing will do so in the long run”, says the paper, “Outsourcing in higher education: the known and unknown about the practice”, published recently in the Journal of Higher Education and Management.

“Instead, as more institutions outsource, the more expense they will incur in future…[because] the profit motive intrinsic to private enterprises [will increase] the cost of providing services…in the long run,” states author Caroline Sabina Wekullo, a PhD student at Texas A&M University’s department of educational administration and human resource.

“Though sometimes outsourcing has increased variety and quality of services, the costs have also gone up making it more expensive for students,” the paper adds, saying that this has been “one of the contributing factors to the high costs of higher education in the US”.

Only three articles of the 30 papers assessed concluded that outsourcing had been broadly positive; three found it to have been largely negative, while others categorised it as having caused “mixed” or “non-significant” effects.

One of the most popular areas for outsourcing was IT. A study by International Data Corporation in 2015 found that US universities spent $6.6 billion (£5 billion) a year on outsourcing IT, far more than the $4.6 billion spent by the US federal government in this area, the report says.

However, other outsourced activities assessed by the literature review included academic grading, facility management, curriculum design, programmes and classroom instruction, as well as “non-core” support services such as security, catering and maintenance.

An Australian university’s attempt to outsource academic activity in an overseas campus was one of the examples in which the practice was found to cause negative effects, the paper says.

While universities should be open to externally run solutions to student services, the paper advises that “findings show that [its] effectiveness varies across institutions and depends on the activity outsourced”. Managers should think hard about whether outsourcing will work given the “size of [their] institutions, the activity being outsourced and the expected benefits” and should “continuously monitor and evaluate to determine if outsourcing is effective”.

“Though outsourcing may improve the quality of services, they are becoming more expensive for students and harder for them to afford,” the paper concludes, saying “further rigorous research to make empirical claims about the effectiveness of outsourcing” is needed.


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Reader's comments (3)

Interesting article. I’ve long thought that the university that chooses to outsource many student services – particularly those relating to student wellbeing, disability or other pastoral support, such as visa advice or funding advice – is a pretty brave university. Private providers are very good at bidding to run these services but can subsequently be taken aback by the volume, complexity and the level of risk inherent in their delivery. Universities can therefore find that the cost of outsourced services – quoted low initially, to gain the contract – increase quickly as this realisation sets in. I'm sure we will see more outsourcing, and that private providers will gain more experience in these areas. However, in the short to medium term, universities need to think through the risks involved in bringing in private providers to manage complex, sensitive and high-risk services.
Surely it depends upon what services you outsource.... Outsourcing staff or student email to Microsoft or Google is vastly more cost-effective than trying to provide in-house. Using a sector-owned body (such as JISC or UCAS or even smaller services such as the NorMAN Out-of-Hours Helpdesk) provide us all with some very cost-effective services... However, TUPEing stagg across to a private company to provide services such as Finance, HR, IT, Estates etc needs to be approached with caution. 'Price' and 'Cost' are different words. You need to ensure that there is an escape clause at the end of the contract etc. Caveat Emptor really applies to outsourcing!
I am in the process of writing an MSc dissertation on the outsourcing of Hard FM service provision on campus University accommodation. If anyone within the sector would be interested in completing a short questionnaire I would be extremely grateful although appreciate this article is a little old now.