Higher Education IT Outsourcing: Future Trends and Market Forecast

Survey respondents represent roughly seven percent of the total population of U.S. and Canadian institutions of higher learning. Their characteristics make these institutions a good representation of IT spending in the higher education sector of the economy. INPUT weighted EDUCAUSE survey data on the basis of the current proportion of Carnegie classifications of higher education institutions. INPUT has developed market forecasts for IT outsourcing in the education industry for more than 20 years. These forecasts and those for associated markets in business process outsourcing (BPO) and processing services—including application service providers (ASPs) and services—served as the baseline in developing the estimates of market size and growth rates presented in this report. The 2001 market size estimate is based on assumptions that include the following: ◆ A baseline estimate of the total spending by U.S. higher education is $197 billion. Of this, public institutions spent $126 billion (1996–97) and private institutions spent $71 billion (1995–96). ◆ The estimated compound annual growth rate (CAGR) is 5 percent for higher education spending from 1997 to 2001. ◆ Estimated total spending by higher education was approximately $235 billion during 2000–2001. ◆ IT spending by higher education is estimated at 3.5–4.0 percent ($8.2–$9.4 billion) of total spending in 2001, which is comparable to the ratio applicable to the commercial market. In developing the forecasts, INPUT used its knowledge of expected developments in the larger IT outsourcing marketplace over the next five years and contrasted these developments and environmental factors in higher education with those in commercial and government markets. INPUT also compared survey data to revenue estimates from IT vendors that outsource to higher education. There was a very good fit between survey respondent data regarding higher education’s IT spending and vendor revenue estimates, suggesting the forecast is reasonably valid. Finally, on the basis of a small survey sample from Canadian colleges and universities and other data, INPUT developed a forecast for the Canadian market for IT outsourcing.