Outsourcing in Higher Education

The phenomenon known as globalization has had a profound impact on social, political, and economic realities around the world (Eriksen, 2007). From an economic standpoint, globalization has disrupted well-established processes of production, distribution, marketing and sales, as businesses and other institutions search for increased efficiency and reduced costs in order to compete in a worldwide arena (Cloete & Moja, 2005). Business practices such as outsourcing and offshoring were once considered local and of limited applicability; but with the invention and implementation of new technologies, outsourcing and offshoring are now utilized in an array of industries spanning the globe (Massini & Miozzo, 2012). Higher education has not been immune to globalization and its trends (Agnew, 2012): for-profit and public universities have gradually shifted to a business-like approach to improve their operations and compete in what has become a saturated market in some regions (Malik & Mahmood, 2012). This shift to a business approach in higher education has included many strategies in dealing with rising costs and increased levels of expertise required to remain competitive; one such strategy is outsourcing.

Objective

The author believes that outsourcing in contemporary higher education may be understood as a manifestation of globalization. Using key concepts from Castells’ (2000) network society globalization theory, the author discusses several implementations of outsourcing and their impact on higher education institutions around the world.

Defining the Issue

Outsourcing is the “practice of obtaining services from specialist bureaux or other companies, rather than employing full-time members of staff to provide them” (Collin, 2006, p. 284). In higher education, this may involve the use of outside businesses as service providers in diverse functions, such as teaching, cleaning, maintenance, IT, etc. Historically, some of these functions were easily outsourced (e.g. cleaning), but more recently some universities have outsourced what at one point were considered vital functions in higher education (e.g. curricula). Offshoring can be considered an extension of outsourcing, and is defined as “the transfer of service operations to foreign countries in order to take advantage of a supply of skilled but relatively cheap labor” (Offshoring, 2007).

Discussion

Castells’ (2000) network society approach to globalization included three domains of the new economy that can be seen at work in higher education and in the decisions made to outsource various university functions. The global domain involved the idea that aided and facilitated by technology, economic functions and opportunities are no longer limited to local and geographically close locations; the entire globe has become part of the economy and opportunities and risks are abundant. The networked domain explored the concept that all sectors of the economy, with their sub-sectors and players, are interconnected and no longer fit in a neatly vertical or horizontal framework—multiple players are now involved in providing a service or manufacturing a product. As in the global domain, the networked domain was enabled by the technological advances in recent years. The third and final domain was knowledge: with the popularization of the Internet and an exponential increase in research, there is a vast amount of new information that needs to be mastered and can be used to one’s advantage even in distant areas of the globe (Stoer & Magalhães, 2003).

The knowledge domain of the network society, as understood by Castells (2000), can be seen in attempts by Iraqi colleges and universities to adapt to a rapidly changing socio-economic environment. Al-husseini and Elbeltagi (2013) conducted a study of six private Iraqi colleges as they sought to use innovation as a driver to increased efficiency and greater competitiveness. Knowledge sharing (donating and collecting) was found to be positively related to innovation, resulting in increased competitiveness. Although knowledge collecting (the receiving end) had a stronger correlation to innovation than knowledge sharing (the giving end), the latter also benefited these institutions because as knowledge flowed it became “explicit and owned by the entire group” (Al-husseini & Elbeltagi, 2013, p. 134). Knowledge could now be utilized by more individuals for the strengthening of the whole organization, fostering creative abilities that may have resulted in innovation and greater efficiency.

The flow of knowledge has become important among American universities as well, albeit in a different way. Universities worldwide have for many years sought to cut costs and become more efficient (Cloete & Moja, 2005), and outsourcing is one way through which lower costs and increased efficiency can be achieved. As American higher education institutions privatized and outsourced functions deemed not to be crucial or central to academia, the benefits of contracting out became too enticing not to consider it a possible solution for the remaining functions as well. As knowledge became commoditized and easily transferred with the use of technology, universities started looking into knowledge-related functions as possible candidates for outsourcing; and this included even teaching and instruction (Russell, 2010).

The author works for a large, multi-campus for-profit university that partners with community colleges in an attempt to increase its own enrollment. This partnership can be seen as a form of instruction outsourcing: community college students are recruited for transfer to the university upon completion of their two-year associate’s degree. In a way, the university is outsourcing two years of instruction to the community colleges, and focusing its main efforts on upper division courses that will lead to the completion of a bachelor’s degree. This outsourcing is possible because the university assumes that the courses offered by the community college are comparable to those offered by the university at a lower cost to the student (i.e. commoditization); by transferring those credits in, the university is de facto outsourcing its instruction and transferring knowledge acquired by the students from the community college to the university.

The commoditization (or commodification) of higher education can also be seen as a manifestation of the networked domain of the network society globalization theory. Colleges and universities in developed nations have been engaging in new and creative ways to reach their goals and to meet the increasing demand for adult and continuing education. As part of that process, for many years now universities have sought the assistance of outside sources via special partnerships or via direct outsourcing (Steinberg, 2004). Around the same time as Steinberg (2004), Poon (2006) already identified a trend that has continued to this day: “the higher education value chain has become vertically disaggregated, with academics being only one among the many content providers operating in the chain” (p. 81).

Universities today aggregate services provided by a network of sources and package them as part of the university experience (University marketing, 2014). Colleges that offer online education are a prime example of this trend: e-learning requires expertise in information technology that many universities lack or do not wish to take upon themselves. So a growing number of online learning platform vendors have been striving to fill the need for reliable, flexible, and personalizable platforms (Hoffman, 2012); and universities have been eager to contract their services. Hoffman (2012) identified several reasons why higher education has been embracing e-learning, including the facts that online education is seen as a way to enroll more students, it can reach students who could not attend a physical classroom, and it allows the university to hire instructors who may not necessarily reside near the university. By outsourcing the technology-intensive portion of e-learning through the use of third-party learning management systems (LMS) such as Blackboard, Moodle, Desire2Learn, Sakai, or Jenzabar, the university can focus on curriculum and instruction, both of which are considered to be at the core of what the university is about (Poon, 2006). LMSs are located in various geographical areas (e.g. Desire2Learn is based in Canada; Moodle is based in Australia) and serve institutions worldwide as vital partners in the network of distance learning providers.

The global domain is the most obvious of the three domains in the network society globalization theory. As indicated previously, many remote service providers (e.g. LMSs) are located worldwide and are able to provide services locally through the use of technology—usually the Internet. But there are other examples where the trend of outsourcing in higher education is also visible as a manifestation of globalization. For instance, Texas A&M University recently outsourced the entirety of its dining services to Compass Group USA (Mogilyanskaya, 2012). Compass Group USA is a company of Compass North America, a subsidiary of the UK-based Compass Group (About us, 2012). So a company based in the United Kingdom is now serving daily meals to students in College Station. And, as part of the agreement between the university and the service provider, Compass Group USA funded several campus improvements and paid a substantial signing bonus to Texas A&M (Mogilyanskaya, 2012).

Another example of the forces of globalization’s influence in higher education may be drawn from the Greek experience, as documented by Nikolaidis and Maroudas (2013). Higher education in Greece has undergone substantial change in recent years, especially in its approach to the business side of education. As part of the European Union, Greece is subject to neo-liberal economic ideology and practice that may seem to disrupt its own way of doing business. In recent years, Greek universities have adopted the global trend of applying “private sector practices and methods” in the expectation that these will then “improve the efficiency and quality of public services” (Nikolaidis & Maroudas, 2013, p. 128). One of these so-called “private sector practices” is the tendency to use adjunct faculty instead of full-time, university exclusive, instructors. This trend can be understood as the outsourcing of instruction with a clear background in increased competition followed by cost-cutting measures as part of the globalization of business. Higher education professionals have resisted this trend, but this resistance has declined as the idea of globalization takes stronger hold of the country (Antoniades, 2010).

Lessons For Future Practice

The discussion above provides a few insights for colleges and universities that are considering outsourcing as a means to adapt to an ever-changing economic environment. First, as higher education institutions share and acquire knowledge, they should strive to differentiate their products (curricula, graduates, experience, etc.) from those offered by the competition. As knowledge becomes commoditized, the trend is for prices to decrease in the long run; by differentiating their products, universities may be able to avoid some of the pitfalls of competition and stand out among its competitors.

Second, when using third-party vendors for its crucial systems, universities need to be very careful and weigh all positives versus all negatives of a possible partnership or contracting out. The consumer (i.e. student) will not differentiate a product from a vendor from the university itself; both are seen and experienced as one. The university must take steps to protect its brand and ensure high satisfaction levels when a service is outsourced.

Third, globalization offers tremendous opportunities in terms of acquiring services (outsourcing) and of expanding a university’s client base (number of students). But both of these opportunities are also paralleled by risks, such as a possible disconnect between the university’s mission and its practice. Higher education institutions must bare in mind that they are not pure businesses and that they have a calling that may be eventually at odds with the most profitable business practices; in such cases, a balanced approach must be devised in order for the university to fulfill its mission while remaining competitive and financially viable.

Conclusion

Globalization has had a tremendous impact on higher education. This impact can be seen in multiple facets ranging from the structure of the university to the products it offers to the methods it uses to deliver them. The network society globalization theory (Castells, 2000) provides a solid framework to understand this phenomenon because colleges and universities in the industrialized countries have increasingly turned to outsourcing as a strategy to cut costs and increase efficiency. By looking at the three domains of the network society, it is possible to better understand the pervasiveness of globalization manifested through this outsourcing trend and realized through networks of vendors, flow of knowledge, and global perspectives.

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References

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